RPA EXAM 1 PRACTICE TEST QUESTIONS AND ANSWERS
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: - CORRECT
ANSWER✅✅Correct Answer: A: Occupational hazards
Module: 1Reference: Retirement Plans, Twelfth Edition, page 16.Study Guide, First Edition, page 13,
Objective 3.5.
Contributions to a profit sharing plan must be made on: - CORRECT ANSWER✅✅Correct Answer: A
substantial and recurring basis
Module: 5Reference: Retirement Plans, Twelfth Edition, page 93.Study Guide, First Edition, page 5,
Objective 1.4.
describe the tax treatment of nonqualified stock options for the employer? - CORRECT
ANSWER✅✅Correct Answer: C: The employer gets a corporate income tax deduction for the amount of
compensation income the employee realizes at the exercise of the option.
Module: 12Reference: Retirement Plans, Twelfth Edition, page 275.Study Guide, First Edition, page 10,
Objective 3.4.
Of all of the following factors in the Black-Scholes option pricing model, which one is generally deemed
to have the most relative impact on the value of the option? - CORRECT ANSWER✅✅Correct Answer: E:
The expected volatility of the underlying stock's market price
Module: 12Reference: Retirement Plans, Twelfth Edition, page 281.Study Guide, First Edition, page 15,
Objective 5.4.
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: - CORRECT ANSWER✅✅Correct Answer: E: 25 percent
Module: 9Reference: Retirement Plans, Twelfth Edition, page 240.Study Guide, First Edition, page 11,
Objective 3.3.
6
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): - CORRECT ANSWER✅✅Correct Answer: B: Top-hat plan
, The limitation on exclusions for elective deferrals under 401(k) plans is: - CORRECT ANSWER✅✅Correct
Answer: C: Indexed in increments established by the Economic Growth and Tax Relief Reconciliation Act
(EGTRRA)
8
Which of the following are types of eligible Section 457 plans that must be unfunded? - CORRECT
ANSWER✅✅Plans maintained by nongovernmental tax-exempt organizations
9
Under a technique known as a wage-related formula, the impact of postretirement inflation on pension
income is: - CORRECT ANSWER✅✅Measured on the basis of current wage measures to adjust benefits
10
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? - CORRECT ANSWER✅✅Correct Answer: E:
Section 409A
Module: 11Reference: Retirement Plans, Twelfth Edition, page 264.Study Guide, First Edition, page 21,
Objective 6.3.
11
Under a percentage of earnings per year of service formula, the typical range for the percentage of
earnings credited is: - CORRECT ANSWER✅✅Correct Answer: B: 1% to 1.25%
Module: 3Reference: Retirement Plans, Twelfth Edition, page 313.Study Guide, First Edition, page 11,
Objective 3.6.
12
The annual limit on deferral amounts for an ineligible Section 457 plan is: - CORRECT
ANSWER✅✅Unlimited
13
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: - CORRECT
ANSWER✅✅Correct Answer: A: Occupational hazards
Module: 1Reference: Retirement Plans, Twelfth Edition, page 16.Study Guide, First Edition, page 13,
Objective 3.5.
Contributions to a profit sharing plan must be made on: - CORRECT ANSWER✅✅Correct Answer: A
substantial and recurring basis
Module: 5Reference: Retirement Plans, Twelfth Edition, page 93.Study Guide, First Edition, page 5,
Objective 1.4.
describe the tax treatment of nonqualified stock options for the employer? - CORRECT
ANSWER✅✅Correct Answer: C: The employer gets a corporate income tax deduction for the amount of
compensation income the employee realizes at the exercise of the option.
Module: 12Reference: Retirement Plans, Twelfth Edition, page 275.Study Guide, First Edition, page 10,
Objective 3.4.
Of all of the following factors in the Black-Scholes option pricing model, which one is generally deemed
to have the most relative impact on the value of the option? - CORRECT ANSWER✅✅Correct Answer: E:
The expected volatility of the underlying stock's market price
Module: 12Reference: Retirement Plans, Twelfth Edition, page 281.Study Guide, First Edition, page 15,
Objective 5.4.
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: - CORRECT ANSWER✅✅Correct Answer: E: 25 percent
Module: 9Reference: Retirement Plans, Twelfth Edition, page 240.Study Guide, First Edition, page 11,
Objective 3.3.
6
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): - CORRECT ANSWER✅✅Correct Answer: B: Top-hat plan
, The limitation on exclusions for elective deferrals under 401(k) plans is: - CORRECT ANSWER✅✅Correct
Answer: C: Indexed in increments established by the Economic Growth and Tax Relief Reconciliation Act
(EGTRRA)
8
Which of the following are types of eligible Section 457 plans that must be unfunded? - CORRECT
ANSWER✅✅Plans maintained by nongovernmental tax-exempt organizations
9
Under a technique known as a wage-related formula, the impact of postretirement inflation on pension
income is: - CORRECT ANSWER✅✅Measured on the basis of current wage measures to adjust benefits
10
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? - CORRECT ANSWER✅✅Correct Answer: E:
Section 409A
Module: 11Reference: Retirement Plans, Twelfth Edition, page 264.Study Guide, First Edition, page 21,
Objective 6.3.
11
Under a percentage of earnings per year of service formula, the typical range for the percentage of
earnings credited is: - CORRECT ANSWER✅✅Correct Answer: B: 1% to 1.25%
Module: 3Reference: Retirement Plans, Twelfth Edition, page 313.Study Guide, First Edition, page 11,
Objective 3.6.
12
The annual limit on deferral amounts for an ineligible Section 457 plan is: - CORRECT
ANSWER✅✅Unlimited
13
