What kind of annuity is described when an employee contributes to an individual annuity and the employer also contributes to a separate company pension plan?

• A. Nonqualified annuity
• B. Qualified retirement annuity
• C. Immediate annuity
• D. Annuity certain

Answer: (B)

This question tests the distinction between a tax-qualified retirement arrangement and other types. When an employee contributes to an individual annuity and the employer contributes to a separate company pension plan, the overall setup is a qualified retirement program. That means the plan meets IRS/ERISA rules and enjoys tax advantages, such as tax-deferred growth and potential tax-deductible employer contributions.

A nonqualified annuity is funded with after-tax dollars and doesn’t involve the same tax-advantaged treatment or employer-sponsored qualification. An immediate annuity refers to when payments begin, not how the plan is qualified. Annuity certain describes a payout guarantee period, not the tax qualification of the retirement arrangement.