Ray died this year at age 73, and his wife, Mary, age 55, is the designated beneficiary on his Roth IRA. Ray's Roth IRA was established 3 years ago. Which of the following statements is(are) CORRECT?

I Ray was not subject to required minimum distributions from his Roth IRA during his lifetime.

II If Mary chooses to distribute the entire balance of the Roth IRA this year, the distribution may be subject to both regular income tax and an early withdrawal penalty tax of 10%.

Question 1 options:

1)

Both I and II

2)

I only

3)

II only

4)

Neither I nor II

Joe, age 52, has just started a consulting company. He currently employs 6 people, who range in age from 22 to 31 years old. The average employment period for his employees is approximately 4 years. He would like to implement a defined contribution plan and use an appropriate vesting schedule that is most favorable to his business. Which of the following vesting schedules is most appropriate for Joe's company?

Question 2 options:

1)

2to6year graded

2)

3year cliff

3)

3to7year graded

4)

100% immediate vesting

Which of the following is NOT a characteristic of a target benefit pension plan?

Question 3 options:

1)

Employer bears the investment risk

2)

Requires services of an actuary at inception of the plan

3)

Tends to favor older plan participants

4)

Is a type of defined contribution plan

What is the maximum percentage of net selfemployment income that can be a deductible contribution to a Keogh profit?

Question 4 options:

1)

20%

2)

10%

3)

25%

4)

15%

Which of the following statements regarding Social Security is NOT correct?

Question 5 options:

1)

The primary insurance amount (PIA) is the amount payable to a worker at the earliest retirement age of 62.

2)

All benefits paid to a covered worker are based on the worker's primary insurance amount (PIA).

3)

The maximum annual compensation considered in the calculation of Social Security benefits is limited to $118,500 in 2015.

4)

A worker's average indexed monthly earnings (AIME) is based on the worker's lifetime earnings history.

Large Manufacturer, Inc. has grown quickly in the last few years and is now interested in providing a retirement plan for its 2,000 employees. Which of the following is(are) a factor that should provide a guide to the company in selecting a retirement plan for a business?

1 Employees' attitude toward investment risk

2 Employer's attitude toward investment risk

3 Employees' financial condition

4 Employer's financial condition

Question 6 options:

1)

2 and 4

2)

1, 2, 3 and 4

3)

1 and 3

4)

1, 2 and 3

Which of the following benefits is(are) available to a worker's survivors in both the fully insured and currently insured status?

1 Lumpsum death benefit of $255

2 Surviving spouse benefit for a widow(er) who is age 60 or over

3 Dependent child benefit

4 Dependent parent age 62 or over benefit

Question 7 options:

1)

1 and 3

2)

1, 2, 3 and 4

3)

2 and 4

4)

1 and 2

Gordon has met the 2 tests required for a hardship withdrawal from his profitsharing plan with his employer. Which of the following is a qualifying reason for which money may be withdrawn using the hardship withdrawal rules?

Question 8 options:

1)

Gordon, who is experiencing extreme financial difficulties, is using the withdrawal to prevent a foreclosure on his primary residence.

2)

None of these reasons qualify for a hardship withdrawal.

3)

Larry, Gordon's cousin, has asked him for the funds to pay his college costs this semester. Larry is not Gordon's dependent.

4)

Gordon needs the money to loan to his uninsured best friend (not a dependent) to pay for medical costs.

Question 9

(1 point)

Mark participates in a Section 401(k) plan maintained by his employer. His vested account balance is $25,000, and he has never taken a prior loan from the plan. What is the maximum loan amount he can take from his Section 401(k) plan?

Question 9 options:

1)

$12,500

2)

$15,000

3)

$10,000

4)

$25,000

Taylor died at age 60 having been a participant in his employer's Section 401(k). He also owns 2 traditional IRAs consisting entirely of deductible contributions and a Roth IRA that contains no conversion contributions. His beneficiary is his son, Jack, age 35. Which of the plans is(are) subject to required minimum distributions (RMDs) after Taylor's death?

1 Traditional IRAs

2 Roth IRA

3 Section 401(k) plan

Question 10 options:

1)

1, 2 and 3

2)

1 and 2

3)

None of these because Taylor died before his required beginning date for RMDs

4)

1 and 3

Bland Foods, Inc. is considering the implementation of a stock bonus plan. Which of the following is(are) a disadvantage to the employer of implementing a stock bonus plan?

