Pension plans are subject to excess contribution penalties. Which of the following are correct:
I.There is an excess contribution penalty for IRAs or Roth IRAs that equal 6% of the amount in excess of $5,500 or the value of the individual's IRA whichever is less.
II.A 10% excess contribution penalty applies to IRAs and Roth IRAs.

Question

Pension plans are subject to excess contribution penalties. Which of the following are correct:
I.There is an excess contribution penalty for IRAs or Roth IRAs that equal 6% of the amount in excess of $5,500 or the value of the individual's IRA whichever is less.
II.A 10% excess contribution penalty applies to IRAs and Roth IRAs.
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Quizplus · Accepted Answer

Statement I is correct, as there is a 6% penalty for excess contributions made to IRAs or Roth IRAs above the annual contribution limit of $5,500 (or $6,500 for those over age 50). However, statement II is incorrect, as the penalty for excess contributions is not a flat 10% for all plans.

Pension Plans Are Subject to Excess Contribution Penalties