GBA 3 PRACTICE EXAM COMPLETE QUESTIONS AND
100% VERIFIED ANSWERS
1. A global trend taking place in defined contribution retirement plans is:
A. Greater reliance on active management strategies
B. Elimination of default investment options
C. Reduced employer matching contributions
D. Greater reliance on plans with default investments
E. Mandatory employee-directed investments only
Correct Answer: D
Rationale: Default investments have become increasingly prevalent in defined
contribution plans globally as a way to improve retirement outcomes for
participants who may not actively manage their investments. This approach, often
using target-date funds or balanced funds, helps address participant inertia and
improves diversification.
2. A pension plan investment carries an expense of 2%. If the expenses are
decreased by 50 basis points, what will be the new level of expenses?
A. 2.50%
B. 1.00%
C. 0.50%
D. 1.50%
E. 1.75%
Correct Answer: D
Rationale: 50 basis points equals 0.50%. Therefore, 2% - 0.50% = 1.50%. This
calculation is important for understanding investment expense ratios and their
impact on plan participants' retirement savings.
,3. A person's Social Security primary insurance amount (PIA) is which of the
following?
A. The maximum benefit payable at any age
B. The minimum benefit amount guaranteed to all workers
C. The benefit amount before any cost-of-living adjustments
D. The worker's benefit amount at early retirement age
E. The worker's monthly retirement benefit at full retirement age
Correct Answer: E
Rationale: The PIA is the monthly benefit amount a worker receives if they retire
at their full retirement age. It serves as the base amount from which early or
delayed retirement adjustments are calculated.
4. A recent Department of Labor audit quality study showed the percentage of
employee benefit plan audits that had "Unacceptable-Major" deficiencies that
adversely affected overall audit quality. This percentage was approximately:
A. 10%
B. 25%
C. 30%
D. 40%
E. 55%
Correct Answer: D
Rationale: The DOL audit quality study revealed that approximately 40% of
employee benefit plan audits had "Unacceptable-Major" deficiencies, highlighting
significant concerns about audit quality in this sector.
5. A social security totalization agreement might be involved when an employee
takes an international assignment. Which of the following statements best
describes the purpose of this type of agreement?
A. The agreement eliminates all social security taxes for expatriate workers
,B. The agreement doubles the benefits earned under both systems
C. The agreement provides relief from dual social security coverage and taxation
under both systems and integrates or synchronizes the benefits earned under
more than one system
D. The agreement allows workers to opt out of social security coverage entirely
E. The agreement provides benefits only for workers in certain specified countries
Correct Answer: C
Rationale: Totalization agreements prevent dual social security coverage and
taxation while allowing workers to combine credits from both countries' systems
to qualify for benefits.
6. An initial Summary Plan Description must be distributed to participants
within how many days after the date the plan becomes subject to Employee
Retirement Income Security Act (ERISA) disclosure requirements?
A. 30 days
B. 60 days
C. 90 days
D. 100 days
E. 120 days
Correct Answer: E
Rationale: ERISA requires that the initial SPD be distributed to participants within
120 days after the plan becomes subject to ERISA disclosure requirements,
ensuring timely communication of plan terms.
7. Approximately how many individuals are working in occupations covered by
Social Security?
A. 5 out of 10 workers
B. 7 out of 10 workers
C. 8 out of 10 workers
, D. 6 out of 10 workers
E. 9 out of 10 workers
Correct Answer: E
Rationale: Approximately 9 out of 10 workers in the United States are employed in
occupations covered by Social Security, making it one of the most comprehensive
social insurance programs.
8. At a minimum, if there have been no material changes in the plan, the
Employee Retirement Income Security Act requires employers to prepare and
distribute new Summary Plan Descriptions to participants at least every:
A. 2 years
B. 3 years
C. 5 years
D. 7 years
E. 10 years
Correct Answer: E
Rationale: ERISA mandates that SPDs be reissued every 10 years if no material
changes have occurred, or within 5 years if material changes have been made.
9. Form 5500 and other financial reports statutorily must be kept for a minimum
of how many years after the filing date?
A. Three years
B. Four years
C. Five years
D. Six years
E. Seven years
Correct Answer: D
Rationale: ERISA requires that Form 5500 and related financial reports be retained
for a minimum of six years after the filing date to ensure availability for DOL audits
and participant inquiries.
