1

Romeo does not know the amount that his employer will contribute to his pension plan each year. He does know that his pension will be based on 2% of his earnings for each year of employment, based on the average of his best five years of income. From the following types of pension plans, to which one does Romeo belong?

a)

defined-contribution plan

b)

career-average pension plan

c)

best-earnings plan

d)

flat-rate plan

2

Dietrich is a member of a career-average, defined-benefit pension plan with a 2% unit. He joined the plan five years before retiring. At the time he joined the plan, his salary was $55,000 and his income will increase by $2,000 at the beginning of each year. What will be Dietrich's annual pension upon retirement?

a)

$4,000

b)

$4,640

c)

$5,000

d)

$5,900

3

Don has participated in a 1.5% per year of service, career-average, defined-benefit pension plan for the last four years. During those four years, his annual salary each year was $25,000, $25,000, $30,000 and $30,000. What annual pension entitlement has Don earned to date?

a)

$2,750.00

b)

$412.50

c)

$1,650.00

d)

$450.00

4

John and Frank started working for Green Acres Burial Services on the same day. During the entire period of their service to the company, John earned a substantially higher salary than Frank. John retired after 24 years of service and Frank retired after 25 years of service. Frank now receives a higher pension than John. To which of the following forms of pension plans did John and Frank belong?

a)

best-earnings plan

b)

flat-benefit plan

c)

career-average plan

d)

final-earnings plan

5

Wendel is a member of a defined-benefit pension plan. When he joined the company and the pension plan 15 years ago, his starting salary was low. After five years, he received a promotion that doubled his salary. He enjoyed regular salary increases over the next five years until he suffered ill health that forced him to leave his position. The company provided him with a low-stress clerical position at a reduced salary where he expects to remain until his retirement in two years time. Which of the following types of pension plans is best for Wendel?

a)

Flat-benefit

b)

Career average

c)

Final earnings

d)

Best earnings

6

For the past 25 years, Corrina has belonged to a defined-benefit pension plan where the pension entitlement is based on a 2% unit and best earnings over 3 consecutive years. Corrina plans to retire at the end of this year. During the past 10 years, her earnings initially rose consistently for 8 years, before declining slightly as she opted for a reduced work week in the last 2 years, as follows:

$28,000 9 years ago

$30,000 8 years ago

$32,000 7 years ago

$35,000 6 years ago

$39,000 5 years ago

$39,000 4 years ago

$40,000 3 years ago

$43,000 2 years ago

$38,000 last year

$37,000 this year

What will Corrina's annual pension entitlement be at retirement?

a)

$21,500.00

b)

$20,166.67

c)

$20,333.33

d)

$19,666.67

7

Samantha has belonged to a final earnings over three years, 2% unit, defined-benefit pension plan for the past 12 years. In her 10th, 11th and 12th year, she earned $45,000, $50,000 and $55,000, respectively. Samantha plans to retire after another 8 years. What pension entitlement has Samantha earned to date?

a)

$25,000

b)

$13,200

c)

$12,000

d)

$10,800

8

James is retiring after working for Grand Designs Inc. for 15 years. James belongs to a defined benefit pension plan that provides a benefit of 1.3% of final average earnings up to the final YMPE and 2% on final average earnings above the final YMPE for each year of service. The maximum pension benefit for the year is $2,646.67. If James has projected his final average earnings to be $140,000 and the final average YMPE to be $48,533, what will his annual pension benefit be?

a)

$36,904

b)

$39,700

c)

$42,000

d)

$48,533

9

Klare is the owner/operator of a successful metal shop. Klare is 32 years old, and draws a regular annual salary of $185,000. What response represents the MOST SIGNIFICANT deterrent to Klare establishing an individual pension plan for himself?

a)

He is the owner/operator of the business.

b)

He is a connected individual.

c)

He is only 32 years old.

d)

His level of income is too high.

10

Nancy is the sole owner-operator of a modestly successful surveying company. She is 52 years old and draws a regular salary of $40,000 per year. Why would an individual pension plan in all likelihood NOT be beneficial to Nancy?

a)

Her income is too low.

b)

She is the owner/operator of the company.

c)

She is over 45 years of age.

d)

She is a connected individual.

