Which of the following statements concerning retirement plans for the self-employed is true? I. They can be used by owners of incorporated businesses only. II. With certain exceptions, the same rules that apply to qualified corporate plans apply to retirement plans for the self-employed. A) I only B) II only C) both I and II […]
Which of the following statements about SIMPLE retirement plans is true? A) They are limited to employers with 100 or fewer eligible employees and who do not maintain another qualified plan. B) Employees are not permitted to make SIMPLE plan contributions. C) Employers are subject to more stringent nondiscrimination rules than those that apply to […]
Which of the following statements is (are) true with respect to vesting under a qualified retirement plan? I. Vesting helps to reduce labor turnover. II. An employee who terminates employment after four years of service has no vested retirement benefit under cliff vesting. A) I only B) II only C) both I and II D) […]
Rita went to work for a manufacturing company. The company offers a defined-benefit pension plan. The retirement benefit is equal to 1.5 percent multiplied by years of service with the company, and the result is multiplied by average salary in the three highest consecutive years of paid employment with the company. The benefit formula used […]
Which of the following statements is (are) true with respect to SIMPLE retirement plans? I. Only large employers can start a SIMPLE plan, provided the employer does not maintain another qualified plan. II. SIMPLE plans are exempt from most nondiscrimination and administrative rules that apply to qualified plans. A) I only B) II only C) […]
RST Company offers a qualified retirement plan. Each employee contributes 4 percent of his or her pretax income to the plan, and RST matches the employee’s contribution. An employee’s benefit at retirement is determined by his or her account balance at the time of retirement. What type of retirement plan does RST offer? A) defined […]
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
