Question 1

Which of the following defined benefit plans makes a contribution to a hypothetical account for plan participants?&#10;A)Allocated Plan.&#10;B)Cash Balance Plan.&#10;C)Section 412(i)plan.&#10;D)Traditional Plan.

Accepted Answer

A cash balance plan is a type of defined benefit plan where the employer contributes to a hypothetical account for each plan participant. The account grows with interest and plan participants are guaranteed a specific benefit at retirement based on their account balance. Allocated plans and traditional plans do not have this feature, while Section 412(i) plans are a specific type of defined benefit plan that uses life insurance contracts as a funding vehicle.

Question 2

How many quarters of credit are necessary for an individual to be Fully Insured under Social Security and receive retirement benefits?&#10;A)10.&#10;B)20.&#10;C)40.&#10;D)60.

Accepted Answer

To be fully insured under Social Security and receive retirement benefits, an individual must earn 40 quarters of credit, which is equivalent to 10 years of work history.

Question 3

Which of the following qualified plans combines features of defined benefit and defined contribution plans?&#10;A)Money Purchase Plan.&#10;B)Profit Sharing Plan.&#10;C)Section 401(k)Plan.&#10;D)Target Benefit Plan.

Accepted Answer

A target benefit plan is a type of qualified plan that combines features of defined benefit and defined contribution plans. It provides retirement benefits based on a predetermined target benefit, similar to a defined benefit plan, but the contributions are flexible, much like a defined contribution plan.

Question 4

A Section 412(i)Plan is funded exclusively with:&#10;A)Guaranteed Investment Contracts.&#10;B)Insurance Products.&#10;C)Mutual Funds.&#10;D)U.S.Treasury Bonds.

Accepted Answer

Section 412(i) plans are defined benefit plans that are funded solely with insurance products such as annuities or life insurance policies. Guaranteed Investment Contracts, U.S. Treasury bonds, and mutual funds are not permissible investments for these plans.

Question 5

Under ERISA a Key employee is someone who is:&#10;A)A one-percent or more owner (current plan year).&#10;B)A five-percent or more owner (current plan year).&#10;C)An employee earning in excess of $120,000 in the preceding year.&#10;D)An officer of the company (current plan year).

Accepted Answer

Under ERISA, a key employee is defined as a five-percent or more owner of the company.

Question 6

Which of the following plans automatically satisfies the nondiscrimination tests by mandating an employer contribution?&#10;A)Employer 401(k)plan.&#10;B)Mandate 401(k)plan.&#10;C)Safe Harbor Section (401(k)plan.&#10;D)Section 401(k)plan.

Accepted Answer

Safe Harbor Section (401(k) plan) automatically satisfies the nondiscrimination tests by requiring the employer to make contributions to the plan on behalf of employees. This ensures that the plan doesn't discriminate in favor of highly compensated employees and meets the requirements of the IRS. The other options listed do not automatically satisfy the nondiscrimination tests and may require additional testing to ensure compliance.

Question 7

Which of the following is correct in order for a divorced spouse to receive Social Security retirement benefits based on the former spouse's earnings history?&#10;A)The divorced spouse filing for benefits must be at least age 60.&#10;B)The former spouse must not have remarried.&#10;C)The marriage must have lasted at least two years.&#10;D)The spouses must have divorced at least two years previously.

Accepted Answer

A divorced spouse can receive Social Security benefits based on the former spouse's earnings if the marriage lasted at least 10 years, the divorced spouse is unmarried, is age 62 or older, and the divorce occurred at least two years ago.

Question 8

Which of the following is a specific retirement plan for self-employed individuals who are owners of unincorporated businesses such as sole proprietorships and partnerships?&#10;A)ESOP.&#10;B)HR-10 plan.&#10;C)Simple IRA plan.&#10;D)Section 401(k)plan.

Accepted Answer

The HR-10 plan, also known as the Keogh Plan, is specifically designed for self-employed individuals and owners of unincorporated businesses, allowing them to save for retirement.

Deck 13: Planning Vehicles for Retirement