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