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Exam 17: Employee Benefits: Retirement Plans

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Question 21

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Which of the following statements about tax-deferred retirement plans in the U.S.is true? I.Women,on average,receive lower employment-based retirement income than men. II.One way to hedge against inflation is to invest lump-sum pension distributions in fixed-income investments.

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

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Question 22

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Beta Corporation has 1,000 employees eligible to participate in the firm's pension plan,and 100 of these employees are considered highly compensated.All of the highly compensated employees are covered by the plan.What is the minimum number of the 900 non-highly compensated employees who must be covered by the plan in order for the plan to satisfy the ratio percentage test?

A) 500
B) 630
C) 667
D) 900

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Question 23

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Which of the following statements concerning defined benefit and defined contribution pension plans is (are) true? I.The employer bears the investment risk with a defined contribution plan. II.Defined benefit plans favor workers who enter the plan at older ages.

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.

Which of the following statements is (are) true with respect to profit-sharing plans? I.There is no limit on the amount that an employer can contribute annually to an employee's account under a profit sharing plan. II.Profit sharing plans offer greater funding flexibility for employers than under other qualified plans.

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

Which of the following statements is (are) true regarding cash-balance pension plans? I.Cash balance plans are defined contribution plans. II.Under a cash balance plan,the employer creates an investment account for each employee into which the employer makes actual contributions and allocates investment gains and losses.

Which of the following statements about Roth 401(k) plans is true? I.Contributions to a Roth 401(k) plan are made with before-tax dollars. II.Qualified distributions from a Roth 401(k) are received income-tax free.

ACME Company is considering starting a retirement plan for its employees.One option ACME is considering is a profit-sharing plan.All of the following are advantages of this type of retirement plan EXCEPT

Which of the following statements about retirement benefits under pension plans is true?

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

All of the following are potential disadvantages to employees covered by a money-purchase pension plan EXCEPT

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 .

Which of the following statements about Keogh plans is correct?

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

Which of the following is a common investment mistake that many retirement plan participants make?

Winslow Corporation has many long-term employees.The company has never had a pension plan.Recently,a new management team was hired.The new president said he would like to start a pension plan through which he could reward the long-term service provided by many employees.Which of the following types of plans should Winslow Corporation adopt?

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.

RST Company offers a qualified retirement plan.Each employee contributes 4 percent of his or her pretax income to the plan,and RST matches each 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?

Lynn works for a state university.In addition to her regular pension plan,Lynn established another retirement savings plan.She elected to have $5,000 of her salary withheld and contributed to a tax-sheltered annuity with an insurer.The type of plan that Lynn established is called a