40 Question Quiz: IRA Planning After the SECURE Act - Online Session

Program Title: CFP Board Ethics CE
Program Date: March 20, 2020

Instructor Name: Jamie Hopkins

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* 1. Information

First Name

Last Name

CFP #

Email Address

Last 4 Digits Attendee SSN (Must be 4 Digits)

State/Province

Phone Number

Organization

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* 2. How many separate provisions does the SECURE Act have?

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* 3. Through the year 2029, the Congressional Budget Office expects the SECURE Act to:

Decrease government spending and increase tax revenue

Decrease government spending and decrease tax revenue

Increase government spending and decrease tax revenue

Increase government spending and increase tax revenue

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* 4. The SECURE Act changed the rules around multiple employer plans (MEPs) by:

Allowing members and plan sponsors of a MEP to completely avoid any fiduciary responsibility in running a plan.

Putting strict limitations on the number of participants that can join a MEP.

Increasing tax credits to fully cover the cost of setting up a MEP.

Removing the “common nexus” requirement for participating in a MEP.

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* 5. The default savings cap for automatic enrollment safe harbor plans has been raised from:

5-10%

10-15%

15-20%

10% to uncapped

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* 6. After the SECURE Act, part-time workers aged 21 or older that reach at least 500 hours of service, in the past three years will first need to be included in plan testing requirements according to law as soon as:

2024

2023

2022

2021

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* 7. What percentage of 401(k)s offer in plan annuity investment options?

4-5%

7-8%

11-12%

17-18%

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* 8. After the SECURE Act, if an annuity in a 401(k) because an unavailable investment option in the plan, the participant has how many days to take a in-kind distribution of the annuity under the new portability rules?

15 days

30 days

60 days

90 days

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* 9. Which of the following is NOT a requirement in order to qualify for the SECURE Act’s annuity safe harbor provision to allow annuities into 401(k) plans:

The annuity provider must maintain proper reserves for all states it does business in and have done so for the past 7 years.

The annuity provider’s product must be the cheapest option available at time of review for addition into plan.

The insurance company’s ability to meet its financial obligations at the time of selection bust be reviewed.

Annuity provider must have been licensed in the state by the state insurance commissioner to provide such contracts for the past 7 years.

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* 10. John and Sarah, both age 35, have a child that is born on February 1, 2020. Due to costs associated with having their new child, John and Sarah become short on cash. Before the tax filing date for 2020, on March 1, 2021, John and Sarah pull out $5,000 each from their own fully-tax deferred IRAs ($10,000 total) to help with cash flow. Which of the following best illustrates the new SECURE Act childbirth exception?

As a couple, John and Sarah can only take out $5,000 as a couple not the $10,000 they took. As such, $5,000 will be subject to penalty tax but the full $10,000 will be subject to ordinary income.

The entire $10,000 is penalty tax and income tax free.

The entire $10,000 is taxable as ordinary income but is entirely penalty tax free.

The entire $10,000 is taxable as ordinary income and they do not meet the new exception for penalty tax free distributions.

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* 11. Which of the following is correct regarding the SECURE Act’s new qualified distribution rules for payment of student loans from a 529?

A 529 beneficiary can take out up to $10,000 each year to pay student loan interest from a 529 as a qualified distribution.

A distribution from a 529 to pay student loan interest of any family member, children and parents, of a 529 beneficiary will qualify as a qualified distribution.

A beneficiary of a 529 can pay off up to $10,000 of student loan interest as a qualified distribution from a 529 and deduct that student loan interest paid on their income taxes.

A beneficiary of a 529 can use up to $10,000 from a 529 to pay off both student loan interest or principal of the loan and qualify as a qualified distribution.

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* 12. The SECURE Act moved the required beginning date age from age 70.5 to age:

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* 13. The SECURE Act changed the age restrictions on saving in an IRA, allowing:

Anyone over age 70.5 to save in an IRA, even if they have no earned income.

Only those not in an employer sponsored retirement plan to now save in an IRA after age 70.5.

Those with earned income after age 70.5 to contribute to an IRA, either deductible or non-deductible depending on other factors.

Only non-deductible contributions or Roth IRA contributions to be made after age 72.

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* 14. Halie is age 75, and her husband Steve is age 68. Both Halie and Steve worked in 2020. They earned roughly $250,000 as a couple in modified adjusted gross income. How much can Halie and Steve contribute to a Roth IRA for 2020?

Halie can contribute $6,000 and Steve can contribute $6,000 to a Roth

Halie can contribute $7,000 and Steve can contribute $6,000 to a Roth

Halie cannot contribute to a Roth but Steve can contribute $7,000 to a Roth

Neither Halie nor Steve can contribute to a Roth IRA for 2020

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* 15. Halie is age 75 and her husband Steve is age 68. Only Halie continues to work in 2020, earning roughly $250,000 as modified adjust gross income. Halie is self-employed and does not have a 401(k) or any other retirement plan in place. How much can Halie and Steve contribute to a deductible IRA for 2020?

Neither Halie nor Steve can make a deductible IRA contribution for 2020.

Halie can make a $7,000 deductible IRA contribution for 2020, but a deduction IRA contribution for Steve cannot be made since he was not employed.

