CFP - Retirement Planning Exam with all Correct & 100%
Verified Answers |Actual Complete Exam |Already
Graded A+
What are the two pension plans which are defined benefit plans? ✔Correct Answer-Defined
Benefit Pension Plans & Cash Balance Pension Plans
What are the two pension plans which are defined contribution plans? ✔Correct Answer-
Money Purchase Pension Plans & Target Benefit Pension Plans
- profit sharing plans (ER funded)
- stock bonus plans (ER funded)
- ESOPs (ER funded)
- 401(k) plans
- thrift plans
- new comparability plans
- age-based profit sharing plans ✔Correct Answer-Profit Sharing Plans (all Defined
Contribution Plans)
- Legal Promise of Plan: Paying a pension at retirement
- In-Service Withdrawals: No*
- Mandatory Funding: Yes**
- Investment in ER Securities: 10%
- QJSA & QPSA: Yes ✔Correct Answer-Pension Plan Characteristics
- Legal Promise of Plan: deferral of compensation
- In-Service Withdrawals: Yes (after 2yrs)
- Mandatory Funding: No
- Investment in ER Securities: 100%
- QJSA & QPSA: No ✔Correct Answer-Profit Sharing Plan Characteristics
- Annual Contribution Limit: Not less than the unfunded current liability*
- assumes the investment risk: Employer
- How are forfeitures allocated: Reduce Plan Costs
- subject to PBGC coverage: Yes (except professional firms with less than 25 employees) $86 per
plan participant $46 per $1,000 of underfunding (per participant cap - $582) $72,409 (2018)
max benefit
- separate investment accounts: No, commingled, participants have accrued benefits
- Can credit be given for prior service: Yes ✔Correct Answer-Defined Benefit Plan
Characteristics
, - Annual Contribution Limit: 25% of covered comp
- assumes the investment risk: Employee
- How are forfeitures allocated: Reduce Plan Costs or allocate to other participants
- subject to PBGC coverage: no
- separate investment accounts: yes, participants have account balances
- Can credit be given for prior service: no ✔Correct Answer-Defined Contribution Plan
Characteristics
- covered comp: $290k (2021)
- lesser of: $230k or 100% of avg of EE's 3 highest consecutive yrs salary (check plan doc*)
✔Correct Answer-Defined Benefit Plan Limits
- lesser of: 100% of EE's comp or $58,000 (2021)
- +$6,500 (catch-up 50y/o) = $64,500
- limit consists of EE contribs + ER contribs + forfeitures allocated to participant's account
✔Correct Answer-Defined Contribution Plan Limits
Spenser is covered under his employer's top-heavy New Comparability Plan. The plan classifies
employees into one of three categories: 1) Owners, 2) Full-time employees, 3) Part-time
employees. Assume the IRS has approved the plan and does not consider it to be discriminatory.
The employer made a 4% contribution on behalf of all owners, 2% contribution on behalf of all
Full-time employees and 1% contribution on behalf of all part time employees. If Spenser
currently earns $50,000 per year and is a full-time employee, what is the contribution that
should be made for him?
A. $1,000
B. $1,500
C. $19,500
D. $58,000 ✔Correct Answer-B. $1,500 (plan is top heavy, therefore must provide a benefit to
all non-key employees of at least 3%)
J.P. is covered under his employer's Profit-Sharing Plan. He currently earns $500,000 per year.
The plan is top heavy. The employer made a 10% contribution on behalf of all employees. What
is the maximum retirement benefit that can be paid to him?
A. $28,500
B. $50,000
C. $58,000
D. Cannot be determined by the information given. ✔Correct Answer-D. Cannot be
determined by the information given.
Which one of the following statements is NOT true for a defined benefit plan?
A. Favors older participants.
Verified Answers |Actual Complete Exam |Already
Graded A+
What are the two pension plans which are defined benefit plans? ✔Correct Answer-Defined
Benefit Pension Plans & Cash Balance Pension Plans
What are the two pension plans which are defined contribution plans? ✔Correct Answer-
Money Purchase Pension Plans & Target Benefit Pension Plans
- profit sharing plans (ER funded)
- stock bonus plans (ER funded)
- ESOPs (ER funded)
- 401(k) plans
- thrift plans
- new comparability plans
- age-based profit sharing plans ✔Correct Answer-Profit Sharing Plans (all Defined
Contribution Plans)
- Legal Promise of Plan: Paying a pension at retirement
- In-Service Withdrawals: No*
- Mandatory Funding: Yes**
- Investment in ER Securities: 10%
- QJSA & QPSA: Yes ✔Correct Answer-Pension Plan Characteristics
- Legal Promise of Plan: deferral of compensation
- In-Service Withdrawals: Yes (after 2yrs)
- Mandatory Funding: No
- Investment in ER Securities: 100%
- QJSA & QPSA: No ✔Correct Answer-Profit Sharing Plan Characteristics
- Annual Contribution Limit: Not less than the unfunded current liability*
- assumes the investment risk: Employer
- How are forfeitures allocated: Reduce Plan Costs
- subject to PBGC coverage: Yes (except professional firms with less than 25 employees) $86 per
plan participant $46 per $1,000 of underfunding (per participant cap - $582) $72,409 (2018)
max benefit
- separate investment accounts: No, commingled, participants have accrued benefits
- Can credit be given for prior service: Yes ✔Correct Answer-Defined Benefit Plan
Characteristics
, - Annual Contribution Limit: 25% of covered comp
- assumes the investment risk: Employee
- How are forfeitures allocated: Reduce Plan Costs or allocate to other participants
- subject to PBGC coverage: no
- separate investment accounts: yes, participants have account balances
- Can credit be given for prior service: no ✔Correct Answer-Defined Contribution Plan
Characteristics
- covered comp: $290k (2021)
- lesser of: $230k or 100% of avg of EE's 3 highest consecutive yrs salary (check plan doc*)
✔Correct Answer-Defined Benefit Plan Limits
- lesser of: 100% of EE's comp or $58,000 (2021)
- +$6,500 (catch-up 50y/o) = $64,500
- limit consists of EE contribs + ER contribs + forfeitures allocated to participant's account
✔Correct Answer-Defined Contribution Plan Limits
Spenser is covered under his employer's top-heavy New Comparability Plan. The plan classifies
employees into one of three categories: 1) Owners, 2) Full-time employees, 3) Part-time
employees. Assume the IRS has approved the plan and does not consider it to be discriminatory.
The employer made a 4% contribution on behalf of all owners, 2% contribution on behalf of all
Full-time employees and 1% contribution on behalf of all part time employees. If Spenser
currently earns $50,000 per year and is a full-time employee, what is the contribution that
should be made for him?
A. $1,000
B. $1,500
C. $19,500
D. $58,000 ✔Correct Answer-B. $1,500 (plan is top heavy, therefore must provide a benefit to
all non-key employees of at least 3%)
J.P. is covered under his employer's Profit-Sharing Plan. He currently earns $500,000 per year.
The plan is top heavy. The employer made a 10% contribution on behalf of all employees. What
is the maximum retirement benefit that can be paid to him?
A. $28,500
B. $50,000
C. $58,000
D. Cannot be determined by the information given. ✔Correct Answer-D. Cannot be
determined by the information given.
Which one of the following statements is NOT true for a defined benefit plan?
A. Favors older participants.
