QKA-1 RETIREMENT PLAN FUNDAMENTALS EXAM
COMPLETE EXAM QUESTIONS AND 100% VERIFIED
ANSWERS (PASS GUARANTEE)
1. What is a qualified retirement plan? A qualified retirement plan is an
employer-sponsored retirement plan that meets the requirements of Internal
Revenue Code Section 401(a) and is eligible for favorable tax treatment,
including tax-deductible employer contributions and tax-deferred growth of
plan assets.
2. What are the primary types of qualified retirement plans? The primary
types include defined benefit plans, defined contribution plans (such as 401(k),
profit-sharing, and money purchase plans), 403(b) plans, and governmental
457(b) plans.
3. What is a defined benefit plan? A defined benefit plan is a retirement plan
that promises a specified monthly benefit at retirement, typically based on
factors such as salary history and years of service, with the employer bearing
the investment risk.
4. What is a defined contribution plan? A defined contribution plan is a
retirement plan where contributions are defined (either by formula or
discretion), individual accounts are maintained for each participant, and benefits
are based solely on the account balance, with participants bearing the
investment risk.
5. What is a 401(k) plan? A 401(k) plan is a defined contribution plan that
allows employees to make pre-tax or Roth after-tax salary deferral
contributions, often with matching or other employer contributions.
,6. What is ERISA? ERISA is the Employee Retirement Income Security Act
of 1974, the primary federal law governing private-sector retirement plans and
establishing standards for plan management, fiduciary responsibilities,
reporting, and disclosure.
7. What are the main advantages of qualified retirement plans? Main
advantages include tax-deductible employer contributions, tax-deferred (or tax-
free for Roth) growth, potential creditor protection, and a systematic way to
accumulate retirement savings.
8. What is vesting? Vesting refers to a participant's nonforfeitable right to their
account balance or accrued benefit. Participants are always 100% vested in their
own contributions, while employer contributions may vest over time.
9. What is the difference between cliff vesting and graded vesting? Cliff
vesting provides 100% vesting after a specified period (e.g., 3 years), while
graded vesting provides incremental vesting over time (e.g., 20% per year over
5-6 years).
10. What is a profit-sharing plan? A profit-sharing plan is a defined
contribution plan where the employer makes discretionary contributions, which
may or may not be based on company profits, and allocates them among
participants according to a definite formula.
11. What is a money purchase pension plan? A money purchase pension plan
is a defined contribution plan that requires fixed, mandatory employer
contributions each year, typically expressed as a percentage of compensation.
12. What is an employee stock ownership plan (ESOP)? An ESOP is a
qualified retirement plan designed to invest primarily in employer securities,
providing employees with ownership interests in the company.
13. What is a 403(b) plan? A 403(b) plan is a retirement plan for employees of
public schools, certain tax-exempt organizations, and ministers, allowing salary
deferral contributions to annuity contracts or custodial accounts.
14. What is a governmental 457(b) plan? A governmental 457(b) plan is a
deferred compensation plan for state and local government employees, allowing
pre-tax salary deferrals with unique distribution and catch-up contribution rules.
15. What is the distinction between a pension plan and a welfare plan? A
pension plan provides retirement income or defers income until termination of
employment or beyond. A welfare plan provides benefits such as medical,
disability, death benefits, or other non-retirement benefits.
,16. What is a safe harbor 401(k) plan? A safe harbor 401(k) plan is a 401(k)
plan that satisfies certain contribution and vesting requirements, thereby
automatically passing nondiscrimination testing (ADP/ACP tests).
17. What is a simplified employee pension (SEP)? A SEP is a retirement
arrangement where employers make contributions to IRAs established for
employees, with simplified administration and no annual filing requirements.
18. What is a SIMPLE IRA plan? A SIMPLE (Savings Incentive Match Plan
for Employees) IRA is a retirement plan for small employers (100 or fewer
employees) that allows salary deferrals and requires employer contributions
with minimal administration.
19. What is the difference between pre-tax and Roth contributions? Pre-tax
contributions reduce current taxable income and grow tax-deferred with
distributions taxed as ordinary income. Roth contributions are made after-tax
but grow and are distributed tax-free if requirements are met.
20. What is a highly compensated employee (HCE)? An HCE is generally an
employee who owned more than 5% of the employer during the current or prior
year, or who received compensation above a specified threshold ($155,000 for
2024, indexed annually) during the prior year.
21. What is a key employee? A key employee is an employee who, during the
plan year, is an officer earning above a specified amount, a 5% owner, or a 1%
owner earning over $150,000, used for top-heavy testing purposes.
22. What does "top-heavy" mean? A plan is top-heavy when more than 60%
of plan assets or accrued benefits are attributable to key employees, triggering
special minimum contribution or benefit requirements.
