Question 1

The Age Discrimination in Employment Act does not forbid employers from setting a mandatory retirement age for employees who are 65 years old.(Mandatory Retirement Age)

Accepted Answer

The Age Discrimination in Employment Act (ADEA) does not prohibit employers from setting a mandatory retirement age for employees who are 65 years old or older.

Question 2

Constructive receipt guides the timing of an executive's obligation to pay income taxes for funded nonqualified plans.(Funding Mechanisms)

Accepted Answer

Constructive receipt refers to the concept that an executive is considered to have received income when it is made available to them, even if they do not physically or actually receive it yet. In the case of funded nonqualified plans, this means that the executive is obligated to pay income taxes on the contributions made into the plan in the year that the funds are made available (i.e. funded), even if they do not receive the funds until a later year.

Question 3

The endorsement approach designates the employer as owner.(Split-Dollar Life Insurance)

Accepted Answer

In a split-dollar life insurance arrangement, the endorsement approach designates the employer as the owner of the policy and the employee as the insured.

Question 4

Trust funds and insurance contracts do not secure an employer's promise to make future payments.(Funding Status)

Accepted Answer

Trust funds and insurance contracts are mechanisms used to secure an employer's promise to make future payments, ensuring that funds will be available to meet the employer's obligations.

Question 5

Capital gains is the term used to describe the market value of stock options as listed on the NYSE.(Stock Options)

Accepted Answer

Capital gains refer to the profit made from selling an asset at a higher price than its original purchase price. It is not specific to stock options, and it does not refer to the market value listed on the NYSE.

Question 6

Corporate-owned life insurance can be used by employers to recover the costs of nonqualified deferred compensation.(Corporate-Owned Life Insurance)

Accepted Answer

Corporate-owned life insurance policies can be used by employers to recover the costs of nonqualified deferred compensation, as well as other employee benefits such as executive retirement plans or death benefits. The premiums paid by the employer are tax-deductible, and the death benefit paid out to the company upon the insured employee's death can be used to offset the costs of these benefits.

Question 7

For funded plans,executives generally pay federal income taxes when they begin to receive payments from these plans.(Funding Mechanisms)

Accepted Answer

The answer of For funded plans,executives generally pay federal income...

Question 8

Funded plans allocate money to trust funds or insurance company contracts in an executive's name.(Funding Status)

Accepted Answer

Funded plans are plans in which money is allocated to trust funds or insurance company contracts in an executive's name.

Question 9

Top hat plans are unfunded plans.(Supplemental Executive Retirement Plans (SERPs))

Accepted Answer

Top hat plans, also known as Supplemental Executive Retirement Plans (SERPs), are unfunded plans. This means that there is no funding set aside for the plan and the benefits are paid out of the company's general assets when they come due. These plans are typically offered to highly compensated executives as a way to supplement their regular retirement benefits.

Question 10

Collateral approach is a term used to indicate employer ownership of an insurance policy.(Split-Dollar Life Insurance)

Accepted Answer

Collateral approach in the context of Split-Dollar Life Insurance refers to an arrangement where the policy's cash value or death benefit serves as collateral for a loan or an agreement, not to employer ownership of the policy.

Question 11

Excess benefits plans can only be funded plans.(Excess Benefit Plans)

Accepted Answer

Excess benefit plans can be either funded or unfunded, but they are typically unfunded to comply with the requirements of the Employee Retirement Income Security Act (ERISA) and to provide tax advantages.

Question 12

The IRS limits the annual benefit amounts for a defined benefit plans to the lesser of $185,000 in 2017.(Defining Nonqualified Deferred Compensation Plans (NQDC))

Accepted Answer

The IRS does limit the annual benefit amounts for defined benefit plans, but the specific dollar amount can change annually due to adjustments for cost-of-living increases. The amount for 2017 was actually $215,000, not $185,000.

Question 13

Excess benefit plans generally have longer vesting periods than SERPs.(Contrasting Excess Benefit Plans and SERPs)

Accepted Answer

Excess Benefit Plans and SERPs (Supplemental Executive Retirement Plans) are both types of non-qualified deferred compensation plans, but there is no inherent rule or trend that suggests Excess Benefit Plans generally have longer vesting periods than SERPs. Vesting periods can vary widely and are typically determined by the specific terms set by the employer for each plan.

Question 14

ERISA Title I specifies minimum standards for participation and vesting protections for participants and beneficiaries.(ERISA Qualification Criteria)

Accepted Answer

ERISA Title I establishes minimum standards for retirement and health benefit plans in private industry, including rules for participation, vesting, benefit accrual, and funding, to protect individuals in these plans.

Question 15

The Securities Exchange Act of 1934 requires disclosure of company financial information and information about executive compensation practices; all companies must comply.(Securities Exchange Act of 1934)

Accepted Answer

Not all companies are required to comply with the Securities Exchange Act of 1934; only those that are publicly traded or have assets over a certain threshold and a sufficiently large number of shareholders are subject to its requirements.

Question 16

Only ERISA Title I holds provisions setting minimum standards required to qualify pension plans for favorable tax treatment.(ERISA Qualification Criteria)

Accepted Answer

ERISA Title I primarily deals with the protection of employee rights and interests, including fiduciary responsibilities, reporting and disclosure requirements, and enforcement provisions. The qualification criteria for pension plans to receive favorable tax treatment are actually found in the Internal Revenue Code, not ERISA Title I.

Question 17

The IRS uses the term "key employees" for nondiscrimination rules in employer-sponsored health insurance plans.(Who are Executives?)

Accepted Answer

The term "key employees" is used in the context of retirement plans for nondiscrimination testing, not specifically for employer-sponsored health insurance plans. The IRS defines key employees for purposes like top-heavy testing in retirement plans.

Question 18

An employee in a high policymaking role manages the overall company and directs the work of two or more people.(Mandatory Retirement Age)

Accepted Answer

The description provided is more aligned with a managerial role, but mandatory retirement age policies are not determined by the number of people managed.

Question 19

A stock option is a company's offering of stock to an employee.(Basic Terminology)

Accepted Answer

A stock option is the right granted by a company to an employee to buy a set amount of shares of the company's stock at a fixed price for a limited period of time.

Question 20

The IRS has no impact on nonqualified plans.(Defining Nonqualified Deferred Compensation Plans (NQDC))

Accepted Answer

The IRS does have an impact on nonqualified plans as they are subject to various tax laws and regulations.

Quiz 11: Nonqualified Deferred Compensation Plans for Executives