CEBS - RPA 2 EXAM Questions
"At hazard" plans - ANS-Term added via PPA; plans' investment necessities are accelerated;
restrictions positioned on plans encompass curtailment of shutdown benefits and plan
amendments that could growth plan liabilities; plans required to inform contributors if restrictions
on lump-sum distributions imposed.
"disqualified character" - ANS-Plan fiduciary; man or woman presenting provider to plot; ER or
EE organization whose EEs are included with the aid of plan; direct or indirect proprietor of
fifty% or extra of interest; relative of any of above; officer, director and HCEs; man or woman
having 10% or greater possession hobby.
Actuarial assumptions - ANS-Set of assumptions does now not commonly adjust final price of
401-k; PPA substantially changed some flexibilities approved in making assumptions
Alpha cost - ANS-Amount of return produced by portfolio, on average, independent of return of
market
Beta fee - ANS-Represents avg go back on portfolio in keeping with 1% go back available on
the market.
Capital Asset Pricing Model (CAPM) - ANS-Uses std statistical strategies to analyze relationship
b/w periodic returns of portfolio and people of market.
Characteristics of ER-sponsored IRA - ANS-Participants have to be a hundred% vested;
contribution by ER taxable to EE; ERISA necessities may additionally observe, but NOT
participation, investment and vesting policies applicable to certified plans.
Collective funding fund - ANS-A agree with fund managed by way of a bank or consider
organization that swimming pools investments of 401(okay) plans and different similar investors.
There are no front- or returned-quit costs related, however there are funding mgmt and admin
fees.
Collective investment fund fees under 401(ok) - ANS-Investment mgmt costs most effective.
Common stock traits - ANS-Blue chip stocks issued by way of primary agencies and
enchantment to pension price range searching for safety and stability; Income stocks pay
higher-than-average dividend returns; Defensive inventory issued with the aid of
recession-resistant groups; Interest-sensitive shares expenses generally tend to drop while
interest rates rise, and vice versa; Growth stocks issued via businesses whose sales, earnings
and proportion of marketplace increasing faster than capital appreciation (no longer appealing to
plans w/ coins flow wishes b/c small dividends)
, Current disbursement investment approach in 401-k plan - ANS-Benefit payments dealt with as
payroll costs; ER pays advantage without delay to retired employee; fee deducted as business
price; no strengthen funding.
DB formulas - ANS-Flat quantity method; flat % of profits formulation; flat quantity in step with yr
of service method; % of earnings consistent with 12 months of provider system; and variable
advantage method.
DB hybrid plan disadvantages: - ANS-May erode sponsor's essential objective of supplying
retirement advantages and more youthful player's no longer perceiving sufficient fee speedy
enough.
Design functions of exec. Retirement plan steady w/ broad based totally plans - ANS-Form and
manner in which blessings dispensed; right to make and trade beneficiary; proper to amend or
terminate plan; nation law govern plan interpretation.
Disadvantage of solo 401(ok) plan - ANS-Plan is needed to conform w/ maximum of the admin
necessities of non-solo 401(k) plans.
Dollar cost averaging - ANS-Involves investing the same amount of money on periodic basis,
whether over- or below-priced.
Economic fee of inventory options - ANS-Can be tremendous, can decline to 0, may be
approximated by using searching at market expenses of long term investment options (LEAPS)
EEs w/drawing contributions from SIMPLE IRA in the course of initial two-12 months length,
challenge to penalty of: - ANS-25%
EGTRRA change to solo 401(okay) - ANS-Elective deferral limits have been accelerated
Equity index fund - ANS-Replicates a specific index which include S&P 500 and designed to
generate a beta of 1.0 (price of return on fund is predicted to be equal to that of S&P 500);
Based at the green marketplace speculation (EMH), which states that securities markets are
efficient in processing of statistics (i.E., primarily based on accurate assessment of all info
available at time).
Equity pension or variable annuity - ANS-Provides retirement profits that varies in dollar
quantities to mirror the funding consequences of an underlying fund of common stocks. Idea is
that it'll mirror preferred stage of inflation.
