Retirement and other insurance concepts-Practice Questions

Group Life Insurance An employee is joining a group insurance plan. In order to avoid having to prove insurability, what must the employee do? AJoin during the open enrollment period BProvide medical records to the insurer CSign a statement of continued good health DNothing: proof of insurability is never required in group policies

A Join during the open enrollment period Correct! If one applies for coverage after the open enrollment period, proof of insurability may be required in order to avoid adverse selection.

B. Life Settlements Which of the following best defines the "owner" as it pertains to life settlement contracts? A The policyowner of the life insurance policy B A financial entity that sponsors the transaction C A fiduciary for the contract D The insurance provider

A The policyowner of the life insurance policy Correct! The term owner refers to the owner of the policy who may seek to enter into a life settlement contract. The term does not include an insurance provider, a qualified institutional buyer, a financing entity, a special purpose entity, or a related provider trust.

Contributory vs. Noncontributory Which of the following is the required number of participants in a contributory group plan? A25% B50% C75% D100%

C 75% Under a contributory group plan, an insurer will require that 75% of eligible employees be included in the plan.

Rollovers and Transfers For a retirement plan to be qualified, it must be designed for the benefit of AEmployees. BKey employee. CEmployer. DIRS.

A Employees. Qualified plans are designed for the exclusive benefit of the employees and their beneficiaries.

A. Third-party Ownership Who is a third-party owner? A A policyowner who is not the insured B An insurer who issues a policy for two people C An employee in a group policy D An irrevocable beneficiary

A A policyowner who is not the insured Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.

Life Insurance Needs Analysis and Suitability A tax-sheltered annuity is a special tax-favored retirement plan available to ACertain groups of employees only. BAnyone. CCertain age groups only. DCertain groups depending on factors such as race, gender, and age. n).

A Certain groups of employees only. A tax-sheltered annuity is a special tax-favored retirement plan available only to certain groups of employees (nonprofit charitable, educational, religious, and other 501c(3) organizations, including all employees in public education).

Individual Retirement Accounts (IRAs) For a retirement plan to be qualified, it must be designed for the benefit of AEmployees. BKey employee. CEmployer. DIRS.

A Employees. Correct! Qualified plans are designed for the exclusive benefit of the employees and their beneficiaries.

Conversion Privilege When an employee terminates coverage under a group insurance policy, coverage continues in force AFor 31 days. BFor 60 days. CUntil the employee can obtain coverage under a new group plan. DUntil the employee notifies the group insurance provider that coverage conversion policy is issued.

A For 31 days. Correct! An employee has 31 days under the conversion privilege to convert to an individual policy.

What type of life insurance is most commonly used for group plans? A Annually renewable term B Whole life C Flexible premium whole life D Decreasing term

A. Annually renewable term Correct! Group insurance is usually written for employee-employer groups as annually renewable term insurance.

.Simplified Employee Pensions (SEPs) An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? A$10,000, tax on growth only B$10,000, no tax consequence C$8,000, no tax consequence D$8,000, tax on growth only

B. $10,000, no tax consequence Correct! During an IRA direct transfer (or direct rollover), the full amount gets reinvested from one plan to the other.

1. Conversion Privilege An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? AThe insured may convert coverage to an individual policy within 31 days. BThe premium for individual coverage will be based upon the insured's attained age. CThe insured may choose to convert to term or permanent individual coverage. DThe insured would not need to prove insurability for a conversion policy.

C The insured may choose to convert to term or permanent individual coverage. When group coverage is converted to an individual policy, the insurer will determine the type of coverage, usually permanent insurance.

Group Life Insurance All of the following are characteristics of a group life insurance plan EXCEPT AA minimum number of participants is required in order to underwrite the plan. BThe cost of the plan is determined by the average age of the group. CThere is a requirement to prove insurability on the part of the participants. DThe participants receive a Certificate of Insurance as their proof of insurance.

