Quiz-summary
0 of 10 questions completed
Questions:
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
Information
Free Practice Questions
You have already completed the quiz before. Hence you can not start it again.
Quiz is loading...
You must sign in or sign up to start the quiz.
You have to finish following quiz, to start this quiz:
Results
0 of 10 questions answered correctly
Your time:
Time has elapsed
You have reached 0 of 0 points, (0)
Categories
- Not categorized 0%
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
- Answered
- Review
-
Question 1 of 10
1. Question
Which of the following statements is true regarding qualified Keogh plans?
I. Keogh plans are qualified retirement plans designed for an employee, incorporated business owner-employees, and sole proprietors of professional practices
II. These professions include, but are not limited to, freelancers, independent contractors, consultants, and anyone who pays self-employment Social Security taxes
III. All of the contributions to Keogh plans must be generated by self-employment income
IV. If a taxpayer had only $10,000 in self-employed income and earned more from another job, her contributions would be limited to $10,000Correct
Qualified Keogh plans
Keogh plans are qualified retirement plans designed for self-employed persons, unincorporated business owner-employees (or sole proprietors), and sole proprietors of professional practices. These professions include, but are not limited to, freelancers, independent contractors, consultants, and anyone who pays self-employment Social Security taxes. Contributions are limited to $55,000 per year as of 2018. This makes them more attractive than IRAs to self-employed retirement investors. All of the contributions to Keogh plans must be generated by self-employment income. If a taxpayer had only $10,000 in self-employed income and earned more from another job, her contributions would be limited to $10,000. Distributions may not be taken until after age fifty-nine and a half, and they must begin after age seventy and a half.Incorrect
Qualified Keogh plans
Keogh plans are qualified retirement plans designed for self-employed persons, unincorporated business owner-employees (or sole proprietors), and sole proprietors of professional practices. These professions include, but are not limited to, freelancers, independent contractors, consultants, and anyone who pays self-employment Social Security taxes. Contributions are limited to $55,000 per year as of 2018. This makes them more attractive than IRAs to self-employed retirement investors. All of the contributions to Keogh plans must be generated by self-employment income. If a taxpayer had only $10,000 in self-employed income and earned more from another job, her contributions would be limited to $10,000. Distributions may not be taken until after age fifty-nine and a half, and they must begin after age seventy and a half. -
Question 2 of 10
2. Question
Which of the following statements is true regarding profit-sharing retirement plans?
I. Profit-sharing plans enable employers to allow their employees to participate in the profits of the business
II. They are usually awarded to employees based on a percentage of company profits
III. Many employers feel this is a good incentive to discourage employees to perform well and minimize the company’s income
IV. Profit-sharing plans may be paid to the employee or deposited into an account, usually a retirement account, or some combination of the twoCorrect
Profit-sharing retirement plans
Profit-sharing plans enable employers to allow their employees to participate in the profits of the business. They are usually awarded to employees based on a percentage of company profits. Many employers feel this is a good incentive to encourage employees to perform well and maximize the company’s income. Profit-sharing plans may be paid to the employee or deposited into an account, usually a retirement account, or some combination of the two. In order for profit-sharing plans to be considered qualified plans—that is, tax- deductible to the paying company and tax-deferred to the employee—the contributions must be significant and recurring, according to the IRS.Incorrect
Profit-sharing retirement plans
Profit-sharing plans enable employers to allow their employees to participate in the profits of the business. They are usually awarded to employees based on a percentage of company profits. Many employers feel this is a good incentive to encourage employees to perform well and maximize the company’s income. Profit-sharing plans may be paid to the employee or deposited into an account, usually a retirement account, or some combination of the two. In order for profit-sharing plans to be considered qualified plans—that is, tax- deductible to the paying company and tax-deferred to the employee—the contributions must be significant and recurring, according to the IRS. -
Question 3 of 10
3. Question
Which of the following statements is true regarding Nonqualified retirement plans?
I. Nonqualified retirement plans differ from retirement plans in that the contributions are not tax deductible to the employer
II. The employer instead benefits from a tax break when money is distributed from the account
III. Employers benefit from these types of retirement plans because they are not subject to the same types of rules as qualified plans
IV. The employees may indiscriminate as to the employers who benefit from this type of planCorrect
Nonqualified retirement plans
Nonqualified retirement plans differ from retirement plans in that the contributions are not tax deductible to the employer, although some types of nonqualified plans grow tax deferred. The employer instead benefits from a tax break when money is distributed from the account. Employers benefit from these types of retirement plans because they are not subject to the same types of rules as qualified plans. The employer may discriminate as to the employees who benefit from this type of plan. This is particularly useful when rewarding a key employee but not sharing the benefit with other less-essential personnel.Incorrect
Nonqualified retirement plans
Nonqualified retirement plans differ from retirement plans in that the contributions are not tax deductible to the employer, although some types of nonqualified plans grow tax deferred. The employer instead benefits from a tax break when money is distributed from the account. Employers benefit from these types of retirement plans because they are not subject to the same types of rules as qualified plans. The employer may discriminate as to the employees who benefit from this type of plan. This is particularly useful when rewarding a key employee but not sharing the benefit with other less-essential personnel. -
Question 4 of 10
4. Question
Which of the following statements is true regarding fiduciary issues regarding section 404(c) of ERISA?
