Multiple Choice Questions on Retirement Plans

Question 1: Distributions from a 401(k) plan

Would you please answer the multiple-choice question by highlighting the correct answer?

 

The book is attached to the order.

 

The solution has to be from the book. Would you please copy and paste the answer along with the book answer?

 

What is your favourite color in the book?

 

a) Red

 

b) Blue

 

c) Green

 

d) Black

 

Answer: Pg 216 line .. green Very important to match the question and answer toward the book

Question 1 (1.6 points)
 
All of the following statements concerning distributions from a 401(k) plan account are true Except:

Question 1 options:
  
Pre-70-1/2 distributions will be subject to a 10% tax penalty.
  
Minimum required distributions beginning at age 70-1/2 will typically be taxed as ordinary income.
  
Distributions made over the life expectancy of the plan participant are not subject to the 10% tax penalty even if they begin prior to age 59-1/2.
  
A QDRO will not accelerate the income tax liability on the 401(k).

Question 2 (1.6 points)
 
With a survivor's benefit plan, the employer agrees to pay the employee's beneficiary a specified amount of money. Which of the following should be utilized by the employer to "fund" such a plan?

Question 2 options:
  
Employer stock
  
Mutual funds
  
Life insurance
  
Corporate earnings and profits

Question 3 (1.6 points)
 
Which of the following distributions from a qualified plan would be subject to the 10% penalty tax for premature distributions?

Question 3 options:
  
Annual payments of $10,000 made over the employee's lifetime, beginning after the date of separation from service
  
An in-service distribution of $100,000 to an employee who is 55 years of age
  
Payments to a former spouse under a qualified domestic relations order
  
Payments resulting from an employee's disability prior to age 59-1/2

Question 4 (1.6 points)
 
Which of the following best describes the tax ramifications to the employer if a DBO plan is created?

Question 4 options:
  
The premiums paid on the life insurance policy are tax-deductible to the employer as an ordinary and necessary business expense.
  
The life insurance proceeds received by the corporation from the policy funding the DBO plan are never subject to AMT.
  
The payments made to the employee's beneficiary under the DBO plan are deductible to the employer only if the payments represent reasonable compensation for the employee's services.
  
Life insurance proceeds received by the corporation are subject to a gift tax of 30%.

Question 5 (1.6 points)
 
With regard to a survivor's income benefit plan,

Question 5 options:
  
benefits received by beneficiaries are generally received income tax-free.
  
an employee makes a taxable gift to the beneficiary at the employee's death.
  
benefits paid to beneficiaries by a corporation are generally deductible to the corporation.
  
payment of life insurance premiums by the corporation result in taxable income to the employee.

Question 2: Funding a survivor's benefit plan

Question 6 (1.6 points)
 
Martha has been offered a survivor's income benefit plan by her employer. The plan can be used to provide Martha all of the following Except

Question 6 options:
  
Additional retirement benefits
  
Conversion from a split-dollar plan when Table 2001 costs rise
  
An immediate death benefit
  
Benefits excludable from Martha's gross estate

Question 7 (1.6 points)

 
Vesting refers to nonforfeitablility of benefits to covered employees.

Question 7 options:
  
True
  
False

Question 8 (1.6 points)
 
Which of the following is true concerning a DBO plan?

Question 8 options:
  
The DBO plan should never be linked to postretirement annuity benefits.
  
The DBO plan may be linked to postretirement annuity benefits.
  
The DBO plan must be linked to postretirement annuity benefits.
  
DBO plans are a type of retirement asset.

Question 9 (1.6 points)
 
Three years ago, Albert Brown was hired at as an accountant at Ace Computers, Inc. Ace has a 401(k) plan with a 6-year graduated vesting schedule that matches employee contributions dollar-for-dollar up to 3% of an employee's salary. Albert earned $60,000 in year 1, $62,000 in year 2, and $64,000 In year 3. Each year, he contributed $5,000 to his 401(k) plan. He left Ace at the beginning of year 4. What amount of his 401(k) plan can he take with him?

Question 9 options:
  
$0
  
$15,000
  
$17,232
  
$20,580

Question 10 (1.6 points)
 
Qualified pension or profit-sharing plans may provide for voluntary deductible employee contributions.

Question 10 options:
  
True
  
False

Question 11 (1.6 points)
 
Under certain circumstances, the value of the benefits of a DBO plan may be included in the employee's estate.

Question 11 options:
  
True
  
False

Question 12 (1.6 points)
 
A target-benefit plan has characteristics of defined-contribution and defined-benefit plans.

