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Question 1

1pts

Which of the following accurately describes one of the qualification requirements for qualified retirement plans?

Group of answer choices

The plan must cover a percentage of nonhighly compensated employees that is at least half of the percentage of highly compensated employees covered.

The plan may define participants as needing to work at least 1,500 hours per year.

The plan must not discriminate in favor of highly compensated employees.

The plan may impose a waiting period of up to three years for plan participation.

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Question 2

1pts

A profit-sharing plan may use any vesting provision permitted by the Internal Revenue Code.Which of the following provisions would violate the Code's vesting requirements?

Group of answer choices

Employees are 40% vested after five years of service and vesting increases by 20% each year until reaching 100% after eight years.

Employees are 100% vested after three years of service with zero vesting prior to that date.

Employees are 100% vested after two years of service with zero vesting prior to that date.

Employees are 20% vested after two years of service and vesting increases by 20% each year until reaching 100% after six years.

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Question 3

1pts

Melissa has changed employers.She has $25,000 in vested pension benefits with her former employer.She would like to convert the $25,000 in vested pension benefits into a Roth IRA.Which of the following statements is correct?

Group of answer choices

Melissa can convert $5,500 of her vested pension benefits into a Roth IRA each year until all $25,000 has been converted.

Provided that Melissa's income is less than $100,000, she can convert $5,500 into a Roth IRA this year.

Melissa can roll over the pension assets directly into a Roth IRA.

There is no way to convert assets of a qualified plan into a Roth IRA.

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Question 4

1pts

A client with a small business approaches you about setting up a tax-favored retirement plan and you determine that a SIMPLE IRA is the best alternative for the client.Which of the following is an accurate statement of one of the aspects of SIMPLE IRAs that you would discuss with the client?

Group of answer choices

The distributions provided under a SIMPLE IRA will provide adequate retirement income to most employees.

SIMPLE IRAs are usually funded in part through salary reductions by employees.

SIMPLE IRA plans place the risk of investment performace on the employer because the plan promises a specific benefit.

SIMPLE IRAs provide more flexibility in the amount and timing of contributions than a qualified profit-sharing plan.

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Question 5

1pts

A plan must meet stringent Code requirements in order to obtain the favorable tax treatment given to qualified plans.Which of the following would be most likely to result in plan disqualification?

Group of answer choices

Attempting to integrate the plan with Social Security

Providing a contribution or benefit formula that provides a higher benefit for highly compensated employees

A requirement that employees complete five years of service before participating in the plan

A provision that results in the plan covering only 70% of nonhighly compensated employees

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Question 6

1pts

Which of the following statements regarding vesting is/are true?

I.Employer matching contributions in defined contribution plans must be fully vested either after three years of service or in 20% increments beginning with the employee's second year of service.

II.Employee contributions are always 100% vested.

III.Employer contributions made to defined benefit plans may be subject to five-year cliff vesting or seven year graded vesting.

Group of answer choices

I, II, and III

I and II only

III only

II only

I only

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Question 7

1pts

Which of the following is not a qualified distribution from a Roth IRA (for all instances, assume the 5-year holding period has been satisfied)?

Group of answer choices

A first-time home purchase

Payment issued upon an account holder becoming disabled

An early retirement distribution upon the attainment of age 55

One made on, or after, the individual attains age 59 1/2

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Question 8

1pts

Which of the following is true regarding negative elections (negative elections are also known as automatic enrollment)?

I.A negative election is a device where the employee is deemed to have elected a specific deferral unless the employee specifically elects out of such election in writing.

II.Negative elections are no longer approved by the IRS.

III.Negative elections are only available for employees who enter the plan when it is first established and are not available for new employees.

Group of answer choices

I and II only

III only

I and III only

II only

I only

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Question 9

1pts

A loan from a qualified plan to a participant must meet which of the following requirements to be exempt from treatment as a prohibited transaction?

I.Loans must bear a reasonable rate of interest.

II.Loans must be adequately secured.

III.The amount of a loan must not exceed $10,000.

