ABC Company offers a qualified retirement plan. ABC selected a funding instrument with an insurer in which the insurer promised to pay a specified interest rate for a number of years on a lump sum deposit. This funding instrument is called a A) trust-fund plan. B) group deferred annuity. C) separate investment account. D) guaranteed […]
Which of the following statements about the minimum vesting standards for a qualified defined benefit plan is (are) true? I. Under cliff vesting, an employee must be at least 50 percent vested after 5 years of service. II. Under graded vesting, an employee must be at least 20 percent vested after 3 years of service […]
Early distributions from qualified retirement plans are assessed a 10 percent penalty. However, there are some exceptions to this rule. All of the following distributions are exempt from the penalty tax EXCEPT A) lump-sum distributions made after age 59.5. B) lump-sum distributions made directly to the employee at any age when he or she changes […]
For a long-term employee who is covered by a defined benefit plan, the highest retirement income will be obtained if his/her retirement income is based on A) initial average pay. B) random year annual pay. C) career-average pay. D) final average pay. ANSWER Answer: D
Which of the following statements is true with regard to defined benefit and defined contribution pension plans? A) It’s easier for an employer to determine its annual pension contribution under a defined benefit plan than under a defined contribution plan. B) When a new pension plan is installed, it’s more beneficial for older workers if […]
As Social Security slants benefits in favor of lower-paid workers, the Internal Revenue Code permits employers to adjust pension contributions so that the overall contributions (pension plus Social Security) are nondiscriminatory. This adjustment permits employers to increase pension contributions for highly-compensated employees. Adjusting contributions to consider Social Security contributions is called A) prorating. B) indexing. […]
ACME Company is considering starting a retirement plan for its employees. One option ACME is considering is a profit-sharing plan. All of the following are advantages of this type of retirement plan EXCEPT A) The employer’s cost is not affected by the age and the number of employees. B) Profit sharing plans provide an incentive […]
) Which of the following distributions from a qualified retirement plan would be exempt from the 10 percent penalty tax if the distribution occurred before the covered employee was age 59.5? I. A distribution made to an employee with a qualifying disability. II. A distribution made to a beneficiary or to the employee estate’s after […]
Special vesting rules apply to qualified defined contribution plans with voluntary employee contributions and matching employer contributions. Which of the following statements is (are) true with respect to these vesting rules? I. Employer contributions must vest immediately. II. Graded vesting is permitted, and employer contributions must be 20 percent vested after 2 years, with an […]
Which of the following statements about withdrawals from Section 401(k) plans is (are) true? I. The penalty tax does not apply to hardship withdrawals. II. Withdrawals may be made without penalty at age 59.5 or older. A) I only B) II only C) both I and II D) neither I nor II ANSWER […]
