CRPC - Module #7 Exam Questions
with Complete Solutions7
In-service withdrawals prior to age 62 are not permitted from which of the following? -
ANSWERS-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? - ANSWERS-
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? - ANSWERS-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)
(Prior to doing a rollover of assets from an employer plan to IRA there are number of factors
need to be considered and compared. These include an examination of fees, services offered,
investment options, when penalty free withdrawals are available, when required minimum
distributions may be required and protection of assets from creditors.)
, Taxes may be deferred on a qualified plan distribution if it is rolled over to an IRA, TSA, SEP,
governmental 457 plan, or to another qualified plan. All are true regarding rollovers except -
ANSWERS-they generally result in less money for retirement.
(Rollovers generally result in more money for retirement. Tax deferral enables the entire
distribution to continue to earn tax-deferred money. Taking a lump-sum distribution results in
immediate taxation. Amounts distributed from qualified plans must be transferred to a new
account within 60 days of receipt to avoid taxation. All distributions from the named tax-
deferred plans result in taxation as ordinary income, capital gains treatment is not available.)
All of the following are disadvantages to performing an indirect rollover from a qualified plan to
an existing IRA except - ANSWERS-the entire distribution will be subject to immediate taxation.
(By rolling over assets to an existing IRA, the plan assets less the amount withheld escape
immediate taxation. Taxes are deferred until the participant begins withdrawing money. A
mandatory 20% withholding is imposed on a qualified plan distribution if the plan issues a check
to the participant. Finally, if an indirect rollover is not completed within 60-days the full
distribution amount will be taxed.)
Not all distributions from a qualified plan may be rolled over into a traditional IRA. Which one of
the following distributions is an "eligible rollover distribution"? - ANSWERS-the vested cash
balance in the plan
(The participant's vested cash balance in the plan may be rolled over to an existing IRA.
Distributions that are part of a series of substantially equal payments for the life of the
participant or the joint lives of the participant and the participant's designated beneficiary are
not eligible to be rolled over. Hence, such distributions are not eligible rollover distributions.
Neither are dividends on employer securities held by the plan that are distributed in cash to
participants or the taxable cost of life insurance provided by the plan.)
When must the designated beneficiary be determined in order to avoid having to distribute the
full IRA balance under the 5-year rule? - ANSWERS-September 30 of the year following the
participant's death.
(The designated beneficiary must be determined by September 30 of the year following the
participant's death in order to avoid having to distribute the full IRA balance under the 5-year
rule.)
with Complete Solutions7
In-service withdrawals prior to age 62 are not permitted from which of the following? -
ANSWERS-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? - ANSWERS-
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? - ANSWERS-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)
(Prior to doing a rollover of assets from an employer plan to IRA there are number of factors
need to be considered and compared. These include an examination of fees, services offered,
investment options, when penalty free withdrawals are available, when required minimum
distributions may be required and protection of assets from creditors.)
, Taxes may be deferred on a qualified plan distribution if it is rolled over to an IRA, TSA, SEP,
governmental 457 plan, or to another qualified plan. All are true regarding rollovers except -
ANSWERS-they generally result in less money for retirement.
(Rollovers generally result in more money for retirement. Tax deferral enables the entire
distribution to continue to earn tax-deferred money. Taking a lump-sum distribution results in
immediate taxation. Amounts distributed from qualified plans must be transferred to a new
account within 60 days of receipt to avoid taxation. All distributions from the named tax-
deferred plans result in taxation as ordinary income, capital gains treatment is not available.)
All of the following are disadvantages to performing an indirect rollover from a qualified plan to
an existing IRA except - ANSWERS-the entire distribution will be subject to immediate taxation.
(By rolling over assets to an existing IRA, the plan assets less the amount withheld escape
immediate taxation. Taxes are deferred until the participant begins withdrawing money. A
mandatory 20% withholding is imposed on a qualified plan distribution if the plan issues a check
to the participant. Finally, if an indirect rollover is not completed within 60-days the full
distribution amount will be taxed.)
Not all distributions from a qualified plan may be rolled over into a traditional IRA. Which one of
the following distributions is an "eligible rollover distribution"? - ANSWERS-the vested cash
balance in the plan
(The participant's vested cash balance in the plan may be rolled over to an existing IRA.
Distributions that are part of a series of substantially equal payments for the life of the
participant or the joint lives of the participant and the participant's designated beneficiary are
not eligible to be rolled over. Hence, such distributions are not eligible rollover distributions.
Neither are dividends on employer securities held by the plan that are distributed in cash to
participants or the taxable cost of life insurance provided by the plan.)
When must the designated beneficiary be determined in order to avoid having to distribute the
full IRA balance under the 5-year rule? - ANSWERS-September 30 of the year following the
participant's death.
(The designated beneficiary must be determined by September 30 of the year following the
participant's death in order to avoid having to distribute the full IRA balance under the 5-year
rule.)