23. What is a plan year? A plan year is the 12-consecutive-month period
defined in the plan document for calculating contributions, testing, and
reporting purposes, which may differ from the calendar or fiscal year.
24. What is compensation for retirement plan purposes? Compensation
generally includes wages, salaries, fees for professional services, and other
amounts received for personal services, subject to IRC Section 415 limits
($345,000 for 2024) and plan definition specifications.
25. What is the annual additions limit? The annual additions limit (IRC
Section 415(c)) restricts the total of employer contributions, employee
contributions, and forfeitures allocated to a participant's account in a defined
contribution plan ($69,000 for 2024, or $76,500 with catch-up).
, 26. What is a collectively bargained plan? A collectively bargained plan is a
retirement plan established pursuant to a collective bargaining agreement
between employee representatives and one or more employers, often
multiemployer plans.
27. What is a multiemployer plan? A multiemployer plan is a plan maintained
pursuant to collective bargaining agreements involving two or more unrelated
employers, typically in the same industry, with special funding and withdrawal
liability rules.
28. What is a multiple employer plan? A multiple employer plan (MEP) is a
single plan maintained by two or more unrelated employers, allowing smaller
employers to pool resources while maintaining separate plan obligations.
29. What is plan disqualification? Plan disqualification occurs when a plan
fails to meet IRS qualification requirements, resulting in loss of tax benefits,
including immediate taxation of trust earnings and possible taxation of vested
benefits to participants.
30. What is a qualified domestic relations order (QDRO)? A QDRO is a
court order that recognizes an alternate payee's (typically a spouse or former
spouse) right to receive all or a portion of a participant's retirement plan
benefits, usually in divorce situations.
Section 2: Plan Eligibility and Participation (Questions 31-60)
31. What are the maximum age and service requirements for plan
eligibility? Plans may require employees to complete one year of service (1,000
hours) and attain age 21 before becoming eligible to participate, though more
liberal requirements are permitted.
32. Can a plan require two years of service for eligibility? Yes, but only if
the plan provides for 100% immediate vesting upon entry, and this option is not
available for 401(k) plans or plans with cash or deferred arrangements.
33. What is a year of service for eligibility purposes? A year of service for
eligibility is generally a 12-month period during which an employee completes
at least 1,000 hours of service, measured from the employee's hire date or plan
year.
34. What is an hour of service? An hour of service includes each hour for
which an employee is paid or entitled to payment for work performed, plus
certain non-work hours such as vacation, holiday, illness, disability, or layoff.
COMPLETE EXAM QUESTIONS AND 100% VERIFIED
ANSWERS (PASS GUARANTEE)
1. What is a qualified retirement plan? A qualified retirement plan is an
employer-sponsored retirement plan that meets the requirements of Internal
Revenue Code Section 401(a) and is eligible for favorable tax treatment,
including tax-deductible employer contributions and tax-deferred growth of
plan assets.
2. What are the primary types of qualified retirement plans? The primary
types include defined benefit plans, defined contribution plans (such as 401(k),
profit-sharing, and money purchase plans), 403(b) plans, and governmental
457(b) plans.
3. What is a defined benefit plan? A defined benefit plan is a retirement plan
that promises a specified monthly benefit at retirement, typically based on
factors such as salary history and years of service, with the employer bearing
the investment risk.
4. What is a defined contribution plan? A defined contribution plan is a
retirement plan where contributions are defined (either by formula or
discretion), individual accounts are maintained for each participant, and benefits
are based solely on the account balance, with participants bearing the
investment risk.
5. What is a 401(k) plan? A 401(k) plan is a defined contribution plan that
allows employees to make pre-tax or Roth after-tax salary deferral
contributions, often with matching or other employer contributions.
,6. What is ERISA? ERISA is the Employee Retirement Income Security Act
of 1974, the primary federal law governing private-sector retirement plans and
establishing standards for plan management, fiduciary responsibilities,
reporting, and disclosure.
7. What are the main advantages of qualified retirement plans? Main
advantages include tax-deductible employer contributions, tax-deferred (or tax-
free for Roth) growth, potential creditor protection, and a systematic way to
accumulate retirement savings.
8. What is vesting? Vesting refers to a participant's nonforfeitable right to their
account balance or accrued benefit. Participants are always 100% vested in their
own contributions, while employer contributions may vest over time.
9. What is the difference between cliff vesting and graded vesting? Cliff
vesting provides 100% vesting after a specified period (e.g., 3 years), while
graded vesting provides incremental vesting over time (e.g., 20% per year over
5-6 years).
10. What is a profit-sharing plan? A profit-sharing plan is a defined
contribution plan where the employer makes discretionary contributions, which
may or may not be based on company profits, and allocates them among
participants according to a definite formula.
11. What is a money purchase pension plan? A money purchase pension plan
is a defined contribution plan that requires fixed, mandatory employer
contributions each year, typically expressed as a percentage of compensation.
