Question 1

Which of the methods listed below is not used to determine substantially equal periodic payments?&#10;A)Amortization method.&#10;B)Annuitization method&#10;C)Periodic method.&#10;D)Required minimum distribution method.

Accepted Answer

The substantially equal periodic payments can be determined using the Amortization method, Annuitization method, and Required minimum distribution method. The "Periodic method" is not recognized as a method for calculating substantially equal periodic payments.

Question 2

Under _____ ,defined-benefit plans and _____ are protected from all forms of creditor judgments.&#10;A)ERISA / defined contribution plans.&#10;B)ERISA / profit sharing plans.&#10;C)PBGC / defined contribution plans.&#10;D)PBGC / profit sharing plans.

Accepted Answer

ERISA (Employee Retirement Income Security Act) protects defined-benefit plans and defined contribution plans from all forms of creditor judgments. The PBGC (Pension Benefit Guaranty Corporation) protects only defined-benefit plans. Profit sharing plans are a type of defined-contribution plan and are also protected under ERISA.

Question 3

Plan participants who were born before January 2,1936 and who receive a lump-sum distribution from a qualified retirement plan may be able to elect:&#10;A)5-year averaging.This is a distractor.&#10;B)10-year averaging.&#10;C)Qualified joint and survivor annuity.A lump sum distribution was elected therefore,this option is not available.&#10;D)Required minimum distribution method.This is a distractor.

Accepted Answer

Plan participants who were born before January 2, 1936 and who receive a lump-sum distribution from a qualified retirement plan may be able to elect 10-year averaging. This allows them to spread the tax liability from the distribution over ten years, potentially resulting in a lower tax rate overall. The other options (5-year averaging and qualified joint and survivor annuity) are not applicable in this scenario, and required minimum distribution method is not an election but a requirement once the participant reaches age 72.

Question 4

Which of the following benefits will provide payments for the employee's lifetime,as well as the spouse's lifetime?&#10;A)Qualified first and survivor annuity.This is a distractor.&#10;B)Qualified joint and survivor annuity.&#10;C)Qualified life only annuity.This is a distractor.&#10;D)Qualified required distribution annuity.This is a distractor.

Accepted Answer

The only option that provides payments for both the employee's and spouse's lifetime is the qualified joint and survivor annuity. Option A is a distractor because it only provides payments for the employee's lifetime and the survivor's lifetime. Option C only provides payments for the employee's lifetime. Option D is also a distractor as it is not an annuity type that provides payments for the lifetime of the employee and their spouse.

Question 5

Which of the following plans does not allow for a catch-up contribution?&#10;A)401(k).&#10;B)403(b).&#10;C)457(b).&#10;D)Profit sharing.

Accepted Answer

Profit sharing plans do not allow for catch-up contributions. Only 401(k), 403(b), and 457(b) plans allow participants who are 50 years or older to make additional contributions (beyond the regular contribution limits) as catch-up contributions.

Question 6

The sale of a security that has experienced a loss in value is:&#10;A)Net unrealized appreciation.&#10;B)Required minimum distribution.&#10;C)Section 72(t).&#10;D)Tax loss harvesting.

Accepted Answer

The sale of a security that has experienced a loss in value is known as tax loss harvesting. This strategy involves selling a security at a loss in order to offset capital gains and potentially reduce overall taxes owed.

Question 7

In order for an employer-sponsored retirement plan to be considered a qualified plan,it must provide that the retirement benefits cannot be assigned,alienated,or subject to attachment,or garnishment.Which of the following is an exception to this provision?

A)The collection of state employment taxes.This is a distractor.Should read: The collection of federal taxes.
B)Limited assignment of participant payments.This is a distractor.Should read: Limited assignment of benefit payments.
C)Loans secured by the participant's forfeitable benefits.This is a distractor.Should read: Loans secured by the participant's nonforfeitable benefits.
D)Qualified Domestic Relations Order.

Accepted Answer

A Qualified Domestic Relations Order (QDRO) is an exception to the provision that retirement benefits cannot be assigned or alienated. A QDRO is a court-issued order that directs a portion of a participant's retirement benefits to be paid to an alternate payee in the event of divorce or separation.

Question 8

What is the 2016 elective deferral limit for 401(k)and 403(b)plans?&#10;A)3 percent of compensation.&#10;B)5 percent of compensation.&#10;C)$12,000.00.&#10;D)$18,000.00.

Accepted Answer

The 2016 elective deferral limit for 401(k) and 403(b) plans is $18,000. This means that employees can contribute up to $18,000 of their income into their employer-sponsored retirement plan. Option A and B are too low, and option C is not correct for the 2016 year.

Deck 19: Applications in Planning for Retirement