100% VERIFIED ANSWERS
1. A global trend taking place in defined contribution retirement plans is:
A. Greater reliance on active management strategies
B. Elimination of default investment options
C. Reduced employer matching contributions
D. Greater reliance on plans with default investments
E. Mandatory employee-directed investments only
Correct Answer: D
Rationale: Default investments have become increasingly prevalent in defined
contribution plans globally as a way to improve retirement outcomes for
participants who may not actively manage their investments. This approach, often
using target-date funds or balanced funds, helps address participant inertia and
improves diversification.
2. A pension plan investment carries an expense of 2%. If the expenses are
decreased by 50 basis points, what will be the new level of expenses?
A. 2.50%
B. 1.00%
C. 0.50%
D. 1.50%
E. 1.75%
Correct Answer: D
Rationale: 50 basis points equals 0.50%. Therefore, 2% - 0.50% = 1.50%. This
calculation is important for understanding investment expense ratios and their
impact on plan participants' retirement savings.
,3. A person's Social Security primary insurance amount (PIA) is which of the
following?
A. The maximum benefit payable at any age
B. The minimum benefit amount guaranteed to all workers
C. The benefit amount before any cost-of-living adjustments
D. The worker's benefit amount at early retirement age
E. The worker's monthly retirement benefit at full retirement age
Correct Answer: E
Rationale: The PIA is the monthly benefit amount a worker receives if they retire
at their full retirement age. It serves as the base amount from which early or
delayed retirement adjustments are calculated.
4. A recent Department of Labor audit quality study showed the percentage of
employee benefit plan audits that had "Unacceptable-Major" deficiencies that
adversely affected overall audit quality. This percentage was approximately:
A. 10%
B. 25%
C. 30%
D. 40%
E. 55%
Correct Answer: D
Rationale: The DOL audit quality study revealed that approximately 40% of
employee benefit plan audits had "Unacceptable-Major" deficiencies, highlighting
significant concerns about audit quality in this sector.
5. A social security totalization agreement might be involved when an employee
takes an international assignment. Which of the following statements best
describes the purpose of this type of agreement?
A. The agreement eliminates all social security taxes for expatriate workers
,B. The agreement doubles the benefits earned under both systems
C. The agreement provides relief from dual social security coverage and taxation
under both systems and integrates or synchronizes the benefits earned under
more than one system
D. The agreement allows workers to opt out of social security coverage entirely
E. The agreement provides benefits only for workers in certain specified countries
Correct Answer: C
Rationale: Totalization agreements prevent dual social security coverage and
taxation while allowing workers to combine credits from both countries' systems
to qualify for benefits.
6. An initial Summary Plan Description must be distributed to participants
within how many days after the date the plan becomes subject to Employee
Retirement Income Security Act (ERISA) disclosure requirements?
A. 30 days
B. 60 days
C. 90 days
D. 100 days
E. 120 days
Correct Answer: E
Rationale: ERISA requires that the initial SPD be distributed to participants within
120 days after the plan becomes subject to ERISA disclosure requirements,
ensuring timely communication of plan terms.
7. Approximately how many individuals are working in occupations covered by
Social Security?
A. 5 out of 10 workers
B. 7 out of 10 workers
C. 8 out of 10 workers
, D. 6 out of 10 workers
E. 9 out of 10 workers
Correct Answer: E
Rationale: Approximately 9 out of 10 workers in the United States are employed in
occupations covered by Social Security, making it one of the most comprehensive
social insurance programs.
8. At a minimum, if there have been no material changes in the plan, the
Employee Retirement Income Security Act requires employers to prepare and
distribute new Summary Plan Descriptions to participants at least every:
A. 2 years
B. 3 years
C. 5 years
D. 7 years
E. 10 years
Correct Answer: E
Rationale: ERISA mandates that SPDs be reissued every 10 years if no material
changes have occurred, or within 5 years if material changes have been made.
9. Form 5500 and other financial reports statutorily must be kept for a minimum
of how many years after the filing date?
A. Three years
B. Four years
C. Five years
D. Six years
E. Seven years
Correct Answer: D
Rationale: ERISA requires that Form 5500 and related financial reports be retained
for a minimum of six years after the filing date to ensure availability for DOL audits
and participant inquiries.
