Unit 13

Question 1

Reverse churning

Answer 1

Member firm moves low trading activity clients into accounts where they are charged a fixed fee that is higher than what they would have paid in commissions

Question 2

ERISA

Answer 2

Employee Retirement Income Security Act of 1974
Applies to private sector/corporate retirement plans and certain union plans
Does not apply to public plans like those for government workers
Does not apply to non-qualified plans

Question 3

Payroll Deduction Plan

Answer 3

Allows employees to authorize their employer to deduct a specified amount for retirement savings from their paychecks, after taxes are paid. Assume NQ. (does not include 401k)

Question 4

Salary Reduction Plan

Answer 4

401(k), qualified

Question 5

IRA

Answer 5

Individual Retirement Account

Question 6

EGTRRA

Answer 6

Economic Growth and Tax Relief Reconciliation Act of 2001. Catch-up contributions for older IRA owners (traditional or Roth)

Question 7

ESPP

Answer 7

Employee stock purchase program

Question 8

CIP

Answer 8

Customer identification program
USA Patriot act of 2001
Verify the identity of any new customer, maintain records of information used to verify identity, determine if person on list of known or suspected terrorists (OFAC)

Question 9

OFAC

Answer 9

Office of foreign assets control
Maintains a list of known or suspected terrorists or terrorist organizations

Question 10

Vesting

Answer 10

Defines when an employer contribution to a plan becomes the employees money

Question 11

HDHP

Answer 11

High-deductible health plan

Question 12

HSA

Answer 12

Health savings account
Different than FSA, where money cannot be invested; use it or lose it

Question 13

SECURE

Answer 13

Setting Every Community Up for Retirement Enhancement

Question 14

Cliff vesting

Answer 14

I process that allows employees to receive full benefits from their company’s retirement plan or stock option plan on a specific date, rather than gradually over time