Chapter 7 Flashcards
Which one of the following is a requirement of an unfunded excess benefit plan?
A. The plan must file a notice of its Form 6547 with the Department of Labor. No other filing or disclosure is required
B. The plan must comply with the filing requirements (Form 5500), but not the disclosure requirements, under ERISA.
C. The plan must generally comply with both the disclosure requirements and the filing requirements under ERISA.
D. The plan has no disclosure or filling requirements under ERISA
D. The plan has no disclosure or filling requirements under ERISA
Which of the following is a tax consequence of a rabbi trust?
A. The trust assets may be available for general use by the employer
B. Rabbi trusts are deferred compensation plans that do not need to meet requirements imposed by the IRS
C. Rabbi trusts assets are excluded from general creditors in bankruptcy proceedings
D. The employer is taxed on taxable earnings in the plan as they accumulate.
D. The employer is taxed on taxable earnings in the plan as they accumulate.
Tax deferral in an unfunded plan:
A. Depends on whether an executive’s right to compensation is subject to a substantial risk of forfeiture.
B. May be achieved even if an executive’s compensation is subject to constructive receipt.
C. May be achieved if plan assets are subject to company creditors
D. May be achieved if the deferral is agreed upon at any time prior to the time the compensation is paid
C. May be achieved if plan assets are subject to company creditors
Internal Revenue Code Section 409A gives employees 30 days after they first become eligible to participate in the plan to elect to make a deferral. After an employee becomes eligible a participant, elections to defer compensation must occur in the year prior to the tax year of the delivery of services.
Fine inc. is a small publicly traded corporation. The company wants to provide an incentive for Ian Good, its vice president of sales, to continue with the company. However, the company does not want to deplete its much-needed cash account. Based on the characteristic of providing the greatest inventive without depleting cash, Fine Inc. should establish
A. A quarterly bonus plan
B. A restricted stock plan
C. A split dollar plan
D. An executive bonus plan
B. A restricted stock plan
A quarterly bonus plan requires cash. A restrictive stock plan uses no cash, and it also provides an incentive for Ian to stay with the company. A split dollar plan would cost the company money and require cash. An executive bonus plan requires cash.
section 457 plans cover employees of
A. for-profit organizations only. B. state and local governments and nonprofit organizations only C. both nonprofit and for-profit organizations
D. none of the above.
B. state and local governments and nonprofit organizations only
Section 457 plans cover employees of state and local governments and nonprofit (tax exempt) organizations, but they do not cover employees of for-profit organizations.
