Stock Bonus Plans (Chp 6)
When an employee can require the employer to repurchase stock at the fair market value on the distribution date.
What is a put option?
The watchdog for Employee Retirement Income Security Act (ERISA).
403b plans are retirement plans for these.
What are public schools or education organizations AND tax-exempt organizations under IRC 501c3.
Deferred compensation is used to help higher earners ensure that they are able to have ______ that supports their lifestyle.
What is wage replacement ratio?
When a plan sponsor no longer makes contributions to the plan and participants must still meet vesting requirements but something is amiss.
What is a plan freeze?
The value of the stock or the cash at the date of the contribution.
100% – 6.2% - 1.45% = 92.35% (SS & Medicare)
What is the multiplier used for determining earnings subject to self-employment tax?
ERISA only cares about 403bs that do this.
What is they do NOT contribute to the plan?
If you take or you can touch or at no risk of loss, you pay tax.
What are constructive receipt and substantial risk of forfeiture?
These are all types of tax-exempt entities. (Name three).
What are:
•Trade Associations
•Religious Organizations (not churches)
•Private Hospitals
•Rural Electric Cooperatives
•Farmers’ Cooperatives
•Private Schools
•Labor Unions
•Charitable Organizations
These three things are deductible on the employer tax return of a LESOP.
What is value of the stock/cash at the date of contribution, interest, and dividends?
Reasons to amend or terminate a qualified plan. (Four Total)
What....
* Maximize benefits for key employees
* Law changes
* Employer is unable to support plan contributions
* Benefits provided to plan participants were not sufficient
These plans are not aggregated with 401k, 403b or SIMPLE deferral limits.
What are 457(b)s?
This is a type of disqualifying position.
What is a cashless exercise?
The discounted price at which employees can purchase stock.
What is no less than 85% of a date determined stock price or an average stock price?
A qualified participant may force investment diversification within their account at this stage in their career.
What is attaining at least age 55 and completing ten years of participation in the plan?
Name the types of termination.
What are Standard, Distress, and Involuntary?
Employers may have no other retirement plan and employees are automatically enrolled.
What is a safe harbor 403b?
Employee election to include value of stock in taxable income at date of grant rather than at date of vesting or when restrictions are lifted and at this point in time.
What is IRC Section 83(b) and filed no later than 30 days after the stock is transferred?
What are:
Profit Sharing Plans
Stock Bonus Plans
ESOPs
401k Plans
New Comparability Plans
Age-Based Profit Sharing Plans
Diversification for an ESOP.
What is 25% (cumulative) for the first five years of the election period, and up to 50% by the end of the sixth?
Reasons the PBGC would initiate termination. (Four Total)
What are ....
* minimum funding requirements have not been met
* plan cannot pay current benefits when due* a lump-sum payment was made to a substantial owner
*loss to PBGC is expected to be unreasonable
The catch-up contribution rules for a 403b and a 457b.
403b
For 2025, the maximum deferral contribution is $34,000 for age 50+ ($37,750 ages 60-63).
•$23,500 – Employee deferral
•$7,500 – Age 50 and over catch-up (or $11,250 ages 60-63)
•$3,000 – 15-year catch-up
457
•Three years prior to normal retirement age an employee may defer an additional $24,500 for 2026 to the 457 plan.
•Limited to prior unused deferral amounts
•Maximum contribution equals $49,000: $24,500 deferral contribution + $24,500 catch-up contribution (2026)
•Cannot include 50 and over catch-up contribution when determining the final 3-year catch-up
Taxation of ISOs and NQSOs at Grant Date.
What is:
ISOs -
No taxable income unless exercise price is less than fair market value at date of grant.
NQSOs -
No taxable income unless exercise price is less than fair market value at date of grant.
Taxation of ISOs and NQSOs at Exercise.
What is:
ISOs:
No regular tax
AMT adjustment equal to appreciation over the exercise price (the bargain element)
NQSOs:
Executive will have W-2 income for the appreciation over the exercise price (bargain element).
Employer has income tax deduction for same amount.