Group of answer choices

III only

I and II only

I, II, and III

II only

I only

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Question 10

1pts

Maxine, age 35, earns $200,000 annually from ABC Inc.ABC sponsors a SIMPLE IRA and matches all employee deferrals 100% up to a 3% contribution.What is the maximum employee deferral contribution to Maxine's SIMPLE IRA account for this year?

Group of answer choices

$13,000

$16,500

$6,000

$19,000

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Question 11

1pts

Ted Smith, age 65, is considering the establishment of a traditional Individual Retirement Account (IRA).He is not employed in 2019 but has investment income of $95,000.His maximum tax-deductible contribution to an IRA for 2019 will be

Group of answer choices

$0.

$7,000

$6,000

$2,500

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Question 12

1pts

Assume that both Mr. and Mrs. Bouillabaisse are participants in qualified retirement plans and that their combined adjusted gross income (AGI) is $150,000. Both Mr. and Mrs. Bouillabaisse are 43 years old.Which is correct?

Group of answer choices

They may each make contributions to IRAs but the contributions are limited due to their income.

They may each make a contribution to an IRA but the contributions will not be deductible.

They may each make $5,500 contributions to IRAs.

They may not contribute to IRAs this year.

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Question 13

1pts

Gazebos, Inc. is considering the establishment of a qualified plan.All of the characteristics that follow suggest the use of a profit sharing plan except which one?

Group of answer choices

The company's profits vary from year to year and flexibility in funding requirements is needed.

The company already has a defined benefit plan that it wishes to supplement.

The company wants to provide an incentive for employees to improve productivity.

The employees range in ages from 49 to 63 and the company wants one plan that will assure them of an adequate retirement.

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Question 14

1pts

Christian wants to retire in 15 years when he turns 65.Christian wants to have enough money to replace 75% of his current income less what he expects to receive from Social Security at the beginning of each year.He expects to receive $18,000 per year from Social Security in today's dollars.Christian is aggressive and wants to assume an 8% annual rate of return and that inflation will be 3% per year.Based on his family history, Christian expects that he will live to be 95 years old.If Christian currently earns $80,000 per year and he expects his raises to equal the inflation rate, how much does he need at retirement to fulfill his retirement goals?

Group of answer choices

$1,022,807

$1,583,152

$1,559,131

$1,072,458

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Question 15

1pts

Joe receives incentive stock options (ISOs) with an exercise price of $18 when the stock is trading at $18.Joe exercises these options two years after the date of the grant when the stock price is $39 per share.Which of the following statements is correct?

Group of answer choices

Joe will have W-2 income of $21 per share upon exercise.

Upon exercise, Joe will have no regular income for tax purposes.

Joe's adjusted taxable basis for regular income tax will be $39 at exercise.

Joe will have $18 per share of AMT income upon exercise.

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Question 16

1pts

Distributions from a traditional IRA must begin

Group of answer choices

When the participant retires from full-time employment.

Between ages 72 and 75, depending on the IRA contract provisions.

By April 15th of the calendar year following the year in which the participant turns 70 1/2.

By April 1st of the calendar year following the year in which the participant turns 70 1/2.

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Question 17

1pts

The contribution levels allowed under a target or age-weighted defined-contribution plan

Group of answer choices

Are unlikely to produce an adequate retirement benefit for older plan entrants.

Are much higher than the amounts that would be allowed under a defined benefit plan.

Can be based on the participant's compensation and age on entering the plan.

Do not have to be tested for nondiscrimination.

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Question 18

1pts

Which of the following people would be considered a highly compensated employee?

1.Laura, a 1% owner whose salary last year was $128,000 and is in the top 20% of the paid employees.

2.Sam, a 6% owner whose salary was $42,000 last year.

3.Stu, an officer, who earned $80,000 last year and is the 29th highest paid employee of 96 employees.

4.Isaac, who earned $129,000 last year and is in the top 20% of paid employees.

Group of answer choices

Laura, Sam, Stu, and Isaac

Laura, Sam, and Isaac

Laura, Sam, and Stu

Sam and Isaac

Laura and Sam

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Question 19

1pts

Which of the following statements regarding the plan sponsor of a money purchase pension plan is correct?

