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 that credits each participant's account with a set percentage of their salary plus an interest credit based on a predetermined rate. The account grows over time, and the participant receives the accumulated balance at retirement.

Question 2

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

The target benefit plan is a type of qualified plan that combines features of both defined benefit and defined contribution plans. This plan sets a target benefit for each participant, similar to a defined benefit plan, but the actual benefit is based on the contributions made and the plan's investment performance, similar to a defined contribution plan. Money purchase plans and profit sharing plans are examples of traditional defined contribution plans, while Section 401(k) plans are a type of qualified defined contribution plan.

Question 3

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

40 quarters of credit, equivalent to 10 years of work, are necessary for an individual to be Fully Insured under Social Security and eligible for retirement benefits.

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

A Section 412(i) Plan is a type of defined benefit plan that is funded exclusively with insurance products, usually annuities. These insurance products provide guaranteed income streams to the plan participants upon retirement. While other investment options such as mutual funds and U.S. Treasury Bonds can be held within a defined benefit plan, they cannot be the exclusive funding source for a Section 412(i) Plan. Therefore, the best choice is option B, insurance products.

Question 5

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 set aside money for retirement.

Question 6

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

The answer of Under ERISA a Key employee is someone...

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

The answer of Which of the following is correct in...

Question 8

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

A Safe Harbor 401(k) plan would automatically satisfy the nondiscrimination tests by requiring the employer to make either a matching or non-elective contribution to all participants, which benefits the rank-and-file employees. This plan design allows highly compensated employees to maximize their contributions without worrying about failing nondiscrimination testing.

Deck 13: Planning Vehicles for Retirement