I. Section 404(c) of ERISA outlines the responsibilities of a fiduciary of employee benefit plans
II. It specifies that the fiduciary must execute their responsibilities in accordance with the plan document
III. Fiduciary responsibilities must be delegated, although management of the plan’s assets may be delegated to a qualified investment manager
IV. The fiduciary’s responsibilities are clearly defined under section 404(c)Correct
Fiduciary issues regarding section 404(c) of ERISA
Section 404(c) of ERISA outlines the responsibilities of a fiduciary of employee benefit plans. It specifies that the fiduciary must execute their responsibilities in accordance with the plan document. Further, fiduciary responsibilities may not be delegated, although management of the plan’s assets may be delegated to a qualified investment manager. The fiduciary’s responsibilities are clearly defined under section 404(c). They include the duty to act only in best interest of plan participants and their beneficiaries, to deliver benefits only to participants and their beneficiaries while minimizing plan expenses, to act in a prudent manner regarding the management of the plan, to diversify against large losses unless it would be considered imprudent, and to closely follow the structure of the plan, unless the plan contradicts ERISA in some fashion.Incorrect
Fiduciary issues regarding section 404(c) of ERISA
Section 404(c) of ERISA outlines the responsibilities of a fiduciary of employee benefit plans. It specifies that the fiduciary must execute their responsibilities in accordance with the plan document. Further, fiduciary responsibilities may not be delegated, although management of the plan’s assets may be delegated to a qualified investment manager. The fiduciary’s responsibilities are clearly defined under section 404(c). They include the duty to act only in best interest of plan participants and their beneficiaries, to deliver benefits only to participants and their beneficiaries while minimizing plan expenses, to act in a prudent manner regarding the management of the plan, to diversify against large losses unless it would be considered imprudent, and to closely follow the structure of the plan, unless the plan contradicts ERISA in some fashion. -
Question 5 of 10
5. Question
Which of the following statements is true regarding investment policies in ERISA-covered plans?
I. ERISA does not specifically require that a plan have a written investment policy for employee benefit plans
II. Practice to have a written investment policy that acts as a guide for the party of fiduciary responsibility and for the management of the plan’s assets
III. In general, investment policies are not written because of the negligence of the plan
IV. They will never include the investment objective of the plan, the improper course of action for meeting cash flow needsCorrect
Investment policies in ERISA-covered plans
ERISA does not specifically require that a plan have a written investment policy for employee benefit plans, but it is considered best practice to have a written investment policy that acts as a guide for the party of fiduciary responsibility and for the management of the plan’s assets. In general, investment policies are written regarding the needs of the plan. They will usually include the investment objective of the plan, the proper course of action for meeting cash flow needs, the method by which the funds will be managed (i.e., asset allocation style), criteria used for selecting investments, and whatever methods may be used for observing the plan’s performance.Incorrect
Investment policies in ERISA-covered plans
ERISA does not specifically require that a plan have a written investment policy for employee benefit plans, but it is considered best practice to have a written investment policy that acts as a guide for the party of fiduciary responsibility and for the management of the plan’s assets. In general, investment policies are written regarding the needs of the plan. They will usually include the investment objective of the plan, the proper course of action for meeting cash flow needs, the method by which the funds will be managed (i.e., asset allocation style), criteria used for selecting investments, and whatever methods may be used for observing the plan’s performance. -
Question 6 of 10
6. Question
Which of the following statements is true regarding transactions that are prohibited under ERISA guidelines?
Correct
Transactions that are prohibited under ERISA guidelines
ERISA defines parties of interest as any party who may have an impact on an employee benefit plan, such as those rendering advice regarding the plan. As such, any transaction between the ERISA-covered plan and any party of interest is a prohibited transaction, unless there is some specific exemption given in consideration of the transaction. Self- dealing, or transacting with plan funds in the interest of the fiduciary, is strictly prohibited. Likewise, the fiduciary must never engage in transactions in the interest of a party that has goals that are counter to the plan’s goals. The fiduciary party is also prohibited from receiving compensation, generated from transactions associated with the plan, from any entity that has business with the plan.Incorrect
Transactions that are prohibited under ERISA guidelines
ERISA defines parties of interest as any party who may have an impact on an employee benefit plan, such as those rendering advice regarding the plan. As such, any transaction between the ERISA-covered plan and any party of interest is a prohibited transaction, unless there is some specific exemption given in consideration of the transaction. Self- dealing, or transacting with plan funds in the interest of the fiduciary, is strictly prohibited. Likewise, the fiduciary must never engage in transactions in the interest of a party that has goals that are counter to the plan’s goals. The fiduciary party is also prohibited from receiving compensation, generated from transactions associated with the plan, from any entity that has business with the plan. -
Question 7 of 10
7. Question
Which of the following statements is true regarding section 529 plans?
