1) Defined-benefit plans are favorable to employees for which of the following reasons
a) Key employees like to invest the funds that accumulate in their individual accounts.
b) Benefits are based on career-average earnings.
c) Distributions are traditionally in lump sums.
d) Benefits are generally more portable than under defined-contribution plans.
2) All of the following statements comparing a profit-sharing plan to a pension plan are correct, EXCEPT:
a) Restrictions on investment in employer’s stock exist under a pension plan but not with a profit-sharing plan.
b) Employers may make larger annual contributions and take a larger deduction with a profit-sharing plan.
c) In-service withdrawals are permitted with a profit sharing plan but not with a pension plan.
d) An employer may forego contributions in a given year with a profit-sharing plan
3) Which of the following statements concerning the basic provisions that are unique to ESOPs is (are) correct?
I In ESOP plans, employees are awarded stock options that can be exercised after retirement.
II The plan must provide for diversification of investments by permitting participants who have completed 10 years of participation and attained age 55 to direct the investment of a portion of their account balance.
III The employer may leverage the purchase of the qualifying employer securities.
a) I only
b) I, II, and III
c) II and III only
d) I and III only
4) All the following statements concerning qualified target-benefit pension plans are correct, EXCEPT:
a) Contributions can be reduced if investment returns exceed the target.
b) The employer does not guarantee a benefit level.
c) Annual contributions on behalf of an employee are limited to the lesser of $50,000 or 100% of the employee’s salary.
d) Each employee bears the investment risk, not the employer
5) The Good Company must permit which of the following employees to participate in their SEP?
a) Danielle who earned $600 of compensation for the year and has worked for Good Company for the last 10 years
b) Bonny who has worked for the Good Company for 2 of the immediately preceding 5 years.
c) Carol who worked full time as a consultant for the Good Company for the year
d) Aileen who turned 18 this year and has worked for the Good Company since her 16th birthday.