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Question 1 of 10
1. Question
Which of the following statements is true regarding simplified employee pension plans?
Correct
Simplified Employee Pension Plans (SEPs) provide a nice alternative for small businesses and self-employed individuals who may not have the time or resources to adequately establish a traditional qualified retirement plan for employees like a 401(k). SEPs allow the employer to contribute funds to a tax-deferred account on behalf of employees.
Incorrect
Simplified Employee Pension Plans (SEPs) provide a nice alternative for small businesses and self-employed individuals who may not have the time or resources to adequately establish a traditional qualified retirement plan for employees like a 401(k). SEPs allow the employer to contribute funds to a tax-deferred account on behalf of employees.
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Question 2 of 10
2. Question
Which of the following statements is true regarding a savings incentive match plan for employees?
Correct
A Savings Incentive Match Plan for Employees (SIMPLE) provides the opportunity for small employers (defined as 100 employees or less) the opportunity to provide a tax-deferred retirement savings tool into which employees can elect to contribute their income and employers must make matching or other contributions. The contributions into a SIMPLE are put into an Individual Retirement Account (IRA) for each employee and the IRAs follow all of the same taxation and distribution restrictions as for a traditional IRA.
Incorrect
A Savings Incentive Match Plan for Employees (SIMPLE) provides the opportunity for small employers (defined as 100 employees or less) the opportunity to provide a tax-deferred retirement savings tool into which employees can elect to contribute their income and employers must make matching or other contributions. The contributions into a SIMPLE are put into an Individual Retirement Account (IRA) for each employee and the IRAs follow all of the same taxation and distribution restrictions as for a traditional IRA.
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Question 3 of 10
3. Question
Which of the following statements is true regarding 401(k) plans?
Correct
A business of any size can choose to offer a 401(k) plan to its employees. These plans allow employees to defer receipt of their income, and therefore taxation on that income, to a later date. The contributions grow tax-deferred and distributions are taxed as ordinary income when received.
Incorrect
A business of any size can choose to offer a 401(k) plan to its employees. These plans allow employees to defer receipt of their income, and therefore taxation on that income, to a later date. The contributions grow tax-deferred and distributions are taxed as ordinary income when received.
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Question 4 of 10
4. Question
In which kind of restrictions do roth IRAs differ from traditional IRAs?
Correct
Roth IRAs differ in that no minimum or mandatory distributions are required prior to the death of the owner of the account. Upon the death of the account owner in a traditional IRA or 401(k) plan account, the beneficiary has a number of options with respect to any remaining payments from the plan, including continuing to calculate the required minimum distribution based on the decedent’s age, calculating the new required minimum distribution based on his/her own age, and withdrawing the entire remaining balance in a lump sum.
Incorrect
Roth IRAs differ in that no minimum or mandatory distributions are required prior to the death of the owner of the account. Upon the death of the account owner in a traditional IRA or 401(k) plan account, the beneficiary has a number of options with respect to any remaining payments from the plan, including continuing to calculate the required minimum distribution based on the decedent’s age, calculating the new required minimum distribution based on his/her own age, and withdrawing the entire remaining balance in a lump sum.
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Question 5 of 10
5. Question
Which of the following statements is true regarding a 403(b) plan?
Correct
A 403(b) plan is utilized by employers who are public educational institutions, churches, or nonprofit organizations exempt under 501(c)(3). With this plan, if anyone is allowed to elect to defer compensation, then all participants must be allowed to defer. Participant deferrals into these plans are tax-deductible and accumulate tax-deferred.
Incorrect
A 403(b) plan is utilized by employers who are public educational institutions, churches, or nonprofit organizations exempt under 501(c)(3). With this plan, if anyone is allowed to elect to defer compensation, then all participants must be allowed to defer. Participant deferrals into these plans are tax-deductible and accumulate tax-deferred.
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Question 6 of 10
6. Question
Under which plan does the employer agree to pay the employee a specific benefit to the employee upon a qualifying retirement or termination event?
Correct
Defined benefit plans, which were especially popular throughout the last several decades, were arrangements between employers and employees under which the employer agreed to pay the employee a specific benefit, often a percentage of salary based on years of service, to the employee upon a qualifying retirement or termination event. Under such an arrangement, the employer is subject to the investment risk of having to set aside enough funds in order to be able to pay the promised benefits.
Incorrect
Defined benefit plans, which were especially popular throughout the last several decades, were arrangements between employers and employees under which the employer agreed to pay the employee a specific benefit, often a percentage of salary based on years of service, to the employee upon a qualifying retirement or termination event. Under such an arrangement, the employer is subject to the investment risk of having to set aside enough funds in order to be able to pay the promised benefits.
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Question 7 of 10
7. Question
Which of the following statements is true regarding the Employee Retirement Income Security Act of 1974?
Correct
The Employee Retirement Income Security Act of 1974 (ERISA) was enacted to provide minimum standards for pension plans established by employers. One such minimum standard relates to participation, as ERISA provides that the only employees who can be excluded from participation are those under the age of 21 and those who have not yet completed one full year of service with the employer.
Incorrect
The Employee Retirement Income Security Act of 1974 (ERISA) was enacted to provide minimum standards for pension plans established by employers. One such minimum standard relates to participation, as ERISA provides that the only employees who can be excluded from participation are those under the age of 21 and those who have not yet completed one full year of service with the employer.
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Question 8 of 10
8. Question
The ERISA act also imposes fiduciary responsibilities on anyone who has discretionary authority or management of the plan or renders fee-for-service investment advice regarding plan assets. These fiduciary responsibilities include a duty of loyalty to plan participants and beneficiaries, a duty of prudence in the management of plan assets, a duty to diversify investments as a risk mitigation tool, a duty to act in accordance with the terms of the plan document, and to avoid entering into certain prohibited transactions.
Correct
Which of the following statements is NOT one of fiduciary responsibilities on anyone who has discretionary authority?
Incorrect
Which of the following statements is NOT one of fiduciary responsibilities on anyone who has discretionary authority?
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Question 9 of 10
9. Question
Into which type of accounts cannot assets from a qualified plan be rolled over?
Correct
Assets from a qualified plan, such as a 401(k), can be rolled over into a number of other accounts, including a traditional IRA or Roth IRA, a SEP, a 457(b) plan, another employer’s 401(k) plan, or a 403(b) plan. These assets cannot, however, be rolled over into a SIMPLE IRA.
Incorrect
Assets from a qualified plan, such as a 401(k), can be rolled over into a number of other accounts, including a traditional IRA or Roth IRA, a SEP, a 457(b) plan, another employer’s 401(k) plan, or a 403(b) plan. These assets cannot, however, be rolled over into a SIMPLE IRA.
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Question 10 of 10
10. Question
Which of the following statements is true regarding a Section 529 College Savings Plan?
Correct
A Section 529 College Savings Plan is a valuable tool for parents to invest funds on a tax-preferred basis to be used for the costs of college education. Contributions into the plan are made with after-tax dollars, so the benefit of the plan is not experienced at the time of contribution.
Incorrect
A Section 529 College Savings Plan is a valuable tool for parents to invest funds on a tax-preferred basis to be used for the costs of college education. Contributions into the plan are made with after-tax dollars, so the benefit of the plan is not experienced at the time of contribution.