FIN 612 Chapter 5: Chapter 5.docx

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taupeotter260

20 Apr 2015

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Purpose: put a limit on the annual rrsp contribution that an employee can make when that employee is a member of one of these registered plans: rrsp maximum dollar limit, 18% of prior year"s total compensation, money purchase limit for prior year. Dpsp, a dbpp and a dcpp: rrsp"s do not generate pension credits, an individual"s pa for a year is the total pension credits from, defined contribution pension plan, defined benefit pension plan, deferred profit sharing plan. Forfeited amounts amounts to which a member no longer has a right, arise mostly from non vested contributions by the employer: an employee has left a job before these contributions have vested. Dpsp"s to which the employee might belong is the total of: all employer contributions (employees do not make contributions, any forfeited amounts, to a maximum of the lesser of, of the money purchase limit for the current year, or, 18% of earnings for the current year before the dpsp contributions.

Related Questions

Question 1

Life insurance is viewed as favorable in defined benefit plans because it adds to the limit on deductible contributions

True

False

2 points

Question 2

Some of the advantages of using life insurance in a qualified plan includethe following except:

		plan costs for employer are predictable
		life insurance is considered to be a very safe investmen
		greater rates of return on insurance cash value than alternative investments
		retirement benefits can be guaranteed by both the insurance company and employer
		low cost installation and service of the plan

2 points

Question 3

A defined benefit plan can help an older employee in a small business maximize tax-deferred savings.

True

False

2 points

Question 4

IRS sets a maximum limit on the projected annual benefit that a defined benefit plan can provide a participant.

True

False

2 points

Question 5

An employee can be covered under both a defined benefit and a defined contribution plan.

True

False

2 points

Question 6

Which type of plan has benefit levels that are guaranteed by the employer and also the Pension Benefit Guaranty Corporation (PBGC)?

money purchase plan

defined benefit plan

target benefit plan

cross tested plan

tax deferred annuity

2 points

Question 7

Regarding a cash balance plan, which of the following is (are) true?

		the employee bears investment risk
		each participant has a hypothetical account that the employer credits at least annually
		the plan benefits older workers more than younger workers
		1 and 3
		2 and 3

2 points

Question 8

A traditional defined benefit plan and a cash balance plan share the following characteristics:

Pension Benefit Guaranty Corporation coverage

employer bears investment risk

able to use Social Security integration

all of these

only 1 and 2

2 points

Question 9

If an employer wants to reward an employee

Hi, Please help me to solve these questions with detailexplanation . Thanks

Question 4
Dustin, who is 48 years old, works for Pinnacle Inc., with a salaryof $300,000, a car allowance, and a very nice expense account.Pinnacle is a Fortune 1,000 company that sponsors a defined benefitplan that pays 2 percent times years of participation times theaverage of the three final years of compensation. In addition,Pinnacle sponsors a 401(k) / profit sharing plan and contributes18% of employees salary to the profit sharing plan. There is noadditional match. If the ADP of the NHCEs is 3%, what is themaximum that Dustin can defer this year (2018)?
A.

$5,500.
B.

$13,750.
C.

$15,000.
D.

$18,500.

Question 5
Larry, age 55, is employed by BB Trucking Company as a tire repairspecialist. He earns $62,000 per year and received an allocation of$40,000 to his employer-provided profit sharing plan for the year.If BB Trucking does not match employee deferrals, what is themaximum amount Larry can defer to his 401(k) plan for the 2018 planyear?
A.

$15,000
B.

$18,500
C.

$21,000
D.

$24,500

Question 6
Jacques, who is age 45, has just resigned from his current job. Heworked for Ace, which sponsors a cash balance plan and a standard401(k) plan. Each of the plans uses the longest permitted vestingschedule and both plans are top heavy. He has a balance of $40,000in the cash balance plan, has deferred $20,000 into the 401(k) planand has employer matching contributions of $10,000. If he has beenemployed for three years, but only participating in the plans forthe last two years, how much does he keep if he leaves today?
A.

$ 20,000.
B.

$30,000.
C.

$60,000.
D.

$64,000.

Question 7
Mikael opened a fabulous restaurant ten years ago. The food is soexceptional that the restaurant has become one of the top spots inthe city. Mikael, age 55, is the sole owner with compensation of275,000. Mikaelâs son Jamel, age 28, is the master chef withcompensation of $100,000. Jamel has been with the restaurant fulltime since he turned 18. Mikael also employs 15 other individualswhose ages range between 25 and 35 and have compensation on averageof $40,000 per year. Mikael wants to establish a profit sharingplan. Which of the following statements is true?
A.

If Mikael selected the standard allocation method and the plancontributes 10 percent per individual, the plan will contribute$55,000 to Mikaelâs account.
B.

If Mikael selected the permitted disparity method and the plancontributes 10 percent per individual, the contribution the companymakes for Mikael will be increased.
C.

Considering the needs and wants of Mikael and Jamel, anage-based profit sharing plan is the best plan for both ofthem.
D.

A new comparability plan is the least expensive, simplest way tomeet both Mikael and Jamelâs retirement needs.
Question 8

Which of the following statements regarding an age-based profitsharing plan is correct?
A.

An age-based profit sharing plan provides a greater benefit tothose plan participants whose earnings exceed the Social Securitywage base and who are over fifty years old.
B.

An age-based profit sharing plan only provides a benefit tothose plan participants whose age is within 10 years of the age ofthe owner of the plan sponsor.
C.

An age-based profit sharing plan provides greater benefits tothe older plan participants.
D.

Younger plan participants in an age-based profit sharing planusually receive the majority of the profit sharing planallocation.

Question 9 :
Acme Inc., is establishing a retirement plan and they want a planthat includes a Roth account. Which of the following statements iscorrect about Roth accounts?
A.

Matching contributions can be contributed to Roth account.

Amounts in a traditional 401(k) plan cannot be rolled over to aRoth account.
C.

Roth accounts do not require minimum distributions until afterthe death of the participant.

Roth accounts permit access for taxpayers who may otherwise notbe able to contribute to a Roth IRA.

Question 10
Which of the following qualified plans would allocate a higherpercentage of the planâs current contributions to a certain classor group of eligible employees?

A profit sharing plan that uses permitteddisparity.
An age-based profit sharing plan.
A defined benefit pension plan.
A target benefit pension plan.

1 only
B.

1 and 3
C.

2 and 4
D.

1, 2, 3, and 4

redwolf542

Chapter 8 - Question 6 :

Please, help me to explain this question. Thank you

ABC Corporation, is considering implementing some form ofretirement plan. The clientâs objectives for the plan, in order ofimportance, are:
1. Rewarding long-term employees
2. Retention of employees
3. Providing a level of income at retirement equal to 50% of anemployeeâs earnings
4. Tax-deductible funding
5. No risk to employees of benefits available
The company indicates it is willing to contribute an amount equalto 30% of payroll to such a plan. The company has been in businessfor 22 years and during the past decade has consistently beenprofitable. Based upon the stated objectives, the most suitableretirement plan for ABC Corporation would be a:
A. Money-purchase pension plan
B. Non-qualified deferred-compensation plan forlong-term employees
C. Combination defined-benefit/401(k) plan
D. Defined-benefit plan
E. Profit-sharing plan

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FIN 612 Chapter 5: Chapter 5.docx

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Related Questions

		money purchase plan
		defined benefit plan
		target benefit plan
		cross tested plan
		tax deferred annuity

		Pension Benefit Guaranty Corporation coverage
		employer bears investment risk
		able to use Social Security integration
		all of these
		only 1 and 2