Group of answer choices

The plan sponsor is required to make an annual contribution to the plan.

The plan sponsor generally bears the investment risk of the plan assets.

The excess earnings of a money purchase pension plan are returned to the plan sponsor.

A plan sponsor with fluctuating cash flows would adopt a money purchase pension plan.

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Question 20

1pts

All of the following are advantages of a 401(k) plan except

Group of answer choices

Employers can sponsor 401(k) safe harbor plans without committing to annual contributions and without creating a deferred liability.

Employers can establish 401(k) plans with minimal expense.

Earnings grow tax-deferred until distributed.

Employees are permitted to shelter current income from taxation in a 401(k) plan.

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Question 21

1pts

Which of the following statements is/are correct regarding the 10% early distribution penalty tax for a qualified plan?

I.Retirement at age 55 or older exempts the distributions from the early withdrawal penalty tax.

II.Distributions used to pay medical expenses in excess of 10% of AGI for a tax filer who itemizes are exempt from the early withdrawal penalty.

III.Distributions that are part of a series of equal periodic payments paid over the life or life expectancy of the participant are exempt from the early withdrawal penalty.

Group of answer choices

I and II only

I, II, and III

II only

III only

I only

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Question 22

1pts

On January 5th, Devon, age 39, withdrew $42,000 from her qualified plan.Devon had an account balance of $180,000 and an adjusted taxable basis in the account of $30,000.Calculate any early withdrawal penalty.

Group of answer choices

$1,200

$0

$3,500

$4,200

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Question 23

1pts

Phillip, currently age 52, made his only contribution to his Roth IRA ten years ago in the amount of $4,000.If he were to receive a total distribution of $8,000 from his Roth IRA today, how would he be taxed?

Group of answer choices

Since Phillip waited five years, the distribution will be classified as a "qualified distribution" and will therefore not be taxable or subject to the 10% early distribution penalty.

Although Phillip waited five years, the distribution will not be classified as a "qualified distribution" and therefore all of the distribution proceeds will be taxable and will be subject to the 10% early distribution penalty.

Since Phillip waited five years, the distribution will be classified as a "qualified distribtuion" and will therefore not be taxable but will be subject to the 10% early distribution penalty.

Although Phillip waited five years, the distribution will not be classified as a "qualified distribution" and will therefore be taxable to the extent of earnings and will be subject to the 10% early distribution penalty on the amount that is taxable.

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Question 24

1pts

Medicare Part A provides hospital coverage.Which of the following persons is not covered under Part A?

Group of answer choices

A person 62 or older and receiving railroad retirement benefits.

Chronic kidney patients who require dialysis or a renal transplant.

Disabled beneficiaries regardless of age who have received Social Security for two years.

A person 65 or older entitled to a monthly Social Security check.

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Question 25

1pts

Part B of Medicare is considered to be supplemental insurance and provides additional coverage to participants.Which of the following is true regarding Part B coverage?

Group of answer choices

Coverage under Part B does not include deductibles or coinsurance.

The premiums for Part B are paid monthly through withholding from Social Security benefits.

The election to participate must be made at the time the insured is eligible for Part A Medicare and at no time after.

Once a participant elects Part B, he must maintain the coverage until death.

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Question 26

1pts

Which of the following is a reason why an employer might favor a nonqualified plan over a qualified retirement plan?

I.There is more design flexibility with a nonqualified plan.

II.A nonqualified plan typically has lower administrative costs.

III.Nonqualified plans typically allow the employer an immediate income tax deduction.

Group of answer choices

I only

III only

I, II, and III

I and II only

II only

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Question 27

1pts

ABC has an Employee Stock Purchase Plan (ESPP).Which statements regarding an ESPP is/are correct?

I.The price may be as low as 85% of the stock value.

II.When an employee sells stock at a gain in a qualifying disposition, all of the gain will be capital gain.

Group of answer choices

II only

Both I and II

Neither I nor II

I only

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Question 28

1pts

Which of the following factors may affect a person's individual retirement planning?

