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Question 1 of 10
1. Question
Which statement stands true for section 457 plan?
I. They are exempted from ERISA.
II. Loans can be taken against plan 457.
III.They are not subjected to non-discrimination rules.
IV. A 457 plan may be parallelly funded with 403(b) plans without affecting each others contribution.Correct
A 457 plan may be concurrently funded with 403(b) plans without the contribution limits of one plan affecting the other. Also of note is that loans may not be taken against a 457 plan.457 plans are that they are exempt from ERISA and they are not subject to non-discrimination rules.
Incorrect
A 457 plan may be concurrently funded with 403(b) plans without the contribution limits of one plan affecting the other. Also of note is that loans may not be taken against a 457 plan.457 plans are that they are exempt from ERISA and they are not subject to non-discrimination rules.
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Question 2 of 10
2. Question
How is a nonqualified retirement plan different from a qualified retirement plan?
I. In a nonqualified retirement plan contributions are tax deductible to the owner.
II. Nonqualified plans are exempt from the reporting and disclosure requirements of qualified plans.
III. In a nonqualified retirement plan contributions are not tax deductible to the owner.
IV. The employer may categorise the employees who benefit from this type of plan.Correct
The employer may discriminate as to the employees who benefit from this type of plan. Nonqualified plans are exempt from the reporting and disclosure requirements of qualified plans. Nonqualified retirement plans differ from retirement plans in that the contributions are not tax deductible to the employer.
Incorrect
The employer may discriminate as to the employees who benefit from this type of plan. Nonqualified plans are exempt from the reporting and disclosure requirements of qualified plans. Nonqualified retirement plans differ from retirement plans in that the contributions are not tax deductible to the employer.
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Question 3 of 10
3. Question
Which statements hold true for Uniform Prudent Investors Act of 1994 ?
I. Concept of prudence regarding an investment is applied to the portfolio as a single asset.
II. Advisors were permitted to delegate investment management to other parties.
III. Concept of prudence regarding an investment is applied to the portfolio as a whole.
IV. This does not combat the inflation risk inherent in capital preservation portfolios.Correct
Under UPIA, advisors were permitted to delegate investment management to otherparties.Under the UPIA, the concept of prudence regarding an investment is applied to the portfolio as a whole.
Incorrect
Under UPIA, advisors were permitted to delegate investment management to otherparties.Under the UPIA, the concept of prudence regarding an investment is applied to the portfolio as a whole.
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Question 4 of 10
4. Question
What are the main responsibilities of an advisor’s under the Uniform Prudent Investors Act?
I. Recognising the reward relationship in the investment.
II. Recognising the risk relationship in the investment.
III. Understanding the client’s appetite for risk.
IV. Undertaking plans not suiting the clients appetite for risk because it will yield good investment.Correct
Understanding the client’s appetite for risk and recognizing the risk/reward relationship in the investment are the advisor’s primary fiduciary responsibilities under UPIA.
Incorrect
Understanding the client’s appetite for risk and recognizing the risk/reward relationship in the investment are the advisor’s primary fiduciary responsibilities under UPIA.
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Question 5 of 10
5. Question
What are the responsibilities of a fiduciary regarding section 404(c) of ERISA?
I. To act discreetly regarding the management of the plan.
II. Not to branch out against large losses.
III.To deliver benefits only to participants and their beneficiaries while minimizing plan expenses.
IV. They include the duty to act only in best interest of plan participants and their beneficiaries.Correct
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
Incorrect
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
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Question 6 of 10
6. Question
Which transactions are prohibited under ERISA gudielines?
I. Any transaction between the ERISA-covered plan and any party of interest.
II. Engaging in transactions with a party whose goals are counter to the plan’s goals.
III.Self dealing with plan funds in the interest of fiduciary.
IV. Receiving compensation, generated from transactions associated with the plan.Correct
As such, any transaction between the ERISA-covered plan and any party of interest is a prohibited transaction.As such, any transaction between the ERISA-covered plan and any party of interest is a prohibited transaction.The fiduciary must never engage in transactions in the interest of a party that has goals that are counter to the plan’s goals
Incorrect
As such, any transaction between the ERISA-covered plan and any party of interest is a prohibited transaction.As such, any transaction between the ERISA-covered plan and any party of interest is a prohibited transaction.The fiduciary must never engage in transactions in the interest of a party that has goals that are counter to the plan’s goals
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Question 7 of 10
7. Question
Which of these statements regarding 529 college savings plans is/are true?
I. The investor is taxed on the effective rate of return of a prepaid tuition plan.
II. If the account is used for qualified expenses the earnings may be withdrawn from the account tax free.
III.Investment account can be opened in the name of named beneficiary.
IV. The usage of this plan is not limited to qualified higher education expenses.IV.
Correct
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. The account is used for qualified expenses, the earnings may be withdrawn from the account tax free. Similarly, the investor is not taxed on the effective rate of return of a prepaid tuition plan.
Incorrect
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. The account is used for qualified expenses, the earnings may be withdrawn from the account tax free. Similarly, the investor is not taxed on the effective rate of return of a prepaid tuition plan.
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Question 8 of 10
8. Question
Which statements hold true for prepaid tuition plans?
I. This plan is available to all ages.
II. Prepaid tuition plans also tend to have age limits for beneficiaries.
III.Prepaid plans are subjected to market risk and may lose value.
IV. Investors can lock in current tuition rates.Correct
Prepaid tuition plans also tend to have age limits for beneficiaries.Prepayment plans allow the investor to lock in current tuition rates.
Incorrect
Prepaid tuition plans also tend to have age limits for beneficiaries.Prepayment plans allow the investor to lock in current tuition rates.
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Question 9 of 10
9. Question
What is the difference between a college saving plan and prepaid tuition plan?
I. Prepaid tuition plans often only cover tuition and fees unlike college saving plan which cover other qualified expenses also.
II.There is an age limit for beneficiaries under the prepaid plan unlike the college saving plan.
III.Under the college saving plan the owner can reside in any state unlike the prepaid plan.
IV. Prepaid plans tend to have a brief yearly enrollment period, while college savings plans allow for enrollment year round.Correct
Prepaid tuition plans also tend to have age limits for beneficiaries, while college savings plans are available to all ages. There is no requirement regarding place of residence for college savings plans, but most prepaid plans require that the owner or beneficiary reside in the state in which the plan was purchased. Finally, prepaid plans tend to have a brief yearly enrollment period, while college savings plans allow for enrollment year round
Incorrect
Prepaid tuition plans also tend to have age limits for beneficiaries, while college savings plans are available to all ages. There is no requirement regarding place of residence for college savings plans, but most prepaid plans require that the owner or beneficiary reside in the state in which the plan was purchased. Finally, prepaid plans tend to have a brief yearly enrollment period, while college savings plans allow for enrollment year round
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Question 10 of 10
10. Question
Which accounts were created by Tax payer relief account?
I. UTMA accounts
II. Coverdell Education Savings Accounts
III. 529 college saving plans.
IV. UGMA accountsCorrect
Coverdell Education Savings Accounts, or ESAs, were created by the Taxpayer Relief Act of 1997.
Incorrect
Coverdell Education Savings Accounts, or ESAs, were created by the Taxpayer Relief Act of 1997.