Chapter Exam 10-Retirement Plans

How are Roth's treated for tax purposes? a. Non-deductible contributions and tax-free distributions b. Deductible contributions and taxable distributions c. Distributions taxable as capital gains d. Distributions taxable as income tax

a. Non-deductible contributions and tax-free distributions The tax characteristics of a Roth IRA are non-deductible contributions and tax-free distributions.

What area of group health insurance is regulated under the Employee Retirement Security Act of 1974 (ERISA)? a. Underwriting procedures b. Disclosure and reporting c. Worker's compensation d. Long-term are

b. Disclosure and reporting The Employee Retirement Security Act of 1974 (ERISA) regulates group health insurance in the area of disclosure and reporting.

What does ESOP stand for? a. Employee Stock Ownership Plan b. Employee Savings Optional Plan c. Employee Savings Opportunity Plan d. Employer Stock Offering Program

a. Employee Stock Ownership Plan

Non-deductible contributions are typically associated with a a. Roth IRA b. 401 (k) c. Traditional IRA d. SEP Plan

a. Roth IRA No income-tax deductions can be taken for contributions made to a Roth IRA, but the earnings on those contributions are entirely tax-free when they are withdrawn.

Employer contributions to qualified plans are a. tax-deductible by the employer b. Taxable to the employee c. only available for key employees d. only found in 403(b) plans

a. tax-deductible by the employer Employer contributions to qualified plans are tax-deductible by the employer

Retirement plans are prevented form favoring highly compensated employees under which government regulation? a. Withdrawal fees b. Nondiscrimination c. Keogh regulation d. IRC Section 457

b. Nondiscrimination Nondiscrimination prevents retirement plans from favoring highly compensated employees.

Retirement plans cannot favor highly compensated employs. The government regulation that prevents this from happening is called a. HR-10 b. Nondiscrimination c. IRC Section 457 d. Defamation

b. Nondiscrimination Retirement plans cannot favor highly compensated employees. the government regulation that prevents this from happening is called nondiscrimination.

ESOPs are typically invested in a. non-qualified plans b. IRAs c. employer stock d. annuities

c. employer stock In ESOP, companies provide their employees with stocks ownership, often at no up-front cost to the employees.

All of the following are exempt form the 10% tax penalty for early qualified plan withdrawals EXCEPT a. Qualified college expenses b. First time home purchase c. Death of the participant d. Stock purchase

d. Stock purchase Withdrawing funds from a qualified plan for the purpose of purchasing stocks or other securities would trigger a 10% tax penalty.

Under a 10-year vesting schedule, what percentage of employer contributions must be vested after 10 years of service? a. 25% b. 50% c. 75% d. 100%

d. 100% Benefits that are "vested" belong to each employee even if the employee terminates employment prior to retirement. In this situation, benefits on a 10-year vesting schedule that accrue from employer contributions must be 100% vested after 10 years of service.