5. Advantages of cash compensation include: A. (I) only B. (I) and (II) only C. (II) and (III) only D. (III) and (IV) only

II and III

6. It is always better to roll over qualified plan assets to an IRA rather than keep the assets in the plan. A. True B. False

False

7. Why include capital needs at death in retirement planning? A. Insurance not available at older ages B. Funding is cheaper when started younger C. These concerns rarely arise D. Insurance solves everything

funding is cheaper when started younger

8. Ann has a Roth IRA. She died this year. Her son Jim is the designated beneficiary. Jim is not required to start minimum distributions next year because Roth IRAs are not subject to the required minimum distribution rules after death. A. True B. False

False

9. If a trust is an IRA beneficiary

whose life expectancy is used? A. Spouse B. Brother C. Daughter D. Son , Brother (oldest)

10. Majority S corp shareholders who are employees should: A. Distinguish comp and earnings B. Declare all as comp C. Declare all as earnings D. Use safe harbor

A

11. An employee stock purchase plan is a tax-deferred form of compensation. A. True B. False

A

12. The ERISA definition of a pension plan includes all qualified pension

profit sharing, stock bonus, and similar qualified plans, but it does not include nonqualified deferred compensation plans. A. True B. False ,B

13. ERISA requires report and disclosure of benefits to plan participants under the A. Summary Plan Description B. Summary Annual Report C. Accrued Benefit Statement D. All of the above

D

14. The penalty for early withdrawal from a qualified plan does not apply to distributions from the plan if the employee has separated from service after attaining age fifty-five. A. True B. False

A

15. Employers can use a restricted stock plan to reduce the chance that a savvy executive would learn trade secrets and then go to work for a competitor. A. True B. False

A

16. If a stock option has no readily ascertainable fair market value at the time it is transferred to an executive there is no taxable income to the executive at the date of the grant. A. True B. False

A

17. A trust cannot be a designated beneficiary of an IRA. A. True B. False

B

18. Cathy Atwater is 60 5 years away from retirement. The most accurate method for her to use in calculating her income needs during retirement is the A. Expense method B. Replacement ratio

A

19. To reduce costs of installing a qualified retirement plan a small business owner could purchase a prototype plan from which of the following? A. Insurance co. B. Bank C. Mutual fund D. All of the above

D

20. The owner of Windom Enterprises has asked you to identify a tax-free compensation option that could be used to avoid the "reasonableness of compensation" issue for their executives and upper-level managers. As the owner's financial advisor you suggest A. NQDC B. Restricted stock C. Group-term insurance D. educational assistance plans for the dependents of the CEO and upper-level managers

D

21. A "fiduciary" typically includes which of the following? A. Employer B. Trustee C. Actuary only D. A and B only

D

22. The corporation gets a deduction for the compensation income element that an executive must recognize if stock is sold before the two year/one year holding period. A. True B. False

A

23. Which of the following welfare plans are exempt from ERISA reporting and disclosure requirements? (i.)overtime pay (ii.)sick pay (iii.)voluntary non-contributory group insurance (iv.)mandatory group insurance with required employee contributions A. (i) & (iii) B. (ii) & (iv) C. (i)(ii) & (iii) D. (i) (ii) & (iv)

C

24. Which of the following spousal survivorship benefits are required by pension plans? (i.)qualified pre-retirement survivor lump sum (ii.)qualified pre-retirement survivor annuity (ii.)qualified joint and survivor annuity (iv.)qualified joint and survivor lump sum A. (i) only B. (i) & (ii) C. (ii) & (iii) D. (ii) (iii) & (iv)

C

25. The first step in the planning process is analyzing existing plans to find weaknesses. A. True B. False

B

26. In general the tax consequences of a severance pay plan are similar to a(n) A. Profit-sharing plan B. IRA C. Defined Benefit plan D. Nonqualified Deferred Compensation Plan

D

27. Severance agreements can be negotiated individually with executives. Correct! A. True B. False

A

28. Following ERISA guidelines for qualified plan investments generally results in selecting from a rather narrow range of investment strategies. A. True B. False

B

29. Set-up of an employee stock purchase plan requires A. Written plan B. Employee notice C. approval by stockholders D. All of the above

C

30. Tod Gristham owner of Gristham Enterprises wants to implement one retirement plan that will reduce turnover to about 2% a year favor key employees help forestall unionizing among his rank-and-file workers and hold costs down to between 1% and 2% of company net profit. When you meet with Tod which step of the employee benefit planning process is most important to cover with him? A. Gather data B. Analyze plans C. identify the employer's objectives quantify and prioritize them D. Review effectiveness