C There is a requirement to prove insurability on the part of the participants. Correct! There is no individual underwriting for group life insurance.

Rollovers and Transfers Which of the following is TRUE of a qualified plan? AIt does not need to have a vesting schedule. BIt may discriminate in favor of highly paid employees. CIt may allow unlimited contributions. DIt has a tax benefit for both employer and employee.

D. It has a tax benefit for both employer and employee. Correct! A qualified plan is approved by the IRS, which then gives both the employer and employee benefits in deductibility of contributions and tax deferral of growth.

Simplified Employee Pensions (SEPs) Which of the following is an IRS qualified retirement program for the self-employed? ASplit dollar BBuy-sell agreement C401(k) plan DKeogh plan

D. Keogh plan The Keogh or HR-10 plan allow self-employed individuals to establish tax favored retirement plans for themselves and their eligible employees.

Simplified Employee Pensions (SEPs) An IRA purchased by a small employer to cover employees is known as a A401(k) plan. BDefined contribution plan. C403(b) plan. DSimplified Employee Pension plan.

D. Simplified Employee Pension plan. Correct! A Simplified Employee Pension (SEP) is an employer sponsored IRA. Contributions to the plan are not included in the employee's taxable income for the year, to the extent that they do not exceed the maximums allowed. Distributions from a SEP are taxable as ordinary income when received at retirement.

Individual Retirement Accounts (IRAs) All of the following are general requirements of a qualified plan EXCEPT AThe plan must be for the exclusive benefits of the employees and their beneficiaries. BThe plan must be permanent, written and legally binding. CThe plan must provide an offset for social security benefits. DThe plan must be communicated to all employees.

I C The plan must provide an offset for social security benefits. Correct! Plans must meet the general requirements established by IRS.

Life Settlements Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors? A Life expectancy B Mortality rate C Risk exposure D Morbidity

A Life expectancy Correct! Life Expectancy is an important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors (an arithmetic mean).

Group Life Insurance In a single employer group plan, what is the name of the policy issued to the employer? AMaster contract BCertificate of insurance CEmployer-insurer contract DCertificate of authority

A Master contract In group insurance, the actual policy (master policy/contract) is issued to the sponsor of the group, which is often an employer.

Taxation of IRAs and Roth IRAs Traditional IRA contributions are tax deductible based on which of the following? AOwner's income BHow long the plan has been in force COwner's age DIRA limit

A Owner's income Traditional IRA contributions are tax deductible, but may be limited if the owner's income exceeds a certain level.

Life Insurance Needs Analysis and Suitability An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? AProfit sharing plan B401(k) plan CTax-sheltered account plan DHR 10 plan

A Profit sharing plan Correct! A profit sharing plan is one where the employer will contribute monies into an employee's retirement plan when the company shows a profit. The others are all qualified plans, but company profit isn't an issue with them.

Conversion Privilege If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may ARequire evidence of insurability. BRequire a higher premium. CExtend the open enrollment period. DImpose medical requirements on existing members.

A Require evidence of insurability. Correct! In group underwriting the evidence of insurability is usually not required of each participant unless he or she is enrolling for coverage outside of the normal enrollment period.

Life Insurance Needs Analysis and Suitability What is the primary purpose of a 401(k) plan? ARetirement BEducation funds CTo receive dividends over a certain period DLife insurance distribution

A Retirement Correct! Profit-sharing plans are qualified plans where a portion of the company's profit is contributed to the plan and shared with employees. A 401(k) qualified retirement plan allows employees to take a reduction in their current salaries by deferring amounts into a retirement plan. The company can also somehow match the employee's contribution, whether it is dollar for dollar or on a percentage basis.

Life Insurance Needs Analysis and Suitability All of the following employees may use a 403(b) plan for their retirement EXCEPT AThe CEO of a private corporation. BA school bus driver. CA part-time classroom aide. DThe vice president of a charitable organization.

