1 Ownership share 5% Current year salary $130,000 Prior year salary $100,000 2 Ownership share 6% Current year salary $90,000 Prior year salary $80,000 3 Ownership share 4% Curr (Points : 3)

2 and 4

2 and 3

4 only

1 and 2

Question 2.2. Assume Joseph and Rita would like to be able to spend $48,000 per year (in today's dollars) when they retire in 7 years. They believe they can earn a 7% annual after-tax return on any invested funds and that inflation will be 4% annually over this same time-frame. What future annual income will Joseph and Rita need to meet their 1st-year retirement expenditures? (Round to the nearest dollar.) (Points : 3)

$63,165

$48,000

$58,573

$77,078

Question 3.3. Why would a qualified retirement plan include real estate among its portfolio of investment assets? (Points : 3)

As an inflation hedge

To fund future fixed obligations

Because real estate is always considered to be a very low risking holding

To provide increased liquidity

Question 4.4. Sheila is 45 years old. She withdraws $10,000 from one of her IRAs, and 30 days later deposits the entire amount into another IRA. What are the income tax implications of this transaction? (Points : 3)

Sheila does not include any portion of the $10,000 in her gross income.

The entire $10,000 is includable in Sheilas gross income.

Sheila will receive $9,000 as gross income and $1,000 will be withheld as a premature withdrawal penalty.

The distribution is subject to 20% mandatory withholding.

Question 5.5. Bland Foods, Inc. has 100 employees. Which of the following employees listed is(are) considered a key employee in 2015?

1 Ownership share 5% Current year salary $130,000 Prior year salary $100,000 Officer Yes 2 Ownership share 6% Current year salary $90,000 Prior year salary $80,000 Officer No 3 Ownership share 4 (Points : 3)

2 and 4

1 and 2

4 only

2 and 3

Jonathan wants to establish a retirement plan for himself. Which of the following actions is appropriate to shelter the maximum amount of Jonathans current taxable income? (Points : 3)

He may establish a profit-sharing (Keogh) qualified plan with deductible contributions of 20% of his Schedule C income, as adjusted.

He should establish a Roth IRA with annual contribution amounts of $5,500.

He should establish a SIMPLE IRA.

He should establish a traditional IRA with annual contribution amounts of $5,500.

Question 7.7. ERISA requires reporting and disclosure of plan information to all of the following EXCEPT (Points : 3)

plan sponsors

Internal Revenue Service (IRS)

Department of Labor (DOL)

plan participants

Question 8.8. Which of the following plans is(are) NOT a cross-tested plan(s)?

1 New comparability plan

2 Employer stock ownership plan

3 Age-based profit-sharing plan

4 Stock bonus plan (Points : 3)

2 and 4

1, 2, 3 and 4

3 and 4

2 only

Question 9.9. A qualifying lump-sum distribution from a qualified plan may be eligible for favorable income tax treatment. Which of the following events may allow qualifying lump-sum distribution tax treatment for an employee/participant?

1 The employees attaining age 59

2 The participants purchase of a primary residence

3 Financial hardship

4 Employee separation from service (Points : 3)

1 and 4

1, 2, 3 and 4

1 only

3 only

Question 10.10. George, age 55, earns $250,000 and participates in his employers SIMPLE IRA. The employer match is on a dollar-for-dollar basis, up to 3% of each participating employee's compensation for the year.. What is the maximum amount of employee and employer contributions that can be contributed to Georges account in 2015? (Points : 3)

$23,000

$18,800

$15,500

$6,500

Question 11.11. Which of the following statements regarding a target benefit pension plan is (are) CORRECT?

1 The services of an actuary are required in the 1st year of operation.

2 The plan is funded using the percentage of compensation approach.

3 Minimum funding standards apply.

4 A target benefit pension plan is a type of defined benefit pension plan. (Points : 3)

1, 2 and 3

1, 2, 3 and 4

1 only

2 only

Question 12.12. All of the following are characteristics of traditional defined benefit pension plans EXCEPT (Points : 3)

employees assume the risk of poor investment results

they are complex to design and operate

benefits are guaranteed by the Pension Benefit Guaranty Corporation (PBGC)

the employer is required to make annual contributions

Question 13.13. If partially vested participants in a qualified defined benefit pension plan terminate their employment with the sponsoring employer, how must the plan handle the unvested portion of their benefits? (Points : 3)

Use them to reduce employer contributions for that plan year.

Pay them in cash to the sponsoring employer.

Reallocate them among the remaining plan participants.

Pay them in cash to the terminated employees.

Question 14.14. Which of the following descriptions of the effect of using an actuarial method or assumption in the funding of a defined benefit pension plan is CORRECT? (Points : 3)

The higher the turnover rate assumed by the actuary, the lower the required annual employer contribution and cost.

The greater the assumed rate of return used by the actuary, the greater the projected total cost of the plan.

If the projected benefit cost method is used and the number of plan participants remains unchanged, the plan's cost will increase actuarially each year.

If the accrued benefit cost method is used, each year's plan cost will decrease because there are now fewer years until plan distributions.

Question 15.15. In which of the following pension plans are benefits covered by the Pension Benefit Guaranty Corporation (PBGC)?

1 Cash balance pension plans

2 Money purchase pension plans

3 Target benefit pension plans (Points : 3)

1 only

2 only

3 only

1, 2 and 3

Question 16.16. Which of the following statements regarding the benefit a participant is to receive from a defined benefit pension plan for which the PBGC has assumed financial responsibility in 2015 is CORRECT? (Points : 3)

The benefit paid by the PBGC may be less than the benefit originally promised in the defined benefit plan.

A maximum benefit equal to the annual additions limit of $53,000 annually is paid to the plan participant upon retirement.

The maximum benefit the plan participants can receive is reduced to $210,000 annually.

The benefit for the plan participants is capped at the covered compensation limit of $265,000.

Question 17.17. Which of the following types of retirement plans is insured by the Pension Benefit Guaranty Corporation (PBGC)? (Points : 3)

A traditional defined benefit pension plan

A target benefit pension plan

A money purchase pension plan

An ESOP

Question 18.18. A fully insured Section 412(e)(3) pension plan is funded exclusively by (Points : 3)

cash value life insurance or annuity contracts

municipal bonds

bluechip stocks

Treasury bonds

Question 19.19. In which of the following pension plans are benefits covered by the Pension Benefit Guaranty Corporation (PBGC)?

1 Cash balance pension plans

2 Money purchase pension plans

3 Target benefit pension plans (Points : 3)

1 only

2 only

3 only

1, 2 and 3

Question 20.20. Which of the following types of retirement plans is insured by the Pension Benefit Guaranty Corporation (PBGC)? (Points : 3)

A traditional defined benefit pension plan

A target benefit pension plan

A money purchase pension plan

An ESOP