C

31. Parachute rules apply to payments from both S and C corporations. A. True B. False

B

32. To enjoy favorable tax treatment with an incentive stock option (ISO) the exercise price of the option must be at least equal to the fair market value of the stock on the date the option is granted. A. True B. False

A

33. Alice Compton owner of Fashion Design wants to offer a retirement plan that will give her employees an incentive to maximize their performance. Alice should consider a A. Deferred Benefit plan B. Money purchase C. Profit-sharing plan D. A and B

C

34. Which of the following options is (are) true regarding the tax implications of a stock option that does not have a readily ascertainable fair market value at the time of the grant? A. no taxable income to the employee at the date of the grant B. employer receives a tax deduction at the time of the grant C. employer receives a tax deduction when the employee exercises the option D. A and B E. A and C

E

35. The fiduciary responsibility net includes any person who (i.) exercises any discretionary authority or control over plan management (ii.) exercises any control over plan asset management (iii.) renders investment advice for compensation (iv.) has discretionary authority or responsibility in plan administration A. (i) only B. (i) and (ii) C. (i) (ii) and (iii) D. All of the above

D

36. Which of the following requirements must be met in order for a severance pay plan to be considered a welfare benefit plan for ERISA purposes? (I)payments are not contingent upon retirement (II)total payments do not exceed twice the employee's annual compensation for the immediately preceding year (III)all payments are completed within 24 months after employment ends (IV)payments must be completed within 36 months after employment ends A. I and III B. I II and III C. I III and IV D. II III and IV

B

37. Morgan Bank and Trust Company wants to install executive benefit planning for the bank owners and five top executives that will be more extensive and generous than the employee benefits offered to the tellers and mid-level managers. The financial planner working with Morgan will need information about the executives' individual financial and estate planning situations and needs. A. True B. False

A

38. Nonqualified plans can provide benefits to executives beyond the limits allowed in qualified plans. A. True B. False

A

39. Obtaining a determination letter from the IRS cannot prevent the IRS from later stating that a qualified retirement plan is discriminatory in operation. A. True B. False

A

40. Joan Garvey owns Garvey Management a property management company. Last year Garvey Management installed a qualified defined benefit plan. A small portion of the plan is invested in real estate. Joan hired Hank Thomas an actuary to evaluate the plan on an annual basis. Hank's lease in his old office space ran out and Joan offered to let him occupy an office rent-free in one of the buildings that is in the qualified plan's portfolio. This arrangement would be an acceptable transaction under ERISA. A. True B. False

B

41. Payments made upon termination of employment or service that occurs within the one-year period after a change in control are generally treated as contingent payments. A. True B. False

A

42. An employer receives a tax deduction for a restricted stock plan in the year that the stock plan is adopted. A. True B. False

B

43. Advantages of an incentive stock option (ISO) include which of the following? A. No upfront cash B. Capital gains eligibility C. Tax deferral D. All of the above

D

44. Fiduciaries cannot delegate fiduciary responsibilities and in turn avoid direct responsibility for performing the duty. A. True B. False

B

45. As a general rule the IRC does not allow a tax deduction for a publicly held corporation for compensation in excess of $1000000 for the company CEO. A. True B. False

A

46. It may be advantageous for a participant to keep retirement assets in a qualified plan rather than roll assets over to an IRA for all of the following reasons except A. Loans B. Life insurance C. PBGC D. No spousal consent

D

47. Foster Tate age sixty-four died this year before retiring. Foster's beneficiary receives a lump sum death benefit of $200000 from a cash value life insurance plan that was part of Foster's retirement plan. The cash value of the insurance was $120000 at the time of Foster's death. Foster had reported a total of $20000 of insurance costs for this contract on his income tax returns. The taxable amount of this benefit to the beneficiary is A. $0 B. $200K C. $120K D. $100K

D

48. Blake Johnston retired from Brumley Enterprises a month after his fifty-sixth birthday. Blake began receiving a series of substantially equal periodic payments from his qualified plan based on his life expectancy. When he turned fifty-nine he decided that he wanted to alter his payments so that he would receive a higher monthly payment. If Blake does this A. he will no incur additional taxes B. Early withdrawal penalty C. Penalty + interest

A

49. Objectives that employers have for benefit plans include A. maximizing benefits for shareholder-employees. B. matching benefit levels of local competitors. C. increasing tax burden on employees. D. only A and B

D

50. Under a qualified domestic relations order (QDRO) A. a demand for cash payment can be made even if the plan has no provision for the account owner. B. a person who receives a distribution because of a QDRO can roll over the distribution to his/her own retirement account and preserve the tax deferral. C. a means is provided to circumvent the provision that qualified plan benefits cannot be assigned to another. D. b and c

D