A The CEO of a private corporation. Not all public employees are eligible for 403(b) plans, or tax-sheltered annuities, only employees of public education (local, state, or federal), as well as employees of charitable organizations.

Conversion Privilege An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? AThe insurer will pay the full death benefit from the group policy to the beneficiary. BThe insurer will pay a reduced death benefit to the beneficiary. CThe insurer will pay the death benefit minus one month's premium. DThe insurer will pay nothing because the employee has terminated his group insurance and hasn't started the individual one.

A The insurer will pay the full death benefit from the group policy to the beneficiary. The employee usually has a period of 31 days after terminating from the group in order to exercise the conversion option. During this time, the employee is still covered under the original group policy

Group Life Insurance Which of the following best defines the "owner" as it pertains to life settlement contracts? AThe policyowner of the life insurance policy BA financial entity that sponsors the transaction CA fiduciary for the contract DThe insurance provider

A The policyowner of the life insurance policy Correct! The term owner refers to the owner of the policy who may seek to enter into a life settlement contract. The term does not include an insurance provider, a qualified institutional buyer, a financing entity, a special purpose entity, or a related provider trust.

Contributory vs. Noncontributory Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? AThose who have been insured under the plan for at least 5 years BThose who have worked in the company for at least 3 years CThose who have dependents DThose who have no history of claims

A Those who have been insured under the plan for at least 5 years If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.

Rollovers and Transfers Who can make a fully deductible contribution to a traditional IRA? AAn individual not covered by an employer-sponsored plan who has earned income BAnybody; all IRA contributions are fully deductible regardless of income level CSomeone making contributions to an educational IRA DA person whose contributions are funded by a return on investment

A. An individual not covered by an employer-sponsored plan who has earned income Individuals who are not covered by an employer-sponsored plan may deduct the amount of their IRA contributions regardless of their income level.

Third-party Ownership All of the following are examples of third-party ownership of a life insurance policy EXCEPT A An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. B An insured couple purchases a life insurance policy insuring the life of their grandson. C A company purchases a life insurance policy on their manager, who is an important part of the operation. D When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company.

A. An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. Correct! A collateral assignment is the transfer of some or all of the death benefits of the policy to a creditor as security for a loan, but does not give the creditor the rights of ownership. In the event of the insured's death, the creditor would only be able to recover that portion of the policy's proceeds equal to the creditor's remaining interest in the loan.

Rollovers and Transfers In a direct transfer, how is money transferred from one retirement plan to a traditional IRA? AFrom trustee to trustee BFrom trustee to the participant CFrom the participant to the new plan DFrom the original plan to the original custodian

A. From trustee to trustee In a direct transfer, the distribution is made directly from the trustee of the first plan to the trustee or administrator/custodian of the new IRA plan.

An employee is joining a group insurance plan. In order to avoid having to prove insurability, what must the employee do? A Join during the open enrollment period B Provide medical records to the insurer C Sign a statement of continued good health D Nothing: proof of insurability is never required in group policies

A. Join during the open enrollment period If one applies for coverage after the open enrollment period, proof of insurability may be required in order to avoid adverse selection.

1. Definitions In a single employer group plan, what is the name of the policy issued to the employer? A Master contract B Certificate of insurance C Employer-insurer contract D Certificate of authority

A. Master contract In group insurance, the actual policy (master policy/contract) is issued to the sponsor of the group, which is often an employer.

All of the following statements are true regarding group insurance EXCEPT A Participants in the policy each receive a policy. B The group sponsor is the policyholder. C Participants in a group insurance plan are issued certificates of insurance. D Small groups such as labor unions are eligible for group insurance.

A. Participants in the policy each receive a policy. Correct! Participants receive a certificate of insurance, but the sponsor, not the participants, is in control of the policy.

Simplified Employee Pensions (SEPs) Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT? ASEPs are suitable for large companies. BSEPs allow the employer to make annual tax deductible contributions up to 25% of an employee's earned income. CSEPs have a higher tax deductible contribution limit than an IRA. DEmployer contributions are not included in the employee's gross income.