Question 12 options:
  
True
  
False

Question 13 (1.6 points)
 
Once the plan participant reaches the required beginning date, minimum required distributions from the plan must begin. If the plan participant receives less than the minimum required distribution from the plan after the required beginning date, what are the tax ramifications of the distribution?

Question 13 options:
  
The entire distribution may be subject to ordinary income tax liability.
  
The amount by which the distribution was short will be subject to ordinary income tax plus a 10% tax penalty.
  
The amount by which the distribution was short will be subject to ordinary income tax plus a 50% tax penalty.
  
The amount by which the distribution was short may be rectified in future years without tax or penalty.

Question 14 (1.6 points)
 
A 401(k) plan is also known as a cash or definite-benefit arrangement (CODBA).

Question 14 options:
  
True
  
False

Question 15 (1.6 points)
 
Which of the following is not an advantage of setting up a pension or profit-sharing plan?

Question 3: Premature distributions from a qualified plan

Question 15 options:
  
Deferral of taxes
  
Rewarding of long-term service
  
Provision of special benefits for key employees
  
Attracting quality personnel

Question 16 (1.6 points)
 
Employers may not restrict whom an employee chooses as a beneficiary of a DBO plan.

Question 16 options:
  
True
  
False

Question 17 (1.6 points)
 
Julius has a Death Benefit Only (DBO) plan through his employer. Which of the following would not cause death benefits from the DBO plan to be included in Julius's federal gross estate?

Question 17 options:
  
Death benefits are payable to the employee's estate.
  
Death benefits are payable only to eligible beneficiaries determined by the employer.
  
Employee is a controlling shareholder.
  
Employee also has a nonqualified deferred-compensation agreement that pays a retirement benefit.

Question 18 (1.6 points)
 
Which of the following statements is true concerning the income tax treatment to the employer for the proceeds from a life insurance policy purchased to fund a DBO plan.

Question 18 options:
  
The death-benefit proceeds will always be subject to income tax.
  
The death-benefit proceeds will be received income tax-free.
  
The death-benefit proceeds will be subject to income tax only to the extent the proceeds from the policy exceed the premiums paid by the corporation.
  
The death-benefit proceeds will be subject to capital gains tax only to the extent the proceeds from the policy exceed the premiums paid by the corporation.

Question 19 (1.6 points)
 
The primary purpose of offering a 401(k) plan must be to offer employees a retirement benefit (or, in the case of a profit-sharing plan, provide employees with a share in the company's profits).

Question 19 options:
  
True
  
False

Question 20 (1.6 points)
 
In a profit-sharing plan, less than 50% of the aggregate employer contributions and forfeitures allocated to each participant's account can be used to purchase ordinary life insurance.

Question 20 options:
  
True
  
False

Question 21 (1.6 points)
 
The primary purpose of a pension plan must be to provide benefits for an employee's beneficiaries upon the employee's death or disability.

Question 21 options:
  
True
  
False

Question 22 (1.6 points)
 
Which of the following is an accurate statement about qualified pension and profit-sharing plans?

Question 22 options:
  
A plan that is or becomes top-heavy will cease to be qualified until certain corrections are made.
  
In a plan that is integrated with Social Security, the combination of the two benefits will produce a greater proportionate benefit for higher-paid employees than for lower-paid employees.
  
An employer can make contributions to a profit-sharing plan in a year in which it has no profits.
  
The amount an employer may contribute to a qualified plan varies, depending on the number of employees and their years of service.

Question 23 (1.6 points)
 
Which of the following is a correct statement regarding 401(k) plans?

Question 23 options:

  
An employee who has completed a specified number of years of participation, as provided in the plan, may receive a distribution of funds from the plan that are attributable to elective deferrals.
  
An employee's right to other employee benefits may be conditioned on his participation in the employer's 401(k) plan.
  
A 401(k) plan must specify whether contributions will be received by employees in cash or contributed on their behalf to an account.
  
A 401(k) plan is subject to the minimum age and service, coverage, participation, and vesting requirements that are applicable to qualified plans.

Question 24 (1.6 points)
 
Which of the following best describes the tax ramifications to the employee if a DBO plan is created?

Question 24 options:
  
The death benefit will always be included in the gross estate of the employee.
  
The premiums paid by the employer are not income to the employee.
  
When the employer and employee enter into a DBO arrangement, the employee is making a taxable gift to the beneficiary of the plan.
  
Premiums will be taxed as income to the employee.

Question 25 (1.6 points)
 
A "survivor's income benefit plan" is also referred to as

Question 25 options:
  
a qualified retirement plan.
  
a DBO plan.
  
a QTIP plan.
  
a non-discriminatory employee benefit plan.