CRPC Module 7 Test Questions and
Answers
The funds from a 403(b) plan may be rolled over into all of the following except -
Answer-a nongovernmental 457 plan.
(Funds from a 403(b) may not be rolled over into a nongovernmental 457 plan. They
may be rolled into another 403(b) plan, an IRA, qualified plan, SEP, 457 plan that
accounts for rollovers separately, or a conduit IRA.)
Jeffrey died after beginning his required minimum distribution payments. He has named
his daughter as the sole beneficiary of his IRA. Which one of the following statements is
correct regarding her options for this IRA? - Answer-She must calculate her annual
minimum distribution requirement using the fixed-term method.
(She must calculate her annual minimum distribution requirement using the fixed-term,
or unrecalculated, method. The Uniform Table is only available to the original participant
and spouse beneficiaries who choose to roll inherited IRAs to their own name. Non-
spouse beneficiaries do not have the option of rolling inherited IRAs to their own name.
The requirement that an IRA's balance be distributed within five years of the
participant's death does not apply when there is a named beneficiary.)
To remain qualified, pension plans must prohibit in-service withdrawals until employees
reach age - Answer-62.
(Pension plans cannot keep qualified status if they permit in-service withdrawals to
employees younger than age 62. Once employees reach age 62, pension plans can
allow withdrawals)
A trustee-to-trustee transfer is an example of a - Answer-direct rollover.
(A trustee-to-trustee transfer is an example of a direct rollover. A 60-day rollover would
be an example of an indirect rollover. A conduit IRA is used to shift assets from the
qualified plan of one employer to the qualified plan of another employer using the
conduit IRA as an intermediate step.)
A direct rollover is a transaction in which benefits from a qualified plan are rolled over
directly to - Answer-another eligible retirement plan.
(another eligible retirement plan.
A direct rollover may be accomplished by any reasonable means of direct payment to
an eligible retirement plan, including a wire transfer or mailing of a check negotiable
only by the plan's trustee. Using a conduit IRA is a means of an indirect rollover.)
Distributions from IRAs and SEPs must begin - Answer-by April 1 of the year following
the year in which participants attain age 70½.
, (Distributions from IRAs and SEPs must begin by April 1 of the year following the year
in which participants attain age 70½, regardless of employment status. Distributions
from qualified plans, TSAs, and 457 plans must begin by this date or April 1 of the year
following the year of retirement, whichever is later. Roth IRAs are exempt from the
minimum distribution rule.)
A ____ penalty is imposed for failing to take the required minimum distribution (RMD). -
Answer-50%
(The penalty for failing to take the RMD is 50% of the difference between what should
have been taken and what was taken.)
The 10% penalty on early distributions from a qualified plan can be avoided if - Answer-
a plan loan is repaid on a timely basis.
(A loan is not considered a distribution subject to taxation and possibly a 10% early
withdrawal penalty if it is repaid on a timely basis and does not go into default. To avoid
the 10% early withdrawal penalty, payments would need to be taken as substantially
equal periodic payments over one's life expectancy. The exemption applies to certain
medical expenses that are not reimbursed by insurance and exceed 10% (7.5% if over
age 65) of the participant's AGI. The first-time home purchase exclusion applies only to
IRAs.)
The increase in value in the shares of stock distributed from a qualified stock bonus
plan is known as - Answer-net unrealized appreciation.
(The increase in value in the shares of stock distributed from a qualified stock bonus
plan is known as net unrealized appreciation.)
In-service withdrawals prior to age 62 are not permitted from which of the following? -
Answer-cash balance plans
(In-service withdrawals at any age may be permitted from profit sharing plans (including
ESOPs and stock bonus plans), assuming certain other requirements are met. In-
service withdrawals prior to age 62 are not permitted from any pension plan, including
cash balance plans.)
The IRS permits hardship withdrawals from 401(k) plans in cases of "immediate and
heavy financial need." Which of the following is not considered immediate and heavy? -
Answer-payments to prevent defaulting on a mortgage for a second home
(Although payments to prevent eviction from a primary residence are considered
immediate and heavy, payments for a second home are not. The other options are
considered immediate and heavy expenses.)
Before rolling assets from an employer sponsored plan to an IRA one should consider
which of the following? - Answer-All of the above. (the difference in creditor protection
between the two savings vehicles
the difference in when the 10% penalty will apply to distributions
the difference in RMD rules that apply to the two savings vehicles)
Answers
The funds from a 403(b) plan may be rolled over into all of the following except -
Answer-a nongovernmental 457 plan.
