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CHAPTER 19--DEFERRED COMPENSATION Student: ___________________________________________________________________________ 1. The tax law encourages employers to offer deferred compensation plans to their employees to supplement the Federal Social Security retirement system. True False 2. Contributions to a stock bonus plan are immediately deductible by an employer. True False 3. Qualified plans have lower startup and administrative costs than nonqualified plans. True False 4. A restricted property plan is not considered to be a deferred compensation arrangement. True False 5. A medical reimbursement plan is considered to be a type of deferred compensation plan. True False 6. Employer contributions under a qualified pension plan do notdepend upon profits. True False 7. In a defined benefit plan, the employer (not the employee) assumes any market risk. True False 8. In a profit sharing plan, an employer must have current or accumulated profits to make a contribution to the plan. True False 9. In a cash balance plan, the employer bears the investment risks and rewards. True False 10. Cliff vesting minimizes administrative expenses for a company and provides more vesting for long-term employees. True False 11. A failure to make a minimum required distribution to a participant in any taxable year results in a 10% nondeductible excise tax on any excess of the amount that should have been distributed over the amount that actually was distributed. True False 1
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12. A defined benefit plan must reduce the $195,000 (in 2010) maximum benefits payable by one-tenth for each year of participation under 10 years that an employee has performed. True False 13. The amount of the employee’s annual compensation that can be taken into account under a qualified plan is limited to $230,000 in 2010. True False 14. For an employee earning $245,000 in 2010, the employer can deduct $49,000 for contributions to a profit sharing plan. True False 15. A 10% excise tax is imposed on the employee for nondeductible contributions to qualified plans. True False 16. The maximum deduction permitted each year for contributions to stock bonus plans is 100% of the compensation paid or accrued with respect to plan participants. True False 17. Although a § 401(k) plan avoids taxation on any employer contributions, any income earned on such contributions is taxed yearly. True False 18. The maximum annual elective contribution for a participant who is age 40 in a § 401(k) plan is $16,500 for 2010. True False 19. There is a 10% penalty for all early withdrawals from a § 401(k) plan. True False 20. If an employer’s contribution to a SEP IRA is less than $49,000 in 2010 (or 25% of the employee’s earned income, if less), the employee can contribute the difference.
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This note was uploaded on 03/21/2012 for the course ACCT 442 taught by Professor Honig during the Spring '12 term at CUNY Lehman.

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