CRPC PRACTICE MODULE 7 EXAM WITH QUESTIONS AND CORRECT VERIFIED
ANSWERS WITH RATIONALE |ALREADY GRADED A+
In-service withdrawals prior to age 62 are not permitted from which of the following? -
(ANSWER)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? - #$
(ANSWER)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? - (ANSWER)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 -
(ANSWER)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 - (ANSWER)the entire distribution will be subject to
immediate taxation.
, CRPC PRACTICE MODULE 7 EXAM WITH QUESTIONS AND CORRECT VERIFIED
ANSWERS WITH RATIONALE |ALREADY GRADED A+
(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"? - (ANSWER)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? - (ANSWER)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.)
Distributions from qualified plans, 403(b) plans, SEPs, SIMPLEs, and IRAs are assessed a
10% penalty if they are taken before age 59½. Which of the following is not an exception to
this penalty? - (ANSWER)The distribution is made to pay homeowners insurance.
(The distribution is made to pay homeowners insurance.)
Which of the following is not a step in determining the best plan distribution option? -
(ANSWER)compare the options to what the plan may offer in the future
(Reviewing the distribution options is the first step in determining the best plan distribution
option. In order, the other steps are (2) project cash needs and sources of income, (3)
calculate plan payments and tax implications, and (4) determine which option is most
suitable. Comparing options that may be available in the future is not one of the steps.)
Once selected, beneficiaries of a qualified profit sharing plan can be changed -
(ANSWER)at any time.
ANSWERS WITH RATIONALE |ALREADY GRADED A+
In-service withdrawals prior to age 62 are not permitted from which of the following? -
(ANSWER)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? - #$
(ANSWER)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? - (ANSWER)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 -
(ANSWER)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 - (ANSWER)the entire distribution will be subject to
immediate taxation.
, CRPC PRACTICE MODULE 7 EXAM WITH QUESTIONS AND CORRECT VERIFIED
ANSWERS WITH RATIONALE |ALREADY GRADED A+
(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"? - (ANSWER)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? - (ANSWER)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.)
Distributions from qualified plans, 403(b) plans, SEPs, SIMPLEs, and IRAs are assessed a
10% penalty if they are taken before age 59½. Which of the following is not an exception to
this penalty? - (ANSWER)The distribution is made to pay homeowners insurance.
(The distribution is made to pay homeowners insurance.)
Which of the following is not a step in determining the best plan distribution option? -
(ANSWER)compare the options to what the plan may offer in the future
(Reviewing the distribution options is the first step in determining the best plan distribution
option. In order, the other steps are (2) project cash needs and sources of income, (3)
calculate plan payments and tax implications, and (4) determine which option is most
suitable. Comparing options that may be available in the future is not one of the steps.)
Once selected, beneficiaries of a qualified profit sharing plan can be changed -
(ANSWER)at any time.
