Angie's employer has a qualified pension plan. The employer makes all payments into the plan; employees do not contribute to the plan. During the current year, the employer pays $5,000 into the plan on Angie's behalf. Which of the following statements is true?
I.Angie is not taxed on the $5,000 in the current year.
II.The $5,000 payment is excluded from her income in the current year, but she will pay tax on the $5,000 as she receives it.

Question

Angie's employer has a qualified pension plan. The employer makes all payments into the plan; employees do not contribute to the plan. During the current year, the employer pays $5,000 into the plan on Angie's behalf. Which of the following statements is true?
I.Angie is not taxed on the $5,000 in the current year.
II.The $5,000 payment is excluded from her income in the current year, but she will pay tax on the $5,000 as she receives it.
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Quizplus · Accepted Answer

Both statements are correct because employer contributions to a qualified pension plan are not considered taxable income to the employee in the year the contributions are made. Instead, the employee will be taxed on these amounts as they receive distributions from the plan in the future.

Angie's Employer Has a Qualified Pension Plan