Correct
Section 529 plans
Section 529 plans, also known as qualified tuition plans, are savings plans for higher education made available to investors through the state in which they live. The prepaid tuition 529 plan is a means by which investors may lock in today’s tuition (and occasionally room and board) by paying the school attendees tuition now instead of when they actually attend. These plans are only available at participating universities and colleges. The rate of return on this investment is the inflation of college tuition from the time the prepayment is made until the attendee attends the institution. College savings plans allow the investor to set up an investment account in the name of a named beneficiary. This account must be used for qualified higher education expenses.Incorrect
Section 529 plans
Section 529 plans, also known as qualified tuition plans, are savings plans for higher education made available to investors through the state in which they live. The prepaid tuition 529 plan is a means by which investors may lock in today’s tuition (and occasionally room and board) by paying the school attendees tuition now instead of when they actually attend. These plans are only available at participating universities and colleges. The rate of return on this investment is the inflation of college tuition from the time the prepayment is made until the attendee attends the institution. College savings plans allow the investor to set up an investment account in the name of a named beneficiary. This account must be used for qualified higher education expenses. -
Question 8 of 10
8. Question
Which of the following statements is true regarding Coverdell Education Savings Accounts?
Correct
Coverdell Education Savings Accounts
Coverdell Education Savings Accounts, or ESAs, were created by the Taxpayer Relief Act of 1997. They are funded by after-tax monies contributed for beneficiaries that plan on attending institutions of higher learning. Contributions to the account must be made before the beneficiary reaches the age of eighteen, unless said beneficiary is a special needs beneficiary or is physically, mentally, or emotionally handicapped such that it may cause them to need additional time to finish their education. The earnings in the account accumulate on a tax-deferred basis, and as long as those earnings specifically earnings, not principal) are used for qualified higher-learning purposes, the earnings may be excluded from the beneficiary’s income.Incorrect
Coverdell Education Savings Accounts
Coverdell Education Savings Accounts, or ESAs, were created by the Taxpayer Relief Act of 1997. They are funded by after-tax monies contributed for beneficiaries that plan on attending institutions of higher learning. Contributions to the account must be made before the beneficiary reaches the age of eighteen, unless said beneficiary is a special needs beneficiary or is physically, mentally, or emotionally handicapped such that it may cause them to need additional time to finish their education. The earnings in the account accumulate on a tax-deferred basis, and as long as those earnings specifically earnings, not principal) are used for qualified higher-learning purposes, the earnings may be excluded from the beneficiary’s income. -
Question 9 of 10
9. Question
Which of the following statements is true regarding UTMA/UGMA accounts?
Correct
UTMA/UGMA accounts
Uniform Transfer to Minors Act and Uniform Gift to Minors Act accounts are custodial accounts that are established by an adult for the benefit of a minor party. Any type of securities may be gifted into the account as well as cash without limitation. These accounts were established in 1986 and 1956, respectively, for ease of gifting money and securities to minor parties. UTMA accounts have largely superseded UGMA accounts in most states. UTMA custodial accounts are established and managed by an adult on behalf of a minor until the minor reaches the age of majority. The custodian has total transacting authority over the account, including the right to buy and sell securities, exercise rights and warrants, and sell, trade, or hold securities.Incorrect
UTMA/UGMA accounts
Uniform Transfer to Minors Act and Uniform Gift to Minors Act accounts are custodial accounts that are established by an adult for the benefit of a minor party. Any type of securities may be gifted into the account as well as cash without limitation. These accounts were established in 1986 and 1956, respectively, for ease of gifting money and securities to minor parties. UTMA accounts have largely superseded UGMA accounts in most states. UTMA custodial accounts are established and managed by an adult on behalf of a minor until the minor reaches the age of majority. The custodian has total transacting authority over the account, including the right to buy and sell securities, exercise rights and warrants, and sell, trade, or hold securities. -
Question 10 of 10
10. Question
Which of the following statements is false regarding fiduciary responsibilities of UGMA/UTMA accounts?
Correct
Fiduciary responsibilities of UGMA/UTMA accounts
The adult opening the UTMA account, or a separate named custodian, is considered to have fiduciary responsibility for the account. Since the account is for the benefit of the minor, certain restrictions are placed on the accounts. They must be managed only as cash accounts; margin may not be used. Securities in the accounts may not be pledged as collateral for a loan. Cash, interest, and dividends earned in the account must be reinvested within a reasonable time period. The minor’s age must be taken into account regarding investment choices. High-risk investments such as naked options (conservative options contracts such as covered calls are usually allowed) and shorting strategies are never appropriate for a UTMA account.Incorrect
Fiduciary responsibilities of UGMA/UTMA accounts
The adult opening the UTMA account, or a separate named custodian, is considered to have fiduciary responsibility for the account. Since the account is for the benefit of the minor, certain restrictions are placed on the accounts. They must be managed only as cash accounts; margin may not be used. Securities in the accounts may not be pledged as collateral for a loan. Cash, interest, and dividends earned in the account must be reinvested within a reasonable time period. The minor’s age must be taken into account regarding investment choices. High-risk investments such as naked options (conservative options contracts such as covered calls are usually allowed) and shorting strategies are never appropriate for a UTMA account.