A. SEPs are suitable for large companies. Correct! An SEP is a benefit plan that is designed to be provided by a small employer for the benefit of the employees.

Estate Conservation What does "liquidity" refer to in a life insurance policy? ACash values can be borrowed at any time. BThe death benefit replaces the assets that would have accumulated if the insured had not died. CThe policyowner receives dividend checks each year. DThe insured receives payments each month in retirement.

ACash values can be borrowed at any time. Liquidity in life insurance refers to availability of cash to the insured through cash values.

Rollovers and Transfers Traditional IRA contributions are tax deductible based on which of the following? AOwner's income BHow long the plan has been in force COwner's age DIRA limit

AOwner's income Correct! Traditional IRA contributions are tax deductible, but may be limited if the owner's income exceeds a certain level.

Life Insurance Needs Analysis and Suitability Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings? AThey are tax deferred until withdrawn. BTaxes must be paid in full. CEmployer's matching contribution can be 50% of employee's salary. D75% of employee's contributions are taxed.

AThey are tax deferred until withdrawn. Correct! Taxation is deferred on both contributions and earnings until funds are withdrawn.

Individual Retirement Accounts (IRAs) The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is AIllegal. BA nonqualified annuity plan. CAn executive annuity plan. DSubject to government standards.

B A nonqualified annuity plan. Correct! Nonqualified plans are a perfectly legal way for selected employees to receive certain types of benefits. Before-tax corporate dollars can be used for these plans, and they are not subject to government standards. Because of this, however, nonqualified plans contributions are not tax-deductible, unlike with qualified plans.

Conversion Privilege In group life policies, a certificate of insurance is given to AThe policyholder to keep on file. BEach insured person. CThe group sponsor. DThe insurance producer.

B Each insured person. Correct! In group life policies, individual certificates are given to each insured person.

Individual Retirement Accounts (IRAs) If a retirement plan or annuity is "qualified," this means AIt is noncancellable. BIt is approved by the IRS. CIt has a penalty for early withdrawal. DIt accepts after-tax contributions.

B It is approved by the IRS. A qualified retirement plan is approved by the IRS, which then gives both the employer and employee benefits such as deductible contributions and tax-deferred growth.

Contributory vs. Noncontributory An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy? AShe must apply for a new policy, which requires her to provide proof of insurability. BShe can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. CShe will still be covered under the group plan, but will have to pay an individual policy premium. DShe can only convert her coverage without proof of insurability if she has the master policy.

B She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan. Correct! If a person has life insurance under a group plan and then leaves the group, he/she may convert group coverage to individual coverage within 31 days of leaving the plan without proof of insurability.

Individual Retirement Accounts (IRAs) Which of the following would be considered a nonqualified retirement plan? ARoth IRA BSplit-dollar plan C401(k) DKeogh plan

B Split-dollar plan Correct! Examples of nonqualified plans are individual annuities and deferred compensation plans for highly paid executives, split-dollar insurance arrangements, and Section 162 executive bonus plans.

. Life Insurance Needs Analysis and Suitability A 403(b) plan, commonly referred to as a TSA, is available to be used by ASelf-employed persons. BTeachers and not-for-profit organizations. CGovernment workers. DPostal employees.

B Teachers and not-for-profit organizations. Tax sheltered annuities, commonly referred to as 403 (b) plans are designed for teachers and not-for-profit organizations.

Definitions Which of the following statements about group life is correct? A The policy can be converted to an individual term insurance policy. B The cost of coverage is based on the ratio of men and women in the group. C The premiums are higher than in an individual policy because there is no medical exam. D The group sponsor receives a Certificate of Insurance.

B The cost of coverage is based on the ratio of men and women in the group. Group life insurance can be converted to an individual whole life, not a term, policy; the group life insurance premiums are usually lower than those of an individual policy; the group sponsor receives a master contract, while the participants receive certificates of insurance. The cost of the coverage is based on the average age of the group and the ratio of men to women.