ER in search of to inspire early retirement ought to take following moves - ANS-Establish
ordinary retirement age in advance than 65; offer no actuarial discount of EE retires after
achieving some min. Age; no reductin thing if early retirement happens whilst EE's age and
"At hazard" plans - ANS-Term added via PPA; plans' investment necessities are accelerated;
restrictions positioned on plans encompass curtailment of shutdown benefits and plan
amendments that could growth plan liabilities; plans required to inform contributors if restrictions
on lump-sum distributions imposed.
"disqualified character" - ANS-Plan fiduciary; man or woman presenting provider to plot; ER or
EE organization whose EEs are included with the aid of plan; direct or indirect proprietor of
fifty% or extra of interest; relative of any of above; officer, director and HCEs; man or woman
having 10% or greater possession hobby.
Actuarial assumptions - ANS-Set of assumptions does now not commonly adjust final price of
401-k; PPA substantially changed some flexibilities approved in making assumptions
Alpha cost - ANS-Amount of return produced by portfolio, on average, independent of return of
market
Beta fee - ANS-Represents avg go back on portfolio in keeping with 1% go back available on
the market.
Capital Asset Pricing Model (CAPM) - ANS-Uses std statistical strategies to analyze relationship
b/w periodic returns of portfolio and people of market.
Characteristics of ER-sponsored IRA - ANS-Participants have to be a hundred% vested;
contribution by ER taxable to EE; ERISA necessities may additionally observe, but NOT
participation, investment and vesting policies applicable to certified plans.
Collective funding fund - ANS-A agree with fund managed by way of a bank or consider
organization that swimming pools investments of 401(okay) plans and different similar investors.
There are no front- or returned-quit costs related, however there are funding mgmt and admin
fees.
Collective investment fund fees under 401(ok) - ANS-Investment mgmt costs most effective.
Common stock traits - ANS-Blue chip stocks issued by way of primary agencies and
enchantment to pension price range searching for safety and stability; Income stocks pay
higher-than-average dividend returns; Defensive inventory issued with the aid of
recession-resistant groups; Interest-sensitive shares expenses generally tend to drop while
interest rates rise, and vice versa; Growth stocks issued via businesses whose sales, earnings
and proportion of marketplace increasing faster than capital appreciation (no longer appealing to
plans w/ coins flow wishes b/c small dividends)
, Current disbursement investment approach in 401-k plan - ANS-Benefit payments dealt with as
payroll costs; ER pays advantage without delay to retired employee; fee deducted as business
price; no strengthen funding.
DB formulas - ANS-Flat quantity method; flat % of profits formulation; flat quantity in step with yr
of service method; % of earnings consistent with 12 months of provider system; and variable
advantage method.
DB hybrid plan disadvantages: - ANS-May erode sponsor's essential objective of supplying
retirement advantages and more youthful player's no longer perceiving sufficient fee speedy
enough.
Design functions of exec. Retirement plan steady w/ broad based totally plans - ANS-Form and
manner in which blessings dispensed; right to make and trade beneficiary; proper to amend or
terminate plan; nation law govern plan interpretation.
Disadvantage of solo 401(ok) plan - ANS-Plan is needed to conform w/ maximum of the admin
necessities of non-solo 401(k) plans.
Dollar cost averaging - ANS-Involves investing the same amount of money on periodic basis,
whether over- or below-priced.
Economic fee of inventory options - ANS-Can be tremendous, can decline to 0, may be
approximated by using searching at market expenses of long term investment options (LEAPS)
EEs w/drawing contributions from SIMPLE IRA in the course of initial two-12 months length,
challenge to penalty of: - ANS-25%
EGTRRA change to solo 401(okay) - ANS-Elective deferral limits have been accelerated
Equity index fund - ANS-Replicates a specific index which include S&P 500 and designed to
generate a beta of 1.0 (price of return on fund is predicted to be equal to that of S&P 500);
Based at the green marketplace speculation (EMH), which states that securities markets are
efficient in processing of statistics (i.E., primarily based on accurate assessment of all info
available at time).
Equity pension or variable annuity - ANS-Provides retirement profits that varies in dollar
quantities to mirror the funding consequences of an underlying fund of common stocks. Idea is
that it'll mirror preferred stage of inflation.
ER in search of to inspire early