Which of the following statements is true of a nonqualifiedplan?
(A) The employer receives a tax deduction only when the employeereports income.
(B) The contributions are tax deductible to the employer and tothe employee at the time the employer makes them.
(C) The contributions are deductible to the employer at the timethe employer makes them and taxable to the employee.
(D) The contributions are deductible to the employer at the timethe employer makes them and the employee is not taxed untilbenefits are distributed.
Which of the following advantages is (are) obtained frominstallation of a defined-benefit retirement plan? ?
I. The plan will increase employees’ take-home pay. ?
II?. The plan will help the employer to attract neededemployees. ?
III?.The plan will minimize the employer’s investment risk.?
IV?. The plan will allow the employer to deduct contributions inthe year made.
(A) II only?? (B) II and IV only? (C) I and III only (D) I, II,III and IV
Which of the following statements concerning a qualified plan is(are) correct?
(A) Qualified plans do not provide protection for plan benefitsfrom bankruptcy of the business.
(B) Qualified plans provide a tax shelter for the investmentincome earned by the plan assets.
(C) Qualified plans are not limited on the amount of benefitswhen the plan includes immediate vesting.
(D) Qualified plans are not subject to ERISA rules when the planincludes immediate vesting.
Which of the following statements best describes the advantagesof a qualified money-purchase pension plan?
(A) It is designed to adequately protect against inflation.
(B) Older employees can be more readily provided with adequateretirement benefits.
(C) Tax sheltering is enhanced because an annuity can bepurchased for each employee.
(D) Costs are predictable, and the design is simple andunderstandable.
Which of the following statements concerning a cash balance planis correct?
??(A) ?The employer assumes the investment risk.
(B)Â Â ?There are individual account balances in a cashbalance plan.
(C)Â Â ?A cash balance plan is a profit sharingplan.
(D)Â Â ?The cash balance plan is generally lessexpensive plan to install than a money purchase plan.
Which of the following statements concerning thenondiscrimination requirements of profit-sharing and stock bonus401(k) plans is correct? ???
(A) The actual deferral percentage of the highly-paid employeesmay not exceed 100% of that of the nonhighly-paid.
(B) The actual deferral percentage of the highly-paid employeesmay not be more than 200% of that of the nonhighly-paid, and thedifference between the two percentages may not exceed 2%.
(C) The use of a safe-harbor provision is prohibited.
(D) In addition to the ADP test, the plans must satisfy both theratio percentage test and the average benefit test.
Which of the following statements concerning funding policy andobjectives is (are) correct??
?I?. Defined-benefit plans are required to adopt a fundingpolicy, but it is optional for defined-contribution plans.
?II?. In defined-contribution plans, the objective may be tooffer investment vehicles so that participants can make up theirown portfolios.
(A)?I only??(C)?Both I and II
(B)?II only??(D)?Neither I nor II
?Which of the following statements concerning selection ofinvestments for qualified plans is (are) correct?
?I?. Tax-exempt bonds are generally not appropriate investmentsfor qualified plans.
?II?. Money market instruments are appropriate for long-termcapital growth.
(A) ?I only?? (C) ?Both I and II
(B) ?II only?? (D) ?Neither I nor II
All the following statements concerning mutual fund investmentsfor qualified plans are correct, EXCEPT:
(A)?The availability of participant-directed investmentsrelieves the sponsor of all fiduciary liability.
(B)?Management and acquisition fees are important factors.
(C)?Debt portfolios may be used in addition to equity-basedfunds.
(D)?Both small and large plans can participate in mutual fundinvestments.