1 The employer does not have to deplete cash to make contributions to the plan.

2 Ownership of the company is diluted when the shares are contributed to the plan.

3 Employees participating in the plan may defer taxation on the net unrealized appreciation on a lumpsum distribution of the employer stock.

Question 11 options:

1)

2 only

2)

1, 2 and 3

3)

1 and 3

4)

1 and 2

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?

Question 12 options:

1)

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

2)

The entire $10,000 is includable in Sheila's gross income.

3)

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

4)

The distribution is subject to 20% mandatory withholding.

Which of the following statements regarding target benefit pension plans is(are) CORRECT?

1 The ultimate account balance for the employee's account is guaranteed by the plan.

2 Target benefit pension plans tend to favor older participants.

3 Target benefit pension plans are a type of defined contribution plan.

4 Each plan participant has an individual account in the plan.

Question 13 options:

1)

2, 3 and 4

2)

1 only

3)

1, 2, 3 and 4

4)

3 only

Which of the following is considered to have received earned income for purposes of making contributions to a traditional IRA?

Question 14 options:

1)

Lucy has received $12,000 in alimony this year and $15,000 in child support.

2)

Carl's total income of $30,000 is received from his rental properties.

B) Pat receives pension income of $18,000 annually, in addition to her $12,000 of Social Security benefits.

D) Margaret receives $35,000 annually in interest and dividend distributions from her parents' trust.

Which of the following statements regarding qualified joint and survivor annuities (QJSA) is(are) CORRECT?

I A QJSA is an optional benefit that must be elected by the plan participant in a defined benefit pension plan in order for the survivor to receive the benefit.

II A QJSA may apply to a money purchase pension plan under certain circumstances.

Question 15 options:

1)

II only

2)

I only

3)

Both I and II

4)

Neither I nor II

Carol has been researching IRAs and learning of the advantages and disadvantages of using an IRA as a retirement savings vehicle. Which of the following statements regarding an IRA is CORRECT?

Question 16 options:

1)

Earnings on assets held in an IRA are not subject to federal income tax until withdrawn from the account.

2)

When the investments in an IRA consist solely of securities, net unrealized appreciation (NUA) treatment of a lumpsum distribution is available.

3)

Certain taxpayers may be eligible for an income tax credit for contributions to a traditional IRA but not for a Roth IRA.

4)

Eligible individuals may contribute up to $5,500 to an IRA and an additional $1,000 when age 40 or over.

All of the following workers are covered under the Social Security system EXCEPT

Question 17 options:

1)

certain federal civil service workers hired prior to 1984

2)

a minister

3)

a selfemployed individual

4)

an independent contractor

Barry's full retirement age is 67. He wants to take early retirement and retire at age 62. If Barry retires at age 62, what is the reduction percentage that will be used to calculate his benefit?

Question 18 options:

1)

30%

2)

0%

3)

25%

4)

20%

Porter has reached retirement age after working for the same employer for 25 years. His employer has a defined benefit pension plan for which the PBGC has assumed financial responsibility. Disregarding Porter's actual accrued benefit in the plan, what is the maximum annual benefit Porter could receive under PBGC administration of the plan?

Question 19 options:

1)

$60,132

2)

$210,000

3)

$53,000

4)

$265,000

Consider the following employee information for ABC Company:

Employee; Prior Year Compensation; Ownership %

1 $150,000; 70%

2 $127,000; 4%

3 $75,000; 6%

4 $80,000; 2%

In the year 2015, which of these employees are highly compensated for purposes of the qualified plan coverage rules?

Question 20 options:

1)

1, 2 and 3

2)

1 and 4

3)

3 and 4

4)

2, 3 and 4

Under the minimum distribution rules and the Uniform Lifetime Table, Jason was required to take a minimum distribution of $10,000 for last year from his IRA. However, a distribution of only $8,000 has been made. What is the dollar amount of the penalty that may be assessed in this situation?

Question 21 options:

1)

$1,000

2)

$2,000

3)

$4,000

4)

$5,000

Which of the following persons may receive a Social Security benefit as a survivor of the fully insured worker?

