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
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
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. […]
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
) 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 […]
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
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 […]
Date: September 19th, 2020
A financial institution that provides for the accumulation or administration of the funds that will be used to pay pension benefits is called a A) trust fund. B) mutual fund. C) funding instrument. D) funding agency. ANSWER Answer: D
Date: September 19th, 2020
Which of the following statements about trust fund plans is (are) true? I. The trustee typically purchases annuities for retiring employees. II. The trustee guarantees the adequacy of the fund to pay the promised benefits. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: […]
Date: September 19th, 2020
Which of the following statements about pension funding agencies and funding instruments is true? A) Under a trust-fund plan, individual annuities are purchased each year for employees participating in the plan. B) A separate investment account is a group pension account with a life insurance company. C) If the funding instrument is a commercial bank, […]
Date: September 19th, 2020