12. What is an employee stock ownership plan (ESOP)? An ESOP is a
qualified retirement plan designed to invest primarily in employer securities,
providing employees with ownership interests in the company.
13. What is a 403(b) plan? A 403(b) plan is a retirement plan for employees of
public schools, certain tax-exempt organizations, and ministers, allowing salary
deferral contributions to annuity contracts or custodial accounts.
14. What is a governmental 457(b) plan? A governmental 457(b) plan is a
deferred compensation plan for state and local government employees, allowing
pre-tax salary deferrals with unique distribution and catch-up contribution rules.
15. What is the distinction between a pension plan and a welfare plan? A
pension plan provides retirement income or defers income until termination of
employment or beyond. A welfare plan provides benefits such as medical,
disability, death benefits, or other non-retirement benefits.
,16. What is a safe harbor 401(k) plan? A safe harbor 401(k) plan is a 401(k)
plan that satisfies certain contribution and vesting requirements, thereby
automatically passing nondiscrimination testing (ADP/ACP tests).
17. What is a simplified employee pension (SEP)? A SEP is a retirement
arrangement where employers make contributions to IRAs established for
employees, with simplified administration and no annual filing requirements.
18. What is a SIMPLE IRA plan? A SIMPLE (Savings Incentive Match Plan
for Employees) IRA is a retirement plan for small employers (100 or fewer
employees) that allows salary deferrals and requires employer contributions
with minimal administration.
19. What is the difference between pre-tax and Roth contributions? Pre-tax
contributions reduce current taxable income and grow tax-deferred with
distributions taxed as ordinary income. Roth contributions are made after-tax
but grow and are distributed tax-free if requirements are met.
20. What is a highly compensated employee (HCE)? An HCE is generally an
employee who owned more than 5% of the employer during the current or prior
year, or who received compensation above a specified threshold ($155,000 for
2024, indexed annually) during the prior year.
21. What is a key employee? A key employee is an employee who, during the
plan year, is an officer earning above a specified amount, a 5% owner, or a 1%
owner earning over $150,000, used for top-heavy testing purposes.
22. What does "top-heavy" mean? A plan is top-heavy when more than 60%
of plan assets or accrued benefits are attributable to key employees, triggering
special minimum contribution or benefit requirements.
23. What is a plan year? A plan year is the 12-consecutive-month period
defined in the plan document for calculating contributions, testing, and
reporting purposes, which may differ from the calendar or fiscal year.
24. What is compensation for retirement plan purposes? Compensation
generally includes wages, salaries, fees for professional services, and other
amounts received for personal services, subject to IRC Section 415 limits
($345,000 for 2024) and plan definition specifications.
25. What is the annual additions limit? The annual additions limit (IRC
Section 415(c)) restricts the total of employer contributions, employee
contributions, and forfeitures allocated to a participant's account in a defined
contribution plan ($69,000 for 2024, or $76,500 with catch-up).
, 26. What is a collectively bargained plan? A collectively bargained plan is a
retirement plan established pursuant to a collective bargaining agreement
between employee representatives and one or more employers, often
multiemployer plans.
27. What is a multiemployer plan? A multiemployer plan is a plan maintained
pursuant to collective bargaining agreements involving two or more unrelated
employers, typically in the same industry, with special funding and withdrawal
liability rules.
28. What is a multiple employer plan? A multiple employer plan (MEP) is a
single plan maintained by two or more unrelated employers, allowing smaller
employers to pool resources while maintaining separate plan obligations.
29. What is plan disqualification? Plan disqualification occurs when a plan
fails to meet IRS qualification requirements, resulting in loss of tax benefits,
including immediate taxation of trust earnings and possible taxation of vested
benefits to participants.
30. What is a qualified domestic relations order (QDRO)? A QDRO is a
court order that recognizes an alternate payee's (typically a spouse or former
spouse) right to receive all or a portion of a participant's retirement plan
benefits, usually in divorce situations.
Section 2: Plan Eligibility and Participation (Questions 31-60)
31. What are the maximum age and service requirements for plan
eligibility? Plans may require employees to complete one year of service (1,000
hours) and attain age 21 before becoming eligible to participate, though more
liberal requirements are permitted.
32. Can a plan require two years of service for eligibility? Yes, but only if
the plan provides for 100% immediate vesting upon entry, and this option is not
available for 401(k) plans or plans with cash or deferred arrangements.
33. What is a year of service for eligibility purposes? A year of service for
eligibility is generally a 12-month period during which an employee completes
at least 1,000 hours of service, measured from the employee's hire date or plan
year.
34. What is an hour of service? An hour of service includes each hour for
which an employee is paid or entitled to payment for work performed, plus
certain non-work hours such as vacation, holiday, illness, disability, or layoff.
