Question

1) jack has worked for the same corporation for 20 years. when he retired, he will receive an annual pension. the amount of his benefit will be based on the number of years he worked for the company, his age, and the history of his earnings with the company. jack participates in which of the following types of employer-sponsored retirement plans?

A) defined benefit plan

B)defined contribution plan

C)4012(k) plan

D)403(b) plan

2) Melody is single with a modified adjusted gross income of $71,000. she is covered by an employer-sponsored retirement plan.

she contributed $ 5,500 to her traditional IRA during the year. how much may she deduct?

A) $0 B) $1,100 C) $4,400 D) $5,500

3) All of the following are types of retirement plans self-employed taxpayers may establish for themselves and their employees except:

A) qualified defined contribution plans, such as 401(k) plan.

B) simplified employee pensions (SEPs).

C) simple IRAs.

D) spousal IRAs.

Answer 1

1. A.

Defined contribution plan is a contributory plan where both employee and employer contribute on regular basis.

4012 (k) plan or 401(k) plan is a retirement benefit plan which is sponsored by the employer.

403 (b) plan is a plan for certain class of employees like employees of public schools, employees of specific tax- exempt organizations etc.

2. D.

As per the rules for contribution to traditional IRA, a single under the age of 50 years can contribute to $5,500 even if they have employer sponsored retirement plans if MAGI is under the limit.

IRA is tax deuctible in the year in which it is contributed.

3. D.

In spousal IRAs, working spouse is elogible to contribute for his/her non working spouse. There is no role of employer and employee contributions under this plan