B. Life Settlements In a life settlement contract, whom does the life settlement broker represent? A The life settlement intermediary B The owner C The insurer D The beneficiary

B The owner Correct! Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only the policyowners.

Group Life Insurance In a life settlement contract, whom does the life settlement broker represent? AThe life settlement intermediary BThe owner CThe insurer DThe beneficiary

B The owner Correct! Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only the policyowners.

1. Definitions In group life policies, a certificate of insurance is given to A The policyholder to keep on file. B Each insured person. C The group sponsor. D The insurance producer.

B. Each insured person. Correct! In group life policies, individual certificates are given to each insured person.

A. Third-party Ownership Which of the following is NOT true of life settlements? A They involve insurance policies with large face amounts. B The seller must be terminally ill. C They could be used for a key person coverage. D They could be sold for an amount greater than the current cash value.

B. The seller must be terminally ill. Correct! With Life Settlements, unlike with viatical settlements, the seller does not need to be terminally ill. They usually involve life insurance policies with a face amount of $250,000 or more, "key-person" coverage, corporate owned policies, or policies representing excess coverage that is no longer needed, and could be sold for an amount greater than the current cash value.

A. Third-party Ownership Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner? A Family term rider B Third-party ownership C An irrevocable beneficiary D A buy-sell agreement

B. Third-party ownership Contracts that are owned by someone other than the insured are known as third-party ownership. Most policies involving third-party ownership are written in business situations or for minors in which the parent owns the policy.

Individual Retirement Accounts (IRAs) Employer contributions made to a qualified plan AAre after-tax contributions. BAre taxed annually as salary. CAre subject to vesting requirements. DMay discriminate in favor of highly paid employees.

C Are subject to vesting requirements. Correct! Qualified plans must have a vesting requirement.

Individual Retirement Accounts (IRAs) Employer contributions made to a qualified plan AAre after-tax contributions. BAre taxed annually as salary. CAre subject to vesting requirements. DMay discriminate in favor of highly paid employees.

C Are subject to vesting requirements. Qualified plans must have a vesting requirement.

Rollovers and Transfers All of the following statements are true regarding tax-qualified annuities EXCEPT AThey must be approved by the IRS. BWithdrawals are taxed. CEmployer contributions are not tax deductible. DAnnuity earnings are tax deferred.

C Employer contributions are not tax deductible. t! Tax-qualified annuities must be approved by the IRS and allow for tax deductible employer contributions. All withdrawals are taxed and earnings grow tax deferred.

Simplified Employee Pensions (SEPs) Which of the following applicants would NOT qualify for a Keogh Plan? ASomeone who is over 25 years of age BSomeone who works for a self-employed individual CSomeone who works 400 hours per year DSomeone who has been employed for more than 12 months

C Someone who works 400 hours per year A person must have worked at least 1,000 hours per year to be eligible for a Keogh Plan.

Individual Retirement Accounts (IRAs) All of the following would be different between qualified and nonqualified retirement plans EXCEPT ATaxation of contributions BIRS approval requirements CTaxation on accumulation DTaxation of withdrawals

C Taxation on accumulation Taxation on accumulation is deferred in both types of plans. The rest of the characteristics would differ.

Individual Retirement Accounts (IRAs) All of the following would be different between qualified and nonqualified retirement plans EXCEPT ATaxation of contributions BIRS approval requirements CTaxation on accumulation DTaxation of withdrawals

C Taxation on accumulation Taxation on accumulation is deferred in both types of plans. The rest of the characteristics would differ.

Plans for Employers A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? AThere is a 10% early withdrawal penalty. BThe amount distributed is subject to ordinary income tax. CThe amount of the distribution is reduced by the amount of a 20% withholding tax. DNo taxes are due since the plan participant is over age 59 1/2.

