CEBS RPA 2 EXAM QUESTIONS AND 100%
VERIFIED ANSWERS | GRADED A+ |
GUARANTEED PASS!!
"At risk" plans
- answer-Term introduced by PPA; plans' funding requirements are accelerated;
restrictions placed on plans include curtailment of shutdown benefits and plan
amendments that would increase plan liabilities; plans required to notify
participants if restrictions on lump-sum distributions imposed.
"disqualified person"
- answer-Plan fiduciary; person providing service to plan; ER or EE organization
whose EEs are covered by plan; direct or indirect owner of 50% or more of
interest; relative of any of above; officer, director and HCEs; person having 10%
or more ownership interest.
Actuarial assumptions
- answer-Set of assumptions does not normally alter ultimate cost of pension plan;
PPA radically changed some flexibilities permitted in making assumptions
Alpha value
- answer-Amount of return produced by portfolio, on average, independent of
return of market
Beta value
- answer-Represents avg return on portfolio per 1% return on the market.
Capital Asset Pricing Model (CAPM)
- answer-Uses std statistical techniques to analyze relationship b/w periodic returns
of portfolio and those of market.
Characteristics of ER-sponsored IRA
- answer-Participants must be 100% vested; contribution by ER taxable to EE;
ERISA requirements may apply, but NOT participation, funding and vesting rules
applicable to qualified plans.
, Collective investment fund
- answer-A trust fund managed by a bank or trust company that pools investments
of 401(k) plans and other similar investors. There are no front- or back-end fees
associated, but there are investment mgmt and admin fees.
Collective investment fund fees under 401(k)
- answer-Investment mgmt fees only.
Common stock characteristics
- answer-Blue chip stocks issued by major companies and appeal to pension funds
seeking safety and stability; Income stocks pay higher-than-average dividend
returns; Defensive stock issued by recession-resistant companies; Interest-sensitive
stocks prices tend to drop when interest rates rise, and vice versa; Growth stocks
issued by companies whose sales, earnings and share of market expanding faster
than capital appreciation (not attractive to plans w/ cash flow needs b/c small
dividends)
Current disbursement funding approach in pension plan
- answer-Benefit payments treated as payroll costs; ER pays benefit directly to
retired worker; payment deducted as business expense; no advance funding.
DB formulas
- answer-Flat amount formula; flat % of earnings formula; flat amount per year of
service formula; % of earnings per year of service formula; and variable benefit
formula.
DB hybrid plan disadvantages:
- answer-May erode sponsor's fundamental objective of providing retirement
benefits and younger participant's not perceiving sufficient value quickly enough.
Design features of exec. retirement plan consistent w/ broad based plans
- answer-Form and manner in which benefits distributed; right to make and change
beneficiary; right to amend or terminate plan; state law govern plan interpretation.
Disadvantage of solo 401(k) plan
- answer-Plan is required to comply w/ most of the admin requirements of non-solo
401(k) plans.
VERIFIED ANSWERS | GRADED A+ |
GUARANTEED PASS!!
"At risk" plans
- answer-Term introduced by PPA; plans' funding requirements are accelerated;
restrictions placed on plans include curtailment of shutdown benefits and plan
amendments that would increase plan liabilities; plans required to notify
participants if restrictions on lump-sum distributions imposed.
"disqualified person"
- answer-Plan fiduciary; person providing service to plan; ER or EE organization
whose EEs are covered by plan; direct or indirect owner of 50% or more of
interest; relative of any of above; officer, director and HCEs; person having 10%
or more ownership interest.
Actuarial assumptions
- answer-Set of assumptions does not normally alter ultimate cost of pension plan;
PPA radically changed some flexibilities permitted in making assumptions
Alpha value
- answer-Amount of return produced by portfolio, on average, independent of
return of market
Beta value
- answer-Represents avg return on portfolio per 1% return on the market.
Capital Asset Pricing Model (CAPM)
- answer-Uses std statistical techniques to analyze relationship b/w periodic returns
of portfolio and those of market.
Characteristics of ER-sponsored IRA
- answer-Participants must be 100% vested; contribution by ER taxable to EE;
ERISA requirements may apply, but NOT participation, funding and vesting rules
applicable to qualified plans.
, Collective investment fund
- answer-A trust fund managed by a bank or trust company that pools investments
of 401(k) plans and other similar investors. There are no front- or back-end fees
associated, but there are investment mgmt and admin fees.
Collective investment fund fees under 401(k)
- answer-Investment mgmt fees only.
Common stock characteristics
- answer-Blue chip stocks issued by major companies and appeal to pension funds
seeking safety and stability; Income stocks pay higher-than-average dividend
returns; Defensive stock issued by recession-resistant companies; Interest-sensitive
stocks prices tend to drop when interest rates rise, and vice versa; Growth stocks
issued by companies whose sales, earnings and share of market expanding faster
than capital appreciation (not attractive to plans w/ cash flow needs b/c small
dividends)
Current disbursement funding approach in pension plan
- answer-Benefit payments treated as payroll costs; ER pays benefit directly to
retired worker; payment deducted as business expense; no advance funding.
DB formulas
- answer-Flat amount formula; flat % of earnings formula; flat amount per year of
service formula; % of earnings per year of service formula; and variable benefit
formula.
DB hybrid plan disadvantages:
- answer-May erode sponsor's fundamental objective of providing retirement
benefits and younger participant's not perceiving sufficient value quickly enough.
Design features of exec. retirement plan consistent w/ broad based plans
- answer-Form and manner in which benefits distributed; right to make and change
beneficiary; right to amend or terminate plan; state law govern plan interpretation.
Disadvantage of solo 401(k) plan
- answer-Plan is required to comply w/ most of the admin requirements of non-solo
401(k) plans.
