RPA 1 Practice Questions Flashcards
the securities and exchange commission (sec) limits 12b-1 expenses to 100 basis points:
- Unless participants sign a fee waiver agreement
- On an annual basis
- On a monthly basis
- But allows an escalator to 150 basis points if disclosed in the prospectus
- But only when a contingent deferred sales charge also is charged
B
the Daisy Company sponsors a 401(k) plan for all its employees at a certain location. the Daisy Company has 20,000 employees. the plan covers 11,000 of the 19,000 nonhighly compensated employees and 700 of the 1,000 highly compensated employees. All the following are correct statements concerning the plan’s compliance with the coverage tests eXCePt:
- The percentage of nonhighly compensated employees benefiting under the plan is 11,000⁄19,000, which is 58%.
- The percentage of nonhighly compensated to total employees is 11,000⁄20,000 or 55%.
- The percentage of highly compensated employees benefiting under the plan is 700⁄1,000, which is 70%.
- Since the plan benefits 70% of the highly compensated employees of the company, it passes the ratio test.
- Since 58%/70% is 83%, and this is greater than 70%, the plan meets the coverage requirements.
D
which of the following statements describes a limitation of defined contribution retirement plan designs?
- Annual contribution limits include reallocated forfeitures and earnings realized in the previous plan year.
- Their contribution structures make them unsuitable for state and local government employers given the unique budgeting process of these entities.
- In general, they offer limited inflation protection once benefit distribution has commenced.
- The future favorable tax treatment of these designs is uncertain.
- Plan investment choices are constrained by statutory provisions limiting variability in investment returns.
C
in a retirement plan, the right of a participant to receive his or her accrued plan benefit at normal or early retirement, whether or not in the service of the employer, is referred to as:
- (A) Integration
- (B) Benefit accrual
- (C) Annuity options
- (D) Vesting
- (E) Plan termination
D
the economic growth and tax Relief Reconciliation Act of 2001 (egtRRA) changed the tax law so that the maximum exclusion allowance applicable to 403(b) plans was:
- Eliminated
- Increased in amount
- Decreased in amount
- Permanently frozen at 20% of includable compensation
- Modified in an inconsequential manner
A
All the following are characteristics of a money purchase plan eXCePt:
- This type of defined contribution plan has become more popular with the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001.
- The plan is not subject to plan termination provisions of the Employee Retirement Income Security Act.
- The plan is subject to the defined contribution annual limits.
- The plan is required to maintain individual accounts for employees.
- The plan’s employer contributions are either a fixed amount or a fixed percentage of pay.
A
All of the following statements describe retirement risk eXCePt:
- It is a form of investment risk.
- It can be diminished with the purchase of insurance and financial products.
- It is exacerbated by inflation.
- It is likely greater for participants of defined contribution plans than for those participating in defined benefit plans.
- It can be exacerbated by longevity.
A
maximum deferrals in eligible section 457 plans must be coordinated with amounts excluded from income under which of the following plans?
- section 401(k) plans
- simplified employee pensions
- section 403(b) plans
None
I and II only
I and III only
II and III only
I, II and III
A
for profit-sharing plans, the maximum deductible contribution is equal to:
- 5% of annual compensation of participants
- 10% of annual compensation of participants
- 12% of annual compensation of participants
- 15% of annual compensation of participants
- 25% of annual compensation of participants
E
All the following tax considerations may apply to retired employees eXCePt:
- A retired employee is no longer paying a Social Security tax unless he or she is in receipt of earned income.
- Social Security benefits are income tax-free for many individuals.
- Increased standard deductions for federal tax purposes are provided for individuals aged 65 or over.
- Retirement income provided by pension plans is not subject to federal income taxes.
- Retirement income provided by pension plans is not subject to state or local taxes in many jurisdictions.
D
Which of the following techniques may be used to establish the relative standing of various retirement plans?
- A comparison of the benefits actually payable to representative employees under different circumstances
- A comparison of actual cost to the employer
- A comparison of the relative values of the different benefits provided, based on uniform actuarial methods and assumptions
None
I only
II only
I and II only
I, II and III
E
which of the following is (are) advantage(s) of 401(k) plans?
- they can be configured with employee contributions only, or with a variety of employee and employer contribution formulas.
- they can include loan features to allow employees access to plan funds without severe tax consequences from early withdrawals.
- they allow greater annual maximum contributions for employees of not-for- profit organizations.
I only
I and II only
I and III only
II and III only
I, II and III
B
under the deferred wage concept, private pensions are viewed as:
- A. Gratuities or rewards to employees for long and loyal service to an employer
- B. A systematic and socially desirable method of releasing employees who are no longer productive members of an employer’s labor force
- C. Part of a wage package that is composed of cash wages and employee benefits
- D. Annual charges against an employer’s revenue for depreciation of human machines
- E. The fulfillment of a moral obligation on the part of an employer to provide for the economic security of retired workers
C
All the following statements correctly describe the manner in which money purchase pension plans are treated by the tax law eXcePt:
- They are subject to the minimum funding requirements of the tax law that apply to defined benefit arrangements.
- They are subject to the joint-and-survivor requirements of the tax law that apply to defined benefit arrangements.
- Individual accounts must be maintained for employees.
- They are subject to the annual addition limits of Section 415 of the Internal Revenue Code.
- They are subject to the plan termination provisions of Title IV of the Employee Retirement Income Security Act (ERISA).
E
Which of the following is (are) considered to be qualified employers for section 403(b) plans?
- A public school system
- A self-employed person who has no current “qualified” plan
- An individual not covered by a qualified corporate pension plan
I only
III only
I and II only
II and III only
I, II and III
A