1 A dependent parent age 62 or over

2 An unmarried dependent child under age 19 and still in high school

3 A dependent disabled child who was disabled before age 22

Question 22 options:

1)

1, 2 and 3

2)

1 and 2

3)

1 and 3

4)

2 and 3

Which of the following statements regarding the conversion of a traditional IRA consisting entirely of deductible contributions and earnings to a Roth IRA is(are) CORRECT?

1 The converted amount is treated as a taxable distribution from the traditional IRA.

2 The 10% premature penalty applies if the owner is not at least 59 years old.

3 Taxpayers who are age 70 and older may not convert a traditional IRA to a Roth IRA.

4 If the converted assets from the traditional IRA will not remain in the Roth IRA for a relatively long time, conversion is generally advisable.

Question 23 options:

1)

1 only

2)

1, 2 and 4

3)

1, 2, 3 and 4

4)

2 and 3

In which of the following plans would you typically find a lumpsum distribution that may qualify for favorable income tax treatment?

Question 24 options:

1)

A profitsharing plan

2)

A SEP plan

3)

A traditional defined benefit pension plan

4)

A Section 403(b) plan

Which of the following statements regarding a cash balance pension plan are CORRECT?

1 It is a defined benefit pension plan with a guaranteed interest rate credit.

2 Funds contributed to the plan are typically invested more aggressively than required to achieve the guaranteed interest rate credit.

3 The employer assumes the risk of investment performance for the employee.

4 An increase in plan contributions may be necessary because of required PBGC insurance coverage.

Question 25 options:

1)

1, 2, 3 and 4

2)

1 and 2

3)

2 and 4

4)

2, 3 and 4

Karen, age 51, wishes to take distributions from her traditional IRA and avoid imposition of the 10% early distribution penalty. Which of the following distributions will allow Karen to avoid the penalty?

1 If Karen is totally and permanently disabled.

2 Karen wants the distribution to pay medical expenses exceeding 10% of her AGI.

3 Karen may take distributions under the substantially equal payments rule.

4 Karen needs cash to pay for tuition for her child at State University.

Question 26 options:

1)

1, 2, 3 and 4

2)

3 only

3)

2 and 3

4)

1 and 4

Jason has named a trust as the beneficiary of his qualified retirement plan. The trust beneficiaries include his 2 children, ages 4 and 12, and his nephew, age 30. Which of the following is(are) a requirement for the trust beneficiaries to be treated as the designated beneficiaries of the plan?

1 The trust must be valid under state law.

2 The trust must be irrevocable or become irrevocable when Jason dies.

3 The trust beneficiaries must not be identifiable from the trust instrument.

4 Appropriate documentation has been provided to the plan administrator.

Question 27 options:

1)

1, 2 and 4

2)

3 only

3)

2 and 4

4)

1, 2, 3 and 4

Why would a qualified retirement plan include real estate among its portfolio of investment assets?

Question 28 options:

1)

As an inflation hedge

2)

To fund future fixed obligations

3)

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

4)

To provide increased liquidity

Karen, who attained age 51 today, wishes to take distributions from her traditional IRA under the substantially equal periodic payments rule and avoid imposition of the 10% early distribution penalty. Her life expectancy according to IRS Table I is 33.3 years. Which of the following is the minimum period over which the payments must continue to avoid the penalty?

Question 29 options:

1)

8.5 years

2)

5 years

3)

19.5 years

4)

33.3 years

Which of the following describe differences between a taxadvantaged retirement plan and a qualified plan?

I Distributions from taxadvantaged plans are not eligible for 10year forward averaging.

II Employer stock distributions from a taxadvantaged plan do not benefit from NUA.

Question 30 options:

1)

Both I and II

2)

I only

3)

II only

4)

Neither I nor II

Richard participates in a traditional defined benefit pension plan at work. His projected monthly benefit under the plan is $1,000. If the plan provides life insurance for Richard, the death benefit payable under the policy is limited to:

Question 31 options:

1)

100,000

2)

$17,500

3)

$52,000

4)

$210,000

Todd has made total contributions of $75,000 to his traditional IRA of which $15,000 were nondeductible contributions. Todd is 60 and is considering taking a $20,000 distribution from his IRA, which currently has a fair market value of $175,000. This will be the only distribution from his IRA this year. How much of the distribution will be taxable to Todd?