11

Jack, Fred, Mark and Emil are among the shareholders of the same corporation, where they are also employed. Jack holds 25% of the total shares, Fred holds 15%, Mark holds 10% and Emil holds 8%. Which of the shareholders are considered to be "connected individuals" for purposes of pension planning?

a)

all of them

b)

only Jack and Fred

c)

only Jack

d)

only Jack, Fred, and Mark

12

The New Age Furniture Company is considering setting up an IPP and they have come to you for advice. After reading about IPPs, the owner of New Age Furniture asks you for clarification of his understanding of IPPs. All of the following statements are true, EXCEPT:

a)

once an IPP is established, the prescribed contributions must be met every year.

b)

connected persons may only make past service contributions for service after 1991.

c)

the employer's contribution to an IPP on behalf of an employee is not subject to payroll tax.

d)

IPPs are costly and complex to administer.

13

Tanya belongs to a non-contributory profit sharing plan, along with 10 other employees. The allocation of pension entitlements is based on a points system that is directly linked to salary only. The total salaries of all staff amount to $480,000. Tanya herself earns $34,000. According to the terms of the plan, the employer contributes 10% of gross profits, less 50% of capital and operating expenses, to the plan. However, the company has realized a large loss this year. What is the MINIMUM amount of the pension contribution that accrues to Tanya?

a)

$0

b)

$1,000

c)

$340

d)

$780

14

Melissa, Christopher and June are the only three members of the profit sharing pension plan offered by their employer. Their employer's contributions are allocated according to a points system - one point for each year of service, and one point for each $1,000 in annual salary. Information for each member is provided below:

Melissa	$52,000	5 years of service
Christopher	$63,000	8 years of service
June	$47,000	4 years of service

If their employer contributes 10% of net profits, and net profits are $59,000, how much of the contribution accrues to June?

a)

$3,009

b)

$16,809

c)

$1,681

d)

$3,333

15

One of your clients, Jill, died recently at the age of 59. Her adult son, Robert, has asked you to explain the entitlements of Jill's estate to Jill's company pension plan. Jill was a widow and a vested member of the plan that has an NRA of 60. Jill's estate will receive:

a)

the pension to which Jill would have been entitled.

b)

nothing because all funds will revert back to the pension plan.

c)

at least Jill's contributions plus interest.

d)

the equivalent of an early retirement pension.

16

Karl's wife, Angela, works as an air traffic controller. At age 40, she has been a member of, and contributed to, her employer's pension plan for 8 years. Her pension falls under the jurisdiction of the federal Pension Benefits Standards Act (PBSA). If Angela dies tomorrow, Karl will be entitled to:

a)

receive a standard death benefit of 10% of Angela's salary

b)

transfer the value of her vested termination benefits to a locked-in RRSP

c)

receive a refund of Angela's contributions plus interest, in cash

d)

receive a reduced early retirement pension, payable on a joint and last survivor basis

17

Rhiannan is about to retire, and she was hoping to receive a cash settlement from her pension fund instead of a monthly annuity. Rhiannan may be able to receive a cash settlement for any of the following reasons, EXCEPT:

a)

her pension payment is less than $25 per month.

b)

She already has considerable retirement savings.

c)

her life expectancy is short due to a disability or poor health

d)

her pension is less than 2% of the YMPE in the year that service is terminated.

18

Sumaki is a member of a pension plan with an NRA of 65. The plan has a qualifying factor of 80 and Sumaki joined the company when he was 32. At what age could Sumaki take an unreduced early retirement pension?

a)

60

b)

65

c)

56

d)

58

19

Rickie joined a federally-regulated, defined-contribution pension plan three years ago. He asks you to explain vesting as it applies to his pension plan. Which of the following statements is TRUE?

a)

Rickie must work for the same employer for a minimum of 10 years before the employer's contributions to his pension plan become vested.

b)

Rickie must attain the age of 45 before the employer's contributions to his pension plan become vested.

c)

Rickie must work for the same employer for a minimum of 5 years before the employer's contributions to his pension plan become vested

d)

The contributions made by Rickie's employer are now vested.

20

Reese had met the vesting and locking-in requirements of his employer's registered pension plan when his employment was terminated. The plan is governed by the federal PBSA. His new employer has an RPP. Reese can do any of the following, EXCEPT:

a)

rollover his vested benefits into his new employer's RPP.

b)

transfer the vested benefits into a locked-in retirement account.

c)

leave the funds in the pension plan and accepting a deferred pension.

d)

receive a cash refund of his own contributions, plus interest.