Retirement Planning & Employee Benefits - Quiz 8

Plan established his business one year ago. He has hired two assistants. He would like to establish a retirement benefit plan for himself and his two assistants, who want to make voluntary contributions. He is concerned about cash flows for unforeseen business obstacles and future expansion. Which of the following reasons is/are appropriate to recommend the establishment of a retirement plan. 1. A retirement plan would allow Pat to save for his own retirement 2. Tax savings would help to offset the cost of employer contributions 3. A retirement plan would give the appearance of business stability and would be an asset in the securing of business loans to meet growth and cash flow needs

1 and 2

In constructing the taxonomy of retirement plan selection, what is the order of the following steps? 1. Choose between mandatory funded plan and discretionary plan 2. Choose the type of plan that fits objectives of owner and organization 3. Prepare a census 4. Plan sponsor must be willing to comply with qualified plan requirements

4, 3, 1, 2

Pat established his business one year ago. He has hired two assistants. He would like to set up a retirement benefit plan for himself and his two assistants, who want to make voluntary contributions. He is concerned about cash flows for unforeseen business obstacles and future expansion. Of the follow types of retirement plans, which would be the most appropriate for Pat's business: 1. 401(k) Plan 2. Money Purchase Pension Plan 3. Defined Benefit Plan 4. Profit-Sharing Plan

401(k) Plan

Qualified retirement plans that permit the employer unlimited investment in sponsor company stock are: 1. 401(k) Plans 2. Stock Bonus Plans 3. Profit Sharing Plans 4. ESOPs

401(k), Stock Bonus Plan, Profit Sharing Plan, and ESOPs

Which of the following types of plan design would be appropriate for a startup company with wide fluctuations in cash flow and key employees with an average age significantly higher than non-key employees? 1. Cash Balance Plan 2. Service Based Profit Sharing Plan 3. Target Benefit Plan using age weighting 4. Age weighted profit sharing plan

Age weighted profit sharing plan

As part of the overall compensation package, which of the following are an employer goal for a qualified retirement plan? 1. Recruit New Employees 2. Retain Quality Employees 3. Reward Exceptional Employees 4. All of the above are reasons for a qualified plan

Al of the above are reasons for a qualified plan

Which of the following qualified plan require mandatory funding? 1. Defined Benefit Pension Plans 2. 401(k) plans with an employer match organized as a profit sharing plan 3. Cash Balance Pension Plans 4. Money Purchase Pension Plans

Defined Benefit Penion Plans, Cash Balance Pension Plans, and Money Purchase Pension Plans

Bobby's Bar-b-que wants to establish a social security integrated plan using the offset method. Which of the plans should he establish? 1. SIMPLE 2. ESOP 3. Money Purchase Pension Plan 4. Defined Benefit Pension Plan

Defined Benefit Pension Plan

Generally, older age entrants are favored in which of the following plans? 1. Defined Benefit Pension Plan 2. Cash Balance Pension Plan 3. Target Benefit Pension Plan 4. Money Purchase Pension Plan

Defined Benefit Pension Plan and Target Benefit Pension Plan

Marie, a long-time widow, has always treated the employees like her family and the company has experienced very low turnover. She would like to use the retirement plan to assist her in transferring ownership interest to the employees as she is ready to retire. She has a strong preference for avoiding and deferring taxes. She is opposed to mandatory funding and indifferent to integration. Which plan would be appropriate for Marie?

ESOP

A hybrid plan that uses a discretionary contribution but adjusts for age is a form of a: 1. Profit sharing plan 2. Money purchase plan 3. Cash balance plan 4. Defined benefit plan

Profit Sharing Plan

Match the following statement with the type of retirement plan which it most completely describe: "A qualified plan that is not a pension plan" is... 1. Profit Sharing Plan 2. Money Purchase Plan 3. SIMPLE IRA 4. Defined Benefit Plan

Profit Sharing Plan

Your client, ABC Corp., is considering adopting some form of retirement plan. The client states objectives for a plan to be, in the order of importance: 1. Retention of employees 2. Flexible funding 3. Tax-deductible funding 4. Employer would like to offer company stock as an investment option 5. Employer would not like to retain any investment risk The company indicates its willing to contribute a maximum amount of 20% of payroll to such a plan in good years. the company has been in business for 22 years, and during the past decade has consistently been profitable They furnish you with an employee census. Based upon the stated objectives, you advise ABC Corp. that the most suitable retirement plan for the corporation would be:

Profit Sharing Plan

Match the following statement with the type of retirement plan which it most completely describes: "A qualified plan which allows employee elective deferrals of 100% of includible salary and has a mandatory employer match" is... 1. Profit Sharing Plan 2. Money Purchase Plan 3. SIMPLE 401(k) 4. Defined Benefit Plan

SIMPLE 401(k)

Company A has been capitalized by MJBJ Vulture Capital, a venture capital company. Company A's cash flows are expected to fluctuate significantly from year to year, due to phenomenal growth. They expect to go public within 3 years. Which of the following would be the best qualified plan for them to consider adopting? 1. profit sharing plan 2. New comparability plan 3. 401(k) plan with a match 4. stock bonus plan

Stock bonus plan

Luna Autobody wants to establish a pension plan. They want the employees to bear the investment risk and favor older employees. Which plan should they establish? 1. Age Based Profit Sharing Plan 2. Cash Balance Pension Plan 3. Money Purchase Pension Plan 4. Target Benefit Pension Plan

Target Benefit Pension Plan

Plans that require mandatory funding are generally funded by? 1. The Employee 2. The Employer 3. The Employee and The Employer 4. For PBGC insured plans, the employee and the employer

The Employer