Question 32 options:

1)

$16,000

2)

$4,000

3)

$20,000

4)

$0

Which of the following is(are) true regarding the interest rate credit used in cash balance pension plans?

1 The interest rate credited to a participant's hypothetical account is determined upon the establishment of the plan and cannot fluctuate.

2 If the underlying investments of the plan outperform the interest rate credit guarantee in a given year, the participant will receive a greater credit for that given year.

3 If the underlying investments of the plan outperform the interest rate credit guarantee in a given year, the employer may reduce plan contributions for that given year.

4 Because of the hypothetical individual accounts, plan participants may choose among various fixed interest rate investments for their accounts.

Question 33 options:

1)

3 only

2)

1, 2 and 4

3)

1 and 3

4)

4 only

Which of the following statements regarding Social Security benefits is(are) CORRECT?

I Retirees receiving Social Security benefits at or after full retirement age (FRA) do not have to comply with a retirement earnings test.

II Workers retiring before full retirement age may have benefits withheld if their earned income exceeds the current year earnings limit.

Question 34 options:

1)

Both I and II

2)

I only

3)

II only

4)

Neither I nor II

Jonathan, age 45, runs a consulting business and is classified as a selfemployed individual for tax purposes. He reports his earnings on Schedule C of Form 1040. His net earnings from selfemployment are typically $150,000 per year.

Jonathan wants to establish a retirement plan for himself. Which of the following actions is appropriate to shelter the maximum amount of Jonathan's current taxable income?

Question 35 options:

1)

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

2)

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

3)

He should establish a SIMPLE IRA.

4)

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

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

1 The employee's attaining age 59

2 The participant's purchase of a primary residence

3 Financial hardship

4 Employee separation from service

Question 36 options:

1)

1 and 4

2)

1, 2, 3 and 4

3)

1 only

4)

3 only

Which of the following statements regarding fully insured Section 412(e)(3) plans is(are) NOT correct?

Question 37 options:

1)

Section 412(e)(3) plans must meet minimum funding standards each plan year.

2)

This type of plan is not required to be certified by an enrolled or licensed actuary.

3)

A Section 412(e)(3) plan is a type of defined benefit pension plan.

4)

A fully insured plan is inappropriate for an employer who cannot commit to regular premium payments.

Mark died this year fully insured under Social Security. Which of his unmarried, dependent children is eligible for a survivor's benefit from Social Security based upon Mark's fully insured status?

Question 38 options:

1)

Beverly, age 22, who has been disabled for 4 years

2)

Glenn, a 20yearold child still in high school

3)

A 19yearold child in junior college

4)

Mark, Jr., age 20, and Glenn's twin, who lives away from home

Which of the following statements regarding a nonspouse beneficiary of an IRA is CORRECT?

Question 39 options:

1)

The nonspouse beneficiary may elect to distribute the IRA over the remaining life expectancy of the beneficiary commencing the year following the year of death, reduced by 1 for each subsequent year.

2)

The nonspouse beneficiary may rollover the IRA into his own IRA and defer distribution until attaining age 70.

3)

The nonspouse beneficiary must follow the 5year payout rule.

4)

The nonspouse beneficiary must take a lumpsum distribution in the year following the death of the participant owner.

The employer bears the investment risk for which of the following retirement plans?

1 Cash balance pension plan

2 SIMPLE 401(k) plan

3 Ageweighted profitsharing plan

4 Money purchase pension plan

Question 40 options:

1)

1 only

2)

1 and 4

3)

3 and 4

4)

1, 2 and 3

Which of the following plans is(are) NOT a crosstested plan(s)?

1 New comparability plan

2 Employer stock ownership plan

3 Agebased profitsharing plan

4 Stock bonus plan

Question 41 options:

1)

2 and 4

2)

1, 2, 3 and 4

3)

3 and 4

4)

2 only

To which of the following plans do the automatic survivor benefit rules apply?

1 Money purchase pension plan

2 SEP IRA plan

3 Section 403(b) plan with an employer match

4 Traditional defined benefit pension plan

Question 42 options:

1)

1, 3 and 4

2)

1 and 4

3)

2, 3 and 4

4)

2 and 3

Which of the following statements are correct regarding Section 403(b) plans:

1 Section 403(b) plans must comply with many of the same reporting and auditing requirements that apply to Section 401(k) plans.

