412760RR Profit-Sharing and Similar Plans
1. Which of the following statements regarding hardship withdrawal limitations is true?
A. Employer contributions must accumulate for at least five years before they can be withdrawn.
B. Limitations apply only to employer contributions to the plan.
C. Hardship can be loosely defined and applied based on employee need and extenuating circumstances.
D. Employee contributions can be withdrawn at any time with certain restrictions.
2. You’re advising an employee about your company’s 401(k) plan and how it will benefit him. You explain that employees can put money into their accounts prior to paying taxes and choose the amount they would like to save. What other advantage does a 401(k) have for employees?
A. It can be fully funded by salary reduction by employees.
B. It provides access to their money if needed during employment.
C. It reduces unemployment. D. It has lower contribution limits.
3. Which of the following are not allocated to a participant’s account as of the valuation date?
A. Gains B. Investment earnings C. Incentives D. Losses
4. Which of the following is true regarding qualified domestic relations orders (QDROs)?
A. They can require a cash payment to trustees even if the participant has no right to one from the plan.
B. They allow a participant’s plan benefits to become the subject of negotiation in domestic disputes.
C. They can assign a benefit already assigned under a previous order.
D. They can assign a benefit the plan does not provide.
5. Under regulations, a stock bonus plan is a qualified-contribution plan similar to a profit-sharing plan. What, however, makes a stock bonus plan different from a qualified-contribution plan?
A. Employers’ contributions may be made in cash.
B. Employees can also contribute to after-tax savings.
C. Dividends can’t be re-invested to increase the participants’ accounts.
D. The plan contribution formula is based on employee compensation.
6. Karl’s annual salary is $90,000. Last year, he contributed $2,000 to his deferral plan. What is his actual deferral percentage?
A. 3.22% B. 2.22% C. 5.22% D. 4.22%
7. Which one of the following statements is true of 401(k) retirement plans?
A. Because a 401(k) plan is a qualified plan, its administration is simple and uncomplicated.
B. Integration of a 401(k) plan with Social Security is easily managed.
C. A 401(k) plan permits higher contribution levels than IRAs.
D. Even though a 401(k) plan is funded entirely on the basis of employee salary deferrals, the employer enjoys no tax advantages from this fact.
8. With the discretionary provision, _______ determines each year what amount will be contributed.
A. the benefit provider B. the employee C. the actuary D. the company’s board of directors
9. The essential requirements an individual must meet to achieve the desired tax shelter under the Section 403(b) tax deferred annuity plan (TDA) includes which of the following?
A. The individual must be employed on a full-time basis.
B. The individual must purchase the annuity offered by the employer.
C. The individual must be an employee or an independent contractor.
D. The individual must be employed by a qualified charitable organization or public school system
10. At what age are employees eligible to make catch-up contributions to their 401(k)?
A. 50 B. There is no age limit. C. 60 D. 55
11. Which one of the following individuals would most likely be eligible to participate in a Section 403(b) plan?
A. Dr. Bishop, a general practitioner who has an office at the local hospital and accepts both hospital and nonhospital patients
B. Mrs. Osaki, the owner of the bakery on South Street
C. Mr. Morelli, a science teacher at BearCreekMiddle School
D. Dr. Gonzalez, a psychologist who has an office downtown
12. Kim has decided to buy a condo so that she can rent it to tenants. She decides to take a loan from her qualified retirement plan for the down payment and closing costs. How much time does she have to repay this loan?
A. There’s no set amount of time during which she must repay the loan.
B. She must repay the loan within five years.
C. She must repay the loan before retirement or termination.
D. She must repay one-half the loan within one year.
13. When choosing his retirement plan, Mike selected a form that would pay his wife a 100 percent annuity for 15 years. This form of benefit is known as a/an _______ form.
A. constructed transitional B. optional alternative C. natural D. nonalienation
14. The_______ is the most common age-weighted approach designed to provide maximized benefits to highly compensated employees, while benefits for other employees provide what is required to meet Code Section 401(a)(4) regulations.
A. cross-tested plan B. age-weighted profit-sharing plan
C. fail-safe plan D. target plan
15. Which one of the following employers would be eligible to adopt a SIMPLE?
A. A company that maintains an SEP for its employees
B. An electrical contractor with 120 employees
C. A community center that maintains a 403(b) for its employees
D. Any nonprofit employer who does not maintain a 403(b) plan
16. Lassitude, Inc., a new and rapidly growing company, doesn’t have a qualified plan. However, the company would like to provide a salary savings plan for its employees in order to retain its current and new employees. Assuming that Lassitude decides to implement a SIMPLE, which one of the following statements is true?
A. An independent contractor would have to be hired to deal with the complicated paperwork involved.
B. Lassitude management will have to disclose to its employees that their savings won’t be portable.
C. Lassitude, Inc. has 100 or fewer employees.
D. Lassitude employees can rest assured that their savings will provide adequate retirement benefits.
17. Which of the following is a characteristic of a money-purchase defined-contribution pension plan?
A. It provides a better benefit to employees who enter the plan at older ages than other plans.
B. The employer is obligated to make the prescribed contributions each year.
C. The benefit provided at retirement can be accurately predicted
D. It is the most complex of all qualified plans.
18. In order to qualify for lump-sum distribution tax relief, a distribution must meet which of the following requirements?
A. The distribution must represent at least 75 percent of the employee’s benefit in the plan.
B. The employee must have participated in the plan for at least 2 years prior to receiving the distribution.
C. The distribution must be made in a single payment.
D. The distribution must be from a qualified plan.
19. James earns $80,000 per year. What is the limit on his deductible contributions if he has a simplified employee pension?
A. $45,000 B. $15,000 C. $20,000 D. $10,000
20. which of the following statements regarding a simplified employee pension (SEP) is correct?
A. The SEP must cover all employees over age 18 who have worked 2 full years of service, defined as at least 1,000 hours over the course of the year.
B. A SEP plan can exclude nonresident aliens.
C. Administrative costs for the SEP are higher than those for a regular qualified profit-sharing plan.
D. The employer must contribute to the SEP.