(Funds from a 403(b) may not be rolled over into a nongovernmental 457 plan. They
may be rolled into another 403(b) plan, an IRA, qualified plan, SEP, 457 plan that
accounts for rollovers separately, or a conduit IRA.)
Jeffrey died after beginning his required minimum distribution payments. He has named
his daughter as the sole beneficiary of his IRA. Which one of the following statements is
correct regarding her options for this IRA? - Answer-She must calculate her annual
minimum distribution requirement using the fixed-term method.
(She must calculate her annual minimum distribution requirement using the fixed-term,
or unrecalculated, method. The Uniform Table is only available to the original participant
and spouse beneficiaries who choose to roll inherited IRAs to their own name. Non-
spouse beneficiaries do not have the option of rolling inherited IRAs to their own name.
The requirement that an IRA's balance be distributed within five years of the
participant's death does not apply when there is a named beneficiary.)
To remain qualified, pension plans must prohibit in-service withdrawals until employees
reach age - Answer-62.
(Pension plans cannot keep qualified status if they permit in-service withdrawals to
employees younger than age 62. Once employees reach age 62, pension plans can
allow withdrawals)
A trustee-to-trustee transfer is an example of a - Answer-direct rollover.
(A trustee-to-trustee transfer is an example of a direct rollover. A 60-day rollover would
be an example of an indirect rollover. A conduit IRA is used to shift assets from the
qualified plan of one employer to the qualified plan of another employer using the
conduit IRA as an intermediate step.)
A direct rollover is a transaction in which benefits from a qualified plan are rolled over
directly to - Answer-another eligible retirement plan.
(another eligible retirement plan.
A direct rollover may be accomplished by any reasonable means of direct payment to
an eligible retirement plan, including a wire transfer or mailing of a check negotiable
only by the plan's trustee. Using a conduit IRA is a means of an indirect rollover.)
Distributions from IRAs and SEPs must begin - Answer-by April 1 of the year following
the year in which participants attain age 70½.
, (Distributions from IRAs and SEPs must begin by April 1 of the year following the year
in which participants attain age 70½, regardless of employment status. Distributions
from qualified plans, TSAs, and 457 plans must begin by this date or April 1 of the year
following the year of retirement, whichever is later. Roth IRAs are exempt from the
minimum distribution rule.)
A ____ penalty is imposed for failing to take the required minimum distribution (RMD). -
Answer-50%
(The penalty for failing to take the RMD is 50% of the difference between what should
have been taken and what was taken.)
The 10% penalty on early distributions from a qualified plan can be avoided if - Answer-
a plan loan is repaid on a timely basis.
(A loan is not considered a distribution subject to taxation and possibly a 10% early
withdrawal penalty if it is repaid on a timely basis and does not go into default. To avoid
the 10% early withdrawal penalty, payments would need to be taken as substantially
equal periodic payments over one's life expectancy. The exemption applies to certain
medical expenses that are not reimbursed by insurance and exceed 10% (7.5% if over
age 65) of the participant's AGI. The first-time home purchase exclusion applies only to
IRAs.)
The increase in value in the shares of stock distributed from a qualified stock bonus
plan is known as - Answer-net unrealized appreciation.
(The increase in value in the shares of stock distributed from a qualified stock bonus
plan is known as net unrealized appreciation.)
In-service withdrawals prior to age 62 are not permitted from which of the following? -
Answer-cash balance plans
(In-service withdrawals at any age may be permitted from profit sharing plans (including
ESOPs and stock bonus plans), assuming certain other requirements are met. In-
service withdrawals prior to age 62 are not permitted from any pension plan, including
cash balance plans.)
The IRS permits hardship withdrawals from 401(k) plans in cases of "immediate and
heavy financial need." Which of the following is not considered immediate and heavy? -
Answer-payments to prevent defaulting on a mortgage for a second home
(Although payments to prevent eviction from a primary residence are considered
immediate and heavy, payments for a second home are not. The other options are
considered immediate and heavy expenses.)
Before rolling assets from an employer sponsored plan to an IRA one should consider
which of the following? - Answer-All of the above. (the difference in creditor protection
between the two savings vehicles
the difference in when the 10% penalty will apply to distributions
the difference in RMD rules that apply to the two savings vehicles)