A deductible IRA contribution of $7,000 can be made for both Halie and Steve in 2020.

Halie and Steve can both make a $7,000 non-deductible contribution to an IRA for 2020, but cannot deduct it because they earned too much money.

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* 16. The excess contribution penalty for Roth IRA contributions is:

10%

50%

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* 17. If you turn age 72 in 2022, your first RMD from an IRA will need to come out by:

April 1, 2022

April 1, 2023

December 31, 2022

December 31, 2023

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* 18. Qualified charitable distributions can be done from an IRA as early as:

The day in which they reach age 70.5

The year in which they reach age 70.5

The day in which they reach age 72

The year in which they reach age 72

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* 19. Joe decides to make a $7,000 deductible IRA contribution after he reaches age 70.5 in 2023. In 2024, Joe decides to do a qualified charitable distribution (QCD) of $10,000. How much of Joe’s attempted QCD will qualify as a QCD?

$10,000 will qualify as a QCD

$0 will qualify as a QCD

$7,000 will qualify as a QCD

$3,000 will qualify as a QCD

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* 20. Once you reach age 72, you can defer required minimum distributions from a 401(k) at your current employer as long as you do not own more than what percent of the company?

10%

50%

51%

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* 21. Ashely and Jamie are married, work for the same company, and both reach age 72 this year. They each own 4% of their employer’s stock. They both own IRAs and participate in the company 401(k) plan with sizable balances. What of the following is correct regarding the still-working exception from required minimum distributions (RMDs)?

Since neither Ashely nor Jamie own 5 percent of the company, they will both qualify for the still working exception and can avoid RMDs from both their IRAs and their 401(k)s this year.

Since neither Ashely nor Jamie own 5 percent of the company, they will both qualify for the still working exception and can avoid RMDs from their 401(k)s this year but not from their IRAs.

Ashely and Jamie will be treated as owning each other’s shares of the company and therefore do not qualify for the still working exception and will need to begin RMDs from their IRAs and 401(k)s.

Ashley and Jamie will be treated as owning each other’s shares of the company and therefore do not qualify for the still working exception from the 401(k) requirements but since they are still employed they do not need to take RMDs from their IRAs.

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* 22. Jason died January 5, 2020. He left his IRA to his niece, Leslie, age 10. Which of the following best describes Leslie’s required minimum distributions from the inherited IRA?

Since Leslie is a minor, she will owe no RMDs until she reaches the age of majority.

Since Leslie is a minor, she can stretch RMDs until the age of majority and then she must take out the entire account by year 10 after the year in which she reaches majority.

Leslie being a minor has no impact on the amount of her RMDs for the inherited IRA.

The IRA must be distributed into a custodial brokerage account with a year after any IRA owner’s death if the beneficiary is a minor like Leslie.

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* 23. All of the following are eligible designated beneficiaries under the SECURE Act EXCEPT:

Minor Grandchildren of the deceased IRA owner

Disabled Persons

A person not more than 10 years younger than the deceased IRA owner

Spouse of the deceased IRA owner

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* 24. A charity listed as beneficiary of an IRA has how many years to distribute an IRA?

The Charity must distribute within 1 year after the date of death of the IRA owner.

The charity must distribute the account within 5 years after the date of death of the IRA owner.

The charity must distribute the account within 10 years after the date of death of the IRA owner.

The charity has no required distribution period because the charity will not pay income taxes on the distribution at any point.

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* 25. The 10-year distribution period under the SECURE Act for inherited retirement accounts goes into effect for government plans for those who pass away after:

January 1, 2019

December 31, 2019

December 31, 2020

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* 26. Joe has modified adjusted gross income (MAGI) of $200,000. He also has $20,000 of net investment income from real estate rental property. Let’s assume an IRA distribution causes an additional $30,000 of MAGI, sending his total to $230,000. What would Joe owe in net investment income taxes (3.8%)?

$760

$1,140

$8,740

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* 27. Which of the following is true with regards to Medicare’s income related monthly adjusted amount (IRMAA)?

IRMAA is phased in over different MAGI ranges that are the same for single and married filing taxpayers.

One dollar of MAGI over a threshold puts you into the new IRMAA rate.

IRMAA is not impacted by RMDs.

Part A premiums are the only premiums impacted by IRMAA.

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* 28. It is expected that the new 10 year RMD period for inherited IRAs will do all of the following EXCEPT:

Increase tax revenue for the Federal Government

Create additional incentives for Roth Conversions

Decrease the tax deferral value of inherited IRAs

Reduce the number of charitable remainder trusts used as beneficiaries of IRAs

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* 29. It is expected that the new 10-year required minimum distribution (RMD) period for inherited IRAs will do all of the following EXCEPT:

John died on December 31, 2019, leaving his IRA to his 30 year old daughter.

John died on January 5, 2020, leaving his federal thrift savings plan to his 30 year old daughter.

John died on January 5, 2020, leaving his IRA to his surviving spouse.

John died on January 5, 2020, leaving his IRA to his 11 year old niece.