C The amount of the distribution is reduced by the amount of a 20% withholding tax. Correct! Distributions from 401(k) plans are taxable as ordinary income in the year of the distribution. However, if the distribution is rolled over to a Traditional IRA, taxes are deferred until the required minimum IRA distributions begin. Since this client actually took a

Individual Retirement Accounts (IRAs) All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT AThe plan can discriminate as to who may participate. BThe plan is not approved for favorable tax treatment by the IRS. CThe employer can receive a current tax deduction for any contributions made to the plan. DThe plan is a legal method of accumulating money for retirement needs.

C The employer can receive a current tax deduction for any contributions made to the plan. Employers do not receive a current tax deduction for any contributions made to a nonqualified plan. The plans are legal; however, they do not qualify for any favorable tax treatment under the IRS rules.

. Conversion Privilege In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years? A1 B3 C5 D10

C5 If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.

Taxation of IRAs and Roth IRAs Employer contributions made to a qualified plan AAre after-tax contributions. BAre taxed annually as salary. CAre subject to vesting requirements. DMay discriminate in favor of highly paid employees.

CAre subject to vesting requirements. Qualified plans must have a vesting requirement.

Retirement Plans Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT? AEach member covered receives a policy. BCoverage cannot be converted when an individual leaves the group. CPremiums are determined by age, occupation, and individual underwriting. D100% participation of members is required in noncontributory plans.

D 100% participation of members is required in noncontributory plans. If the employer pays all of the premium, then all employees must be included.

.Life Insurance Needs Analysis and Suitability If a company has a Simplified Employee Pension plan, what type of plan is it? AThe same as a 401(k) plan BThe same as an IRA, with the same contribution limits CAn undefined contribution plan for large businesses DA qualified plan for a small business

D A qualified plan for a small business A Simplified Employee Pension (SEP) is a type of qualified plan suited for the small employer or for self-employed. A SEP is an employer-sponsored IRA with an expanded contribution rate up to 25% of compensation or a specified maximum contribution amount.

Conversion Privilege An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his AExperience Rating. BGroup rate. CInsurer's scheduled rate. DAttained age.

D Attained age. Correct! If an employee terminates membership in the insured group, the employee has the right to convert to an individual whole life policy without proving insurability. The insurer will determine what type(s) of policy an employee may convert to, but it must be issued at a standard rate, based on the individual's attained age.

Individual Retirement Accounts (IRAs) Which type of retirement account does not require the owner to start taking distributions at age 73? ANonqualified IRA BStandard IRA CTraditional IRA DRoth IRA

D Roth IRA Roth contributions can continue regardless of the account owner's age, and in contrast with a traditional IRA, distributions do not have to begin at a specified age.

Simplified Employee Pensions (SEPs) All of the following would be eligible to establish a Keogh retirement plan EXCEPT AA sole proprietor of a service station who employs four employees. BA sole proprietor of film development store with no employees. CA hair dresser who operates her business at her house. DThe president and employee of a family corporation.

D The president and employee of a family corporation. Keogh plans are for self-employed individuals and their employees.

Simplified Employee Pensions (SEPs) If a company has a Simplified Employee Pension plan, what type of plan is it? AThe same as a 401(k) plan BThe same as an IRA, with the same contribution limits CAn undefined contribution plan for large businesses DA qualified plan for a small business

D. A qualified plan for a small business Correct! A Simplified Employee Pension (SEP) is a type of qualified plan suited for the small employer or for self-employed. A SEP is an employer-sponsored IRA with an expanded contribution rate up to 25% of compensation or a specified maximum contribution amount.

Rollovers and Transfers Which of the following is NOT true regarding a nonqualified retirement plan? AIt can discriminate in benefits and selecting participants. BEarnings grow tax deferred. CIt needs IRS approval. DContributions are not currently tax deductible.

c.It needs IRS approval. Correct! Nonqualified retirement plans do not meet the IRS requirements for favorable tax treatment of deductions and contributions; th