JKL Company just converted its traditional defined-benefit plan to another type of plan. Under the plan, benefits are defined in terms of a hypothetical account balance, with retirement benefits dependent upon the value of the participant’s account at retirement. Each year, employees receive an interest rate credit and a pay credit which is a specified […]
Which of the following is a reason that social insurance programs exist? A) to compete with private insurance programs B) to provide a base of economic security C) to provide needs-tested benefits to low-income individuals D) to reduce involvement of the government in insurance markets ANSWER Answer: B
All of the following statements about 403(b) plans are true EXCEPT A) Contributions to a 403(b) reduce an employee’s taxable income. B) 403(b) plans are designed for employees of public school systems and tax-exempt organizations. C) The law limits the amount of income that an employee can elect to defer under a 403(b) plan. D) […]
Which of the following statements about Roth 401(k) plans is true? I. Contributions to a Roth 401(k) plan are made with before-tax dollars. II. Qualified distributions from a Roth 401(k) are received income-tax free. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: B
Which of the following statements is (are) true with respect to profit-sharing plans? I. There is no limit on the amount that an employer can contribute annually to an employee’s account under a profit sharing plan. II. Profit sharing plans offer greater funding flexibility for employers than under other qualified plans. A) I only B) […]
Lynn works for a state university. In addition to the university’s regular retirement plan, Lynn participates in another retirement savings plan. She elected to have $5,000 of her salary withheld and contributed to a tax-sheltered annuity with an insurer. The type of plan that Lynn established is called a A) SIMPLE plan. B) 403(b) plan. […]
Which of the following statements concerning defined benefit and defined contribution pension plans is (are) true? I. The employer bears the investment risk with a defined contribution plan. II. Defined benefit plans favor workers who enter the plan at older ages. A) I only B) II only C) both I and II D) neither I […]
In the context of employee benefits, the term “discrimination” refers to benefit comparisons between A) male and female employees. B) current employees and retirees. C) highly compensated employees and non-highly compensated employees. D) members of an under-represented group (by religious preference, race, or national origin) and the majority of employees. ANSWER Answer: C
Which of the following statements is (are) true regarding cash-balance pension plans? I. Cash balance plans are defined contribution plans. II. Under a cash balance plan, the employer creates an investment account for each employee into which the employer makes actual contributions and allocates investment gains and losses. A) I only B) II only C) […]
Under one type of retirement plan for small businesses, the employer contributes to an IRA established for each eligible employee. Under this type of plan, the contribution limits are significantly higher than they are for traditional IRAs and Roth IRAs. This type of plan, which requires little paperwork, is called a A) simplified employee pension […]
