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Exam 17: Employee Benefits: Retirement Plans

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Question 21

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To encourage low- to moderate-income workers to save for retirement, a tax credit called the Saver's Credit is available. Which statement about tax credits and tax deductions is true?

A) Tax deductions are more favorable than tax credit for most taxpayers.
B) Tax credits reduce taxes owed on a dollar-for-dollar basis.
C) Tax credits reduce taxable income.
D) Tax deductions reduce taxes owed on a dollar-for-dollar basis.

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Question 22

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Which of the following statements regarding minimum vesting standards for qualified defined benefit plans is (are) true? I. The vesting standards apply to both employer and employee retirement contributions. II.Employers may vest benefits more quickly than the minimum standards .

A) I only
B) II only
C) both I and II
D) neither I nor II

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Question 23

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Under a 401(k) plan, what is compared to determine if the plan unfairly discriminates in favor of highly compensated employees?

Which of the following statements concerning defined contribution pension plans is (are) true? I.The contribution rate is fixed. II. The retirement benefit varies.

In the context of employee benefits, the term "discrimination" refers to benefit comparisons between

Which of the following statements concerning retirement plans for the self-employed is true? I. They can be used by owners of incorporated businesses only. II. With certain exceptions, the same rules that apply to qualified corporate plans apply to retirement plans for the self-employed.

All the following statements concerning a Roth 401(k) plan are true EXCEPT

RST Company offers a qualified retirement plan. Each employee contributes 4 percent of his or her pretax income to the plan, and RST matches the employee's contribution. An employee's benefit at retirement is determined by his or her account balance at the time of retirement. What type of retirement plan does RST offer?

ABC Company offers a qualified retirement plan. ABC selected a funding instrument with an insurer in which the insurer promised to pay a specified interest rate for a number of years on a lump sum deposit. This funding instrument is called a

Which of the following statements concerning defined-benefit pension plans is (are) true? I.The contribution rate by the employer varies from year to year. II. The retirement benefit is not known in advance.

All of the following statements about 403(b) plans are true EXCEPT

Special vesting rules apply to qualified defined contribution plans with voluntary employee contributions and matching employer contributions. Which of the following statements is (are) true with respect to these vesting rules? I.Employer contributions must vest immediately. II.Graded vesting is permitted, and employer contributions must be 20 percent vested after 2 years, with an additional 20 percent vested in each of the next 4 years.

JKL Company just converted its traditional defined-benefit plan to another type of plan. Under the plan, benefits are defined in terms of a hypothetical account balance, with retirement benefits dependent upon the value of the participant's account at retirement. Each year, employees receive an interest rate credit and a pay credit which is a specified percentage of compensation. This type of plan is called a

Which of the following statements about pension funding agencies and funding instruments is true?

Which of the following statements about SIMPLE retirement plans is true?

Which of the following statements about retirement ages in defined benefit pension plans is (are) true? I.The normal retirement age in most plans is 65. II.For a defined benefit plan, the early retirement age is the earliest age an employee can retire with full, unreduced benefits.

Small business owners have a number of retirement plans available to them. One type of plan is limited to employers with 100 or fewer eligible employees. Under this type of plan, small employers are exempt from most of the nondiscrimination and administrative rules that apply to qualified plans. Such plans are called

Which of the following statements is (are) true with respect to SIMPLE retirement plans? I.Only large employers can start a SIMPLE plan, provided the employer does not maintain another qualified plan. II.SIMPLE plans are exempt from most nondiscrimination and administrative rules that apply to qualified plans.

Which of the following statements is true with regard to defined benefit and defined contribution pension plans?

For a long-term employee who is covered by a defined benefit plan, the highest retirement income will be obtained if his/her retirement income is based on