CEBS - RPA 2 EXAM QUESTIONS &
ANSWERS(RATED A)
Premature distributions from IRAs exempt from penalty if: - ANSWERDistribution
occurred b/c of IRS levy on account to pay taxes.
IRA qualified distributions include: - ANSWERAttained age 59 1/2; disabled; died and
payment made to beneficiary or estate; pay first-time home buyer expenses, not to
exceed $10k.
Term used to describe condition that occurs b/c of different accrual patterns when
traditional DB plan converted to cash balance plan: - ANSWERPension wear away
Section 409A - ANSWERIRC mandate that income from deferred comp arrangements
not be deferred beyond year in which comp is earned.
Qualified retirement plans required to have fidelity bond covering what %? -
ANSWER10%
Dollar cost averaging - ANSWERInvolves investing the same amount of money on
periodic basis, whether over- or under-priced.
Vesting provisions of executive retirement arrangements: - ANSWERvaries depending
on intent of executive arrangement
Excess contribution to IRA subject to nondeductible excise tax of: - ANSWER6%
Nonworking spouse may establish IRA using what types of payment as basis for
eligibility? - ANSWEREarned income of working spouse
Fiduciary liable for duly appointed and monitored investment mgr if performance of plan
below benchmark? - ANSWERNot liable since investment mgmt svcs delegated
Typical range for % of earnings credited under % of earnings per year formula? -
ANSWER1% to 1.25%
Tax treatment of NQSO (NQ stock options) for ER: - ANSWERER gets corporate
income tax deduction for amount of comp income EE realizes at exercise of option.
Penalty for failure to make required distribution of at least correct amount from qualified
retirement plan: - ANSWERNondeductible excise tax of 50%
EEs w/drawing contributions from SIMPLE IRA during initial two-year period, subject to
penalty of: - ANSWER25%
, When qualified plan hold ER securities, max amount for fidelity bond is: -
ANSWERIncreased by a significant amount
Taxable amount received before 59 1/2 from qualified plan subject to additional penalty
of: - ANSWER10%
Surge in investments returns on accumulated pension assets will have what effect on
projected plan costs? - ANSWERReduction effect
SPD to be provided w/in how many days: - ANSWER90
Factor w/ highest impact in Black-Scholes pricing model: - ANSWERExpected volatility
of underlying stock's market price
Tax advantage of ISOs is that there is no regular income tax levied at grant or exercise.
However, tax applies in the following way(s): - ANSWERBargain element upon exercise
of ISO is adjustment item for individual AMT purposes and participant of ISO plan is
taxed only when he/she sells the stock.
Penalties assessed on fiduciary for breach or violations: - ANSWERPersonally liable;
excise tax of % of amount involved (15%); will NOT cause disqualification of plan.
Plans that allow sponsors to make contributions on discretionary basis: - ANSWERAge-
weighted profit sharing plans and New Comparability Plans.
Investment policy statement for qualified retirement plans for participant directed
includes: - ANSWERNumber of options permitted, the range of investment options
allowed and default investment options.
Investment policy statement for qualified retirement plans for NOT participant directed
includes: - ANSWERTargeted asset allocation and frequency of rebalancing.
DB hybrid plan disadvantages: - ANSWERMay erode sponsor's fundamental objective
of providing retirement benefits and younger participant's not perceiving sufficient value
quickly enough.
Proposed asset valuation for DB plan, statutory requirements %: - ANSWERValuation
b/w 90-110% of FMV
Pension equity plans are based on what? - ANSWERFinal average pay and % credits
that worker receives each year he/she is plan participant
Reasons for deferring current income through deferred comp agreement: -
ANSWERExtending exec.'s income beyond normal working years into retirement;
ANSWERS(RATED A)
Premature distributions from IRAs exempt from penalty if: - ANSWERDistribution
occurred b/c of IRS levy on account to pay taxes.
IRA qualified distributions include: - ANSWERAttained age 59 1/2; disabled; died and
payment made to beneficiary or estate; pay first-time home buyer expenses, not to
exceed $10k.
Term used to describe condition that occurs b/c of different accrual patterns when
traditional DB plan converted to cash balance plan: - ANSWERPension wear away
Section 409A - ANSWERIRC mandate that income from deferred comp arrangements
not be deferred beyond year in which comp is earned.
Qualified retirement plans required to have fidelity bond covering what %? -
ANSWER10%
Dollar cost averaging - ANSWERInvolves investing the same amount of money on
periodic basis, whether over- or under-priced.
Vesting provisions of executive retirement arrangements: - ANSWERvaries depending
on intent of executive arrangement
Excess contribution to IRA subject to nondeductible excise tax of: - ANSWER6%
Nonworking spouse may establish IRA using what types of payment as basis for
eligibility? - ANSWEREarned income of working spouse
Fiduciary liable for duly appointed and monitored investment mgr if performance of plan
below benchmark? - ANSWERNot liable since investment mgmt svcs delegated
Typical range for % of earnings credited under % of earnings per year formula? -
ANSWER1% to 1.25%
Tax treatment of NQSO (NQ stock options) for ER: - ANSWERER gets corporate
income tax deduction for amount of comp income EE realizes at exercise of option.
Penalty for failure to make required distribution of at least correct amount from qualified
retirement plan: - ANSWERNondeductible excise tax of 50%
EEs w/drawing contributions from SIMPLE IRA during initial two-year period, subject to
penalty of: - ANSWER25%
, When qualified plan hold ER securities, max amount for fidelity bond is: -
ANSWERIncreased by a significant amount
Taxable amount received before 59 1/2 from qualified plan subject to additional penalty
of: - ANSWER10%
Surge in investments returns on accumulated pension assets will have what effect on
projected plan costs? - ANSWERReduction effect
SPD to be provided w/in how many days: - ANSWER90
Factor w/ highest impact in Black-Scholes pricing model: - ANSWERExpected volatility
of underlying stock's market price
Tax advantage of ISOs is that there is no regular income tax levied at grant or exercise.
However, tax applies in the following way(s): - ANSWERBargain element upon exercise
of ISO is adjustment item for individual AMT purposes and participant of ISO plan is
taxed only when he/she sells the stock.
Penalties assessed on fiduciary for breach or violations: - ANSWERPersonally liable;
excise tax of % of amount involved (15%); will NOT cause disqualification of plan.
Plans that allow sponsors to make contributions on discretionary basis: - ANSWERAge-
weighted profit sharing plans and New Comparability Plans.
Investment policy statement for qualified retirement plans for participant directed
includes: - ANSWERNumber of options permitted, the range of investment options
allowed and default investment options.
Investment policy statement for qualified retirement plans for NOT participant directed
includes: - ANSWERTargeted asset allocation and frequency of rebalancing.
DB hybrid plan disadvantages: - ANSWERMay erode sponsor's fundamental objective
of providing retirement benefits and younger participant's not perceiving sufficient value
quickly enough.
Proposed asset valuation for DB plan, statutory requirements %: - ANSWERValuation
b/w 90-110% of FMV
Pension equity plans are based on what? - ANSWERFinal average pay and % credits
that worker receives each year he/she is plan participant
Reasons for deferring current income through deferred comp agreement: -
ANSWERExtending exec.'s income beyond normal working years into retirement;