I.Work life expectancy

II.Retirement life expectancy

III.Inflation

IV.Savings rate

Group of answer choices

I and II only

I, III, and IV only

II and III only

I, II, III, and IV

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Question 29

1pts

Each of the following is a characteristic of a defined benefit retirement plan EXCEPT

Group of answer choices

The law specifies the maximum allowable annual benefit payable from the plan is equal to the lesser of 100% of salary or $225,000 (2019).

The plan specifies the benefit an employee receives at retirement.

The plan assigns the risk of pre-retirement inflation, investment performance, and adequacy of retirement income to the employee.

The plan has less predictable costs as compared to defined contribution plans.

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Question 30

1pts

Jared, age 54, earns $300,000 per year and is a participant in his employer's 401(k) plan. Ignoring the ADP Test requirements, what is the maximum amount that Jared can defer under the 401(k) plan in 2019?

Group of answer choices

$62,000

$56,000

$25,000

$19,000

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Question 31

1pts

Shawn, a married 29 year old, earned $100,000 and deferred $10,000 into a 401(k) plan sponsored by his employer this year.His wife, Sherry, also age 29, was at home with their children and earned no income this year.Assuming Shawn has no other income, what is the maximum contribution Sherry can make to her Roth IRA this year?

Group of answer choices

$0

$6,000

$1,000

$7,000

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Question 32

1pts

Which of the following statements is true?

Group of answer choices

There is no maximum benefit payable from a defined benefit pension plan.

In-service withdrawals are permitted from defined benefit pension plans.

Cash balance pension plans have hypothetical individual accounts for plan participants.

Many defined contribution plans are required to pay PBGC insurance premiums.

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Question 33

1pts

Defined benefit plans

Group of answer choices

are favored by employers because they can easily anticipate funding requirements.

are fairly simple to administer and inexpensive to fund.

require actuaries to determine funding requirements.

have pre-set funding requirements established by formula in the plan.

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Question 34

1pts

Which plan may NOT be integrated with Social Security?

Group of answer choices

Cash Balance Plan

Profit Sharing Plan

Employee Stock Ownership Plan

Defined Benefit Plan

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Question 35

1pts

When are distributions required from a Roth IRA?

Group of answer choices

After the owner turns age 59 1/2

Never, as long as the owner is still alive

After the owner turns age 70 1/2

After the owner has owned the account for at least 5 years and has stopped contributing to the account

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Question 36

1pts

Bob's Plumbing has a defined benefit plan which uses a funding formula that considers years of service and covered compensation to determine the pension benefit payable to plan participants.If Bill is a participant in the plan and has 20 years of service with the company and average compensation over the 3 highest consecutive earning years of $80,000, what is the maximum pension benefit that can be payable to Bill at retirement?

Group of answer choices

$18,500

$80,000

$220,000

$55,000

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Question 37

1pts

Which of the following correctly describes the order of qualified distributions from a Roth IRA?

Group of answer choices

There is no specified order.

Conversion contributions, earnings, regular contributions

Earnings, regular contributions, conversion contributions

Regular contributions, conversion contributions, earnings

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Question 38

1pts

Health Savings Accounts

Group of answer choices

can only be established by one who is covered by a high deductible health insurance plan.

must be used in full each year to keep from losing the remaining balance.

may be established by anyone with health insurance.

can only be funded by the employee.

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Question 39

1pts

Which of the following fringe benefits would be taxable to the employee receiving the benefit?

I.Group health insurance which is funded solely by the employer

II.Group term life insurance of $50,000

III.Personal use of a company automobile

Group of answer choices

II and III only

III only

II only

I and III only

I only

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Question 40

1pts

Jon, age 36, has $34,000 in a traditional IRA.He pledges the IRA as security for a loan to start a business.Which of the following is true?

Group of answer choices

The account ceases to be an IRA on December 31 of the year of the transaction.

The account ceases to be an IRA as of the beginning of the current year.

The account ceases to be an IRA on the day the IRA was pledged as security.

The account ceases to be an IRA when the lender accesses any of the funds in the account.