10/5/2017 Entire Course (including glossary) Exam Question 54 Jerry begins worki
ID: 2602599 • Letter: 1
Question
10/5/2017 Entire Course (including glossary) Exam Question 54 Jerry begins working for his new employer on March 2, 2017. After several months, Jerry resigns from his current position and is notified that his accrued benefits in the qualified plan are $5,200, of which $1,200 is attributable to his current employment and $4,000 is attributable to his rollover of benefits from his prior employer's qualified plan. Which of the following statements is true for Jerry's current employer with respect to the cash-out rules, if Jerry does not state otherwise? The automatic IRA rollover rules apply because the accrued benefits from the current employer exceed $1,000 but do not exceed $5,000. The automatic IRA rollover rules apply because the rollover- accrued benefits exceed $1,000 but do not exceed $5,000. The cash rules may apply because the accrued benefits from the current employer do not exceed $1,500. A The cash-out rules do not apply because the accrued benefits exceed $5,000.Explanation / Answer
The True statement is
The Automatic IRA Rolleover rules apply because the rollover-accrued benefits exceed 1000 but do not exceed 5000
The provision of the amendment lowering the mandatory distribution threshold from $5,000 to $1,000 provides that rollovers will be included in determining whether the threshold has been met. This provision overrides the election made in the EGTRRA or post-EGTRRA amendments to disregard rollovers in applying the plan’s mandatory distribution provisions. The reason for this provision is that the purpose of lowering the threshold is to avoid totally dealing with the automatic IRA rollovers. However, the automatic IRA rollover rules apply to mandatory distributions of "amounts" over $1,000
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