Tax Chapter 13 - Chapter 13 Retirement Savings / Deferred...

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Chapter 13 Retirement Savings / Deferred Compensation I. Employer-Provided Qualified Plans – favorable tax treatment only if meet certain requirements ensuring that the plan does not discriminate against rank-and-file employees A. Defined benefit plan - Define specific benefits employees receive 1. Benefit – you contribute X amount and receive X amount 2010: max benefit = lesser of $195K or 100% of avg. of 3 highest years of compensation 2. Vesting – process of becoming legally entitled to the property 5 year cliff – get nothing until worked for 5 years 7 year graded scale – increasing % vested each year 3. Funding – employer bears risk and cost of fund administration 4. Distributions – ordinary income to employee B. Defined contribution plan – payout depends on employee’s contributions and success of plans contributed to by employees 1. Differences 2. Funding – employee bears funding responsibility and investment risk 3. Employer matching 4. Contribution limit – except for Roth 401(k)s, contributions are pre-tax, meaning they are deferred from taxable income until distributions are taken
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This note was uploaded on 05/26/2011 for the course ACCT 5400 taught by Professor Staff during the Spring '08 term at University of Georgia Athens.

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Tax Chapter 13 - Chapter 13 Retirement Savings / Deferred...

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