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* 30. The new pass-through business deduction for 199A could be impacted in which of the following ways due to the new SECURE Act 10 year distribution period for inherited IRAs:

There will be no impact for small business owners inherited IRAs under the new 10 year provision as it relates to 199A

Larger taxable distributions from an inherited IRA could cause higher taxable income and lost 199A tax benefits.

Larger distributions from an inherited IRA could cause higher taxable income and increase a small business owner’s 199A deduction.

Small business owners can avoid RMDs on inherited IRAs and the impact on 199A by rolling the accounts into their 401(k)s.

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* 31. Which of the following is a helpful way to reduce taxable income in order for a small business owner to qualify for the 199A deduction:

The business owner should maximize their Roth 401(k) options.

The business owner should consider a large Roth conversions of inherited IRAs during one year to minimize the taxes over the 10 year stretch period.

The business owner could consider setting up a defined benefit plan to make larger tax deductible contributions to offset high taxable income in order to qualify for the 199A deduction.

The business owner should consider giving more to charity in order to bring down taxable income and help qualify for the 199A deduction.

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* 32. John dies in 2018, leaving his IRA to his brother Joe. Joe dies on January 5, 2020, leaving the inherited IRA to Joe’s son Steve. Steve is now the successor beneficiary. What happens to the required minimum distributions (RMDs) from the inherited IRA?

Steve will step into the shoes of his dad, and continue taking distributions just as his dad was taking.

Steve will now recalculate the RMDs of the inherited IRA based on his own life expectancy since this was a grandfathered inherited IRA.

Steve will have to distribute the entire IRA within a year of Joe’s death.

Steve will not have to distribute the entire account within 10 years after the year of death of Joe.

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* 33. After the SECURE Act, conduit trusts:

Will still play just as vital of a role as pre-SECURE Act in beneficiary planning for IRAs.

Need to be reviewed to make sure access language around RMDs matches up to the new SECURE Act 10 year distribution period for inherited IRAs.

Should all be transformed to accumulation truss.

Can no longer function as a way to help protect against spendthrift issues for heirs.

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* 34. Which one of the following is NOT a trigger for a qualified Roth IRA distribution of investment gains?

Death

Disability

College Education Expenses

Reaching age 59.5

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* 35. Which of the following is the correct ordering of Roth IRA distributions?

Contributions, Rollovers, Conversions, Growth

Conversions, Contributions, Rollovers, Growth

Growth, Contributions, Conversions, Rollovers

Contributions, Growth, Conversions, Rollovers

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* 36. Which of these situations would be the best scenario for a Roth conversion?

Jane, age 55, just got a new promotion is now earning the most she ever has in a single year. She does not expect her tax rates to go down in the future.

Ralph, age 40, just inherited a large IRA and started taking out large taxable distributions for the next 10 years. Ralph expects to be in a lower tax rate in the future.

Bobby, age 35, keeps moving up at work and expects over the next 5 or so years to more than double his income, significantly increasing his marginal tax rate in the near future.

Scott is age, 65, he is selling his business for a significant gain this year and plans on retiring in the following year.

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* 37. Which of the following is a benefit of a Roth IRA under the new SECURE Act rules for inherited IRAs?

Roth IRAs are not subject to RMDs once inherited.

Roth IRA growth is subject to taxation once inherited but only the growth that occurs after an individual inherits the account.

Inherited Roth IRAs, while subject to the 10-year distribution rule, could be left till the end of the 10th year following the owner’s death to grow tax free.

Roth IRAs are most beneficial for low income individuals to inherit.

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* 38. Which of following is a benefit of using life insurance as an estate planning strategy for passing over wealth?

Life insurance proceeds are taxed at long-term capital gains rates.

Life insurance held inside an ILIT can avoid inclusion in a taxable estate.

Life Insurance is a valuable IRA investment that can mimic the stretch provisions by providing a tax-free death benefit.

Life insurance premiums can be funded directly from an IRA without any gift tax or estate tax concerns.

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* 39. Which of the following is true regarding using a charitable remainder trust (CRT) as a beneficiary of an IRA?

It is best to gift IRAs to CRTs while alive as an inter vivos gift in order to maximize the gift tax benefits.

A CRT can be an effective way to give to a charity and provide lifetime distributions from an IRA left to a CRT at death of the owner.

A big benefit of leaving an IRA to a CRT at death is to create a large charitable income tax deduction for the estate.

CRTs provide tax free income to beneficiaries, but when the IRA is placed in the charity, the entire amount is subject to taxation that year.

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* 40. When using a charitable remainder trust, which of the following payments would be acceptable distributions from the trust?

A lifetime payment of 1% of trust assets a year

A 30 year term of 1% of trust assets a year.

A lifetime payment of 4% of trust assets a year.

A 10 year term of 5% of trust assets a year.

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* 41. Which of the following is NOT a requirement of a qualified disclaimer:

After a minor reaches age 18, he or she has only 9 months to disclaim property and have it treated as a qualified disclaimer.

A qualified disclaimer must be in writing and signed

A qualified disclaimer must be appropriately delivered.

A disclaimant cannot accept any benefits of the property they want to disclaim.

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* 42. Did you like the format for the seminar?

Yes