RPA 1 Exam 2023 with complete solutions

Under a technique known as a wage-related formula, the impact of postretirement inflation on pension income is: - Answer- Measured on the basis of current wage measures to adjust benefits Under the Pension Protection Act of 2006, a benefit statement must be provided to a plan participant of a defined contribution plan entitled to direct plan investments: - Answer- Once a quarter Federal law defines normal retirement age to be the age specified in the plan, but it cannot occur beyond the later of: - Answer- Age 65 or the fifth anniversary of the participant's date of initial participation In addition to current income taxation, any excess contribution to an individual retirement account (IRA) is subject to a nondeductible excise tax of: - Answer- 6 percent An employee with four years of service participates in a retirement plan. The vesting schedule in this plan is changed by plan amendment. Under tax law, this plan participant: - Answer- Must be given the election to remain under the pre-amendment vesting schedule for both pre- and post-amendment benefit accruals. The annual limit on deferral amounts for an ineligible Section 457 plan is: - Answer- Unlimited To receive tax-preferred treatment under an ineligible Section 457 plan, amounts deferred must be: - Answer- Subject to a substantial risk of forfeiture A theory of income taxation that imposes current tax liability on taxpayers who receive something of reasonable value is known as the doctrine of: - Answer- Economic benefit Which of the following are types of eligible Section 457 plans that must be unfunded? A: Plans maintained by nongovernmental tax-exempt organizations B: Plans of state and local governments C: Plans that invest in insurance company products D: Plans that allow participants to earmark assets E: Plans that offer equity investments - Answer- Plans maintained by nongovernmental tax-exempt organizations Which of the following statements describes the tax treatment of nonqualified stock options for the employer? A: The employer gets no corporate income tax deduction. B: The employer gets a corporate income tax deduction at the time the option is granted. C: The employer gets a corporate income tax deduction for the amount of compensation income the employee realizes at the exercise of the option. D: The employer gets a corporate income tax deduction provided the price of the option granted is not greater than 85% of the fair market value of the stock on the date of grant. E: The employer gets a corporate income tax deduction but corporate alternative minimum tax rules may reduce, or even eliminate, the deduction. - Answer- The employer gets a corporate income tax deduction for the amount of compensation income the employee realizes at the exercise of the option. A retirement plan that is unfunded and maintained by an employer primarily for the purpose of providing deferred compensation for a "select group of management or highly compensated employees" is called a (n): - Answer- Top-hat plan Under which of the following situations are premature distributions from individual retirement accounts (IRAs) exempt from the early distribution penalty tax? A: Distributions because of an Internal Revenue Service levy on the account to pay taxes. B: Distributions to pay off the mortgage of a primary residence after the account owner attains age 55. C: Distributions for health insurance payroll deductions when these deductions annually represent 20% or more of pay. D: Distributions on account of the death of the IRA owner's working spouse. E: Distributions that are to be transferred to a flexible spending account. - Answer- Distributions because of an Internal Revenue Service levy on the account to pay taxes.Module: 10 Those questioning the validity of the human depreciation concept of private pensions would argue that the employer should be held responsible only for the increase in the rate of aging caused by: - Answer- Occupational hazards The Supreme Court ruled in Arizona Governing Committee v. Norris that: - Answer- Life annuities under an employer-sponsored defined contribution plan must be provided on a uniform basis. The most frequently used criterion to establish participation in a supplemental executive retirement plan (SERP) is: - Answer- Position and management status For a distribution from a Roth IRA account to receive favorable tax treatment as a qualified distribution, how long must contributions be in the account? - Answer- 5 years In 1948 the National Labor Relations Board (NLRB) found that the provisions of retirement plans affect conditions of employment and that retirement benefits constitute: - Answer- Wages Which Internal Revenue Code Section generally mandates that, except for certain exceptions that meet specific requirements, income from deferred compensation arrangements may no longer be deferred beyond the year in which such compensation is earned? - Answer- Section 409A Employees withdrawing contributions from a savings incentive match plan for employees (SIMPLE plan) individual retirement account (IRA) during the two-year period beginning on the date of initial participation are subject to a penalty tax of: - Answer- 25 percent Which of the following plans is used in conjunction with debt financing? A: A money purchase plan B: An employee stock ownership plan C: A 401(k) plan D: A simplified employee pension plan E: A profit sharing plan - Answer- An employee stock ownership plan Under a percentage of earnings per year of service formula, the typical range for the percentage of earnings credited is: - Answer- 1% to 1.25% Contributions to a profit sharing plan must be made on: - Answer- A substantial and recurring basis If you knew that a vendor servicing a 401(k) plan was clearing trades internally and not using an outside directed trustee, you generally could conclude that: - Answer- The vendor was providing plan services as a bundled service provider. Under the Employee Retirement Income Security Act of 1974 (ERISA), a fiduciary shall discharge his (or her) duties with respect to an employee benefit plan solely in the interest of: - Answer- The plan's participants and beneficiaries The vesting provision of executive retirement arrangements: - Answer- Varies depending on the intent of the executive arrangement Key employees, for purposes of the top-heavy rules, include all: - Answer- One percent owners receiving annual compensation in excess of $150,000 An example of a sponsor of a 403(b) plan is: - Answer- A public college In general, the aggregate amount of employer contribution allocated to a younger employee under a defined contribution plan compared to that under a defined benefit plan is: - Answer- A higher amount Under certain conditions, a nonworking spouse may establish an individual retirement account (IRA) using which of the follow