2 Certain eligible participants in a Section 403(b) plan may defer as much as much as $27,000 into the plan in 2015.

3 Section 403(b) plans may provide for plan loans to participants.

4 Funding for Section 403(b) plans is limited to mutual funds and annuities.

Question 43 options:

1)

1, 2, 3 and 4

2)

1 and 2

3)

1, 2 and 3

4)

3 and 4

Barry was age 71 when he died this year. He had designated his estate as the sole beneficiary of his IRA. Which of the following statements is CORRECT?

Question 44 options:

1)

If death occurs after the required beginning date, a single lumpsum distribution may be elected, but any installment payments must continue over the deceased participant's remaining distribution period, reduced by 1 each year.

2)

Barry's youngest heir's life expectancy will be used to determine the RMD.

3)

As the designated beneficiary, the administrator or executor of the estate may choose any time period over which to distribute the IRA.

4)

From an income tax perspective, naming the estate as beneficiary is generally advantageous.

Which of the following statements are disadvantages for the employersponsor of a cash balance pension plan?

1 A certain level of plan benefit is guaranteed by the PBGC.

2 The employer bears the investment risk in the plan.

3 Cash balance pension plans are less expensive for the employer than a traditional defined benefit pension plan.

4 Retirement benefits may be inadequate for older plan entrants.

Question 45 options:

1)

2 and 4

2)

3 and 4

3)

1 and 3

4)

1 and 2

When she retired at age 64, Lauren received a lumpsum distribution from her employer's stock bonus plan. The fair market value of the employer stock contributed to her account was $200,000. At the time of the distribution, the employer stock in Lauren's account had a fair market value of $300,000. Six months later, Lauren sold the stock for $310,000.

Which of the following statements regarding the sale of Lauren's stock is(are) CORRECT?

1 The $300,000 distribution is taxed at the longterm capital gain rate.

2 Lauren has a $10,000 shortterm capital gain when the stock is sold.

3 There was no income tax liability incurred when the stock was contributed to the plan.

4 The net unrealized appreciation (NUA) on the stock is $100,000.

Question 46 options:

1)

2, 3 and 4

2)

1, 2, 3 and 4

3)

1 and 2

4)

4 only

Gary was just hired by an employer that maintains a SIMPLE IRA for its employees. Which of the following statements regarding Gary's participation in the SIMPLE IRA is CORRECT?

Question 47 options:

1)

When Gary participates in the plan, he will be 100% vested in his employer's contributions.

2)

Gary may only defer $5,500 into the SIMPLE IRA if he is younger than age 50.

3)

The annual employer match may be limited to 1% of employee compensation each year.

4)

Covered compensation is limited to $265,000 for a SIMPLE IRA if the employer elects a 3% match.

George and Julia anticipate that they will require an annual income of $72,000 (in today's dollars) when they retire 15 years from now. They expect to receive Social Security benefits of $18,000 per year at that time. In calculating their retirement savings need, the couple is assuming a 3% annual rate of inflation, an 8% aftertax return on investments, and a 25year retirement period. What is the annual retirement income need from savings expressed in future dollars that George and Julia will need to fund? (Round your answer to the nearest dollar.)

Question 48 options:

1)

$94,174

2)

$83,124

3)

$84,130

4)

$109,949

For an individual who was born in 1960 or later and wants to retire early at age 62, what is the reduction, if any, in the amount of Social Security retirement income benefits that are otherwise payable?

Question 49 options:

1)

30%

2)

0

3)

20%

4)

25%

Jason recently died at age 68, leaving an IRA with a FMV of $175,000 to his wife, Mary (age 55), who was the only designated beneficiary. Mary has no IRA of her own. Which of the following statements regarding Jason's IRA is CORRECT?

1)

Mary can receive distributions over her remaining single life expectancy, reduced by 1 each subsequent year.

2)

Mary must receive the entire account balance within 5 years of Jason's death.

3)

Because Jason died before age 70, any distribution Mary currently receives from the IRA will be subject to a 10% early withdrawal penalty.

4)

Mary must immediately begin taking distributions over Jason's remaining single life expectancy.