South Carolina Pension Analyst
Certification License Exam Practice
Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1. Which of the following best defines a defined benefit pension plan?
A. A plan where contributions are fixed, and benefits vary based on
investment performance
B. A plan where the employer guarantees a specified retirement
benefit, usually based on salary and years of service
C. A plan solely funded by employee contributions with no employer
guarantee
D. A plan that allows employees to withdraw contributions at any time
B. A plan where the employer guarantees a specified retirement benefit,
usually based on salary and years of service.
Rationale: Defined benefit plans promise a specific benefit at retirement,
typically calculated using a formula based on salary history and years of
service, with the employer bearing the investment risk.
2. Which federal law primarily governs private sector pension plans in the
United States?
A. Securities Act of 1933
B. Sarbanes-Oxley Act
, C. Employee Retirement Income Security Act (ERISA) of 1974
D. Internal Revenue Code Section 401(k)
C. Employee Retirement Income Security Act (ERISA) of 1974.
Rationale: ERISA sets standards for pension plan participation, vesting,
funding, and fiduciary responsibilities, protecting employees’ retirement
assets.
3. In pension terminology, what does “vesting” refer to?
A. The process of investing plan assets
B. The employee’s right to receive benefits accrued under a plan,
even if employment ends
C. The employer’s obligation to fund the plan
D. The tax status of retirement contributions
B. The employee’s right to receive benefits accrued under a plan, even if
employment ends.
Rationale: Vesting ensures that employees gain a nonforfeitable right to
their pension benefits after meeting certain service requirements.
4. A pension plan sponsor wants to calculate the present value of future
benefits for reporting purposes. Which factor is most critical in this
calculation?
A. Employee turnover only
B. Discount rate reflecting the time value of money
C. Current salary only
D. Historical investment returns
B. Discount rate reflecting the time value of money.
Rationale: Present value calculations require discounting future payments
to today’s value, making the choice of discount rate crucial for accurate
pension liability measurement.
, 5. Which type of plan allows employees to contribute pre-tax income and
receive matching contributions from the employer, but the final
benefit depends on investment performance?
A. Defined benefit plan
B. Cash balance plan
C. Defined contribution plan
D. Pension equity plan
C. Defined contribution plan.
Rationale: In defined contribution plans, the benefit depends on
contributions and investment returns, with the employee typically bearing
the investment risk, unlike defined benefit plans.
6. What is the primary purpose of a pension plan’s funding policy?
A. To maximize investment risk
B. To minimize employee contributions
C. To ensure sufficient assets to pay future plan benefits
D. To comply with payroll tax regulations
C. To ensure sufficient assets to pay future plan benefits.
Rationale: Funding policies establish how contributions are made to
maintain adequate assets to meet obligations to participants.
7. Which of the following best describes a cash balance pension plan?
A. A defined contribution plan with guaranteed returns
B. A hybrid plan providing a notional account balance with employer-
funded contributions and a guaranteed interest credit
C. A plan where employees manage their own investments entirely
D. A plan exclusively for top executives
B. A hybrid plan providing a notional account balance with employer-
funded contributions and a guaranteed interest credit.
Rationale: Cash balance plans combine features of defined benefit and
, defined contribution plans, giving participants an account balance that
grows with contributions and interest credits.
8. Which actuarial assumption has the greatest effect on the cost of a
defined benefit pension plan?
A. Expected administrative fees
B. Discount rate
C. Employee dress code
D. Number of investment options
B. Discount rate.
Rationale: The discount rate determines the present value of future
benefits; a lower rate increases the plan’s reported liability and funding
cost.
9. Under ERISA, which fiduciary standard must pension plan managers
adhere to?
A. Standard of a prudent investor with focus only on returns
B. Prudent person standard, acting in the best interest of plan
participants
C. Standard of the employer’s financial convenience
D. Standard of maximum contribution minimization
B. Prudent person standard, acting in the best interest of plan participants.
Rationale: ERISA requires fiduciaries to act with care, skill, prudence, and
diligence for the exclusive benefit of plan participants and beneficiaries.
10. What is the purpose of the Pension Benefit Guaranty
Corporation (PBGC)?
A. To regulate stock market investments for pension plans
B. To manage private 401(k) accounts
C. To insure certain defined benefit plan promises in the event of
Certification License Exam Practice
Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1. Which of the following best defines a defined benefit pension plan?
A. A plan where contributions are fixed, and benefits vary based on
investment performance
B. A plan where the employer guarantees a specified retirement
benefit, usually based on salary and years of service
C. A plan solely funded by employee contributions with no employer
guarantee
D. A plan that allows employees to withdraw contributions at any time
B. A plan where the employer guarantees a specified retirement benefit,
usually based on salary and years of service.
Rationale: Defined benefit plans promise a specific benefit at retirement,
typically calculated using a formula based on salary history and years of
service, with the employer bearing the investment risk.
2. Which federal law primarily governs private sector pension plans in the
United States?
A. Securities Act of 1933
B. Sarbanes-Oxley Act
, C. Employee Retirement Income Security Act (ERISA) of 1974
D. Internal Revenue Code Section 401(k)
C. Employee Retirement Income Security Act (ERISA) of 1974.
Rationale: ERISA sets standards for pension plan participation, vesting,
funding, and fiduciary responsibilities, protecting employees’ retirement
assets.
3. In pension terminology, what does “vesting” refer to?
A. The process of investing plan assets
B. The employee’s right to receive benefits accrued under a plan,
even if employment ends
C. The employer’s obligation to fund the plan
D. The tax status of retirement contributions
B. The employee’s right to receive benefits accrued under a plan, even if
employment ends.
Rationale: Vesting ensures that employees gain a nonforfeitable right to
their pension benefits after meeting certain service requirements.
4. A pension plan sponsor wants to calculate the present value of future
benefits for reporting purposes. Which factor is most critical in this
calculation?
A. Employee turnover only
B. Discount rate reflecting the time value of money
C. Current salary only
D. Historical investment returns
B. Discount rate reflecting the time value of money.
Rationale: Present value calculations require discounting future payments
to today’s value, making the choice of discount rate crucial for accurate
pension liability measurement.
, 5. Which type of plan allows employees to contribute pre-tax income and
receive matching contributions from the employer, but the final
benefit depends on investment performance?
A. Defined benefit plan
B. Cash balance plan
C. Defined contribution plan
D. Pension equity plan
C. Defined contribution plan.
Rationale: In defined contribution plans, the benefit depends on
contributions and investment returns, with the employee typically bearing
the investment risk, unlike defined benefit plans.
6. What is the primary purpose of a pension plan’s funding policy?
A. To maximize investment risk
B. To minimize employee contributions
C. To ensure sufficient assets to pay future plan benefits
D. To comply with payroll tax regulations
C. To ensure sufficient assets to pay future plan benefits.
Rationale: Funding policies establish how contributions are made to
maintain adequate assets to meet obligations to participants.
7. Which of the following best describes a cash balance pension plan?
A. A defined contribution plan with guaranteed returns
B. A hybrid plan providing a notional account balance with employer-
funded contributions and a guaranteed interest credit
C. A plan where employees manage their own investments entirely
D. A plan exclusively for top executives
B. A hybrid plan providing a notional account balance with employer-
funded contributions and a guaranteed interest credit.
Rationale: Cash balance plans combine features of defined benefit and
, defined contribution plans, giving participants an account balance that
grows with contributions and interest credits.
8. Which actuarial assumption has the greatest effect on the cost of a
defined benefit pension plan?
A. Expected administrative fees
B. Discount rate
C. Employee dress code
D. Number of investment options
B. Discount rate.
Rationale: The discount rate determines the present value of future
benefits; a lower rate increases the plan’s reported liability and funding
cost.
9. Under ERISA, which fiduciary standard must pension plan managers
adhere to?
A. Standard of a prudent investor with focus only on returns
B. Prudent person standard, acting in the best interest of plan
participants
C. Standard of the employer’s financial convenience
D. Standard of maximum contribution minimization
B. Prudent person standard, acting in the best interest of plan participants.
Rationale: ERISA requires fiduciaries to act with care, skill, prudence, and
diligence for the exclusive benefit of plan participants and beneficiaries.
10. What is the purpose of the Pension Benefit Guaranty
Corporation (PBGC)?
A. To regulate stock market investments for pension plans
B. To manage private 401(k) accounts
C. To insure certain defined benefit plan promises in the event of
