RPA 1 – Final Exam 100 Questions
(2022/2023) Verified Answers
Top-hat plan – A retirement plan that is unfunded and maintained by an employer primarily for the
purpose of providing deferred compensation for a “select group of management or highly
compensated employees” is called a (n):
Economic Benefit – A theory of income taxation that imposes current tax liability on taxpayers who
receive something of reasonable value is known as the doctrine of:
Must be given the election to remain under the pre-amendment vesting schedule for both pre-and
post-amendment benefit accruals. – An employee with four years of service participates in a
retirement plan. The vesting schedule in this plan is changed by plan amendment. Under tax law,
this plan participant:
An example of a sponsor of a 403(b) plan is – public college
Contributions to a profit sharing plan must be made on – A substantial and reoccurring basis
Employees withdrawing contributions from a savings incentive match plan for employees (SIMPLE
plan) individual retirement account (IRA) during the two-year period beginning on the date of
initial participation are subject to a penalty tax of – 25 percent
Federal law defines normal retirement age to be the age specified in the plan, but it cannot occur
beyond the later of – Age 65 or the fifth anniversary of the participant’s date of initial participation
For a distribution from a Roth IRA account to receive favorable tax treatment as a qualified
distribution, how long must contributions be in the account? – 5 years
For all defined contribution plans, there is a uniform employer deduction limit of – 25% of
compsensation
How did the Pension Protection Act of 2006 change requirements for investment advice provided
to individual retirement account (IRA) owners? – The Act requires that fees for such advice not be
contingent on the investment option chosen.
If a contribution to a profit sharing plan exceeds the maximum deductible contribution limit, the
employer can carryover the excess contribution to the succeeding year, but will be subject to an
excise tax on the excess contribution of: – 10 percent
If you knew that a vendor servicing a 401(k) plan was clearing trades internally and not using an
outside directed trustee, you generally could conclude that: – The vendor was providing plan
services as a bundled service provider.
In 1948 the National Labor Relations Board (NLRB) found that the provisions of retirement plans
affect conditions of employment and that retirement benefits constitute: – Wages
In addition to current income taxation, any excess contribution to an individual retirement account
(IRA) is subject to a nondeductible excise tax of: – 6 percent
n general, the aggregate amount of employer contribution allocated to a younger employee under a
defined contribution plan compared to that under a defined benefit plan is: – A higher amount
Key employees, for purposes of the top-heavy rules, include all: – One percent owners receiving
annual compensation in excess of $150,000
Of all of the following factors in the Black-Scholes option pricing model, which one is generally
deemed to have the most relative impact on the value of the option? – The expected volatility of the
underlying stock’s market price
The annual limit on deferral amounts for an ineligible Section 457 plan is – Unlimited
The limitation on exclusions for elective deferrals under 401(k) plans is: – Indexed in increments
established by the Economic Growth and Tax Relief Reconciliation Act (EGTRRA)
The most frequently used criterion to establish participation in a supplemental executive
retirement plan (SERP) is: – Position and management status
The Supreme Court ruled in Arizona Governing Committee v. Norris that: – Life annuities under an
employer-sponsored defined contribution plan must be provided on a uniform basis
The vesting provision of executive retirement arrangements: – Varies depending on the intent of the
executive arrangement
Those questioning the validity of the human depreciation concept of private pensions would argue
that the employer should be held responsible only for the increase in the rate of aging caused by: –
Occupational hazards
To receive tax-preferred treatment under an ineligible Section 457 plan, amounts deferred must be
- Subject to a substantial risk of forfeiture
Under a percentage of earnings per year of service formula, the typical range for the percentage of
earnings credited is: – 1% to 1.25%
Under a technique known as a wage-related formula, the impact of postretirement inflation on
pension income is – Measured on the basis of current wage measures to adjust benefits
Under certain conditions, a nonworking spouse may establish an individual retirement account
(IRA) using which of the following types of payments as the basis for eligibility to make
contributions? – Earned income of a working spouse
Under the Employee Retirement Income Security Act of 1974 (ERISA), a fiduciary shall discharge
his (or her) duties with respect to an employee benefit plan solely in the interest of: – The plan’s
participants and beneficiaries
Under the Pension Protection Act of 2006, a benefit statement must be provided to a plan
participant of a defined contribution plan entitled to direct plan investments – Once a quarter
Under which of the following situations are premature distributions from individual retirement
accounts (IRAs) exempt from the early distribution penalty tax? – Distributions because of an
Internal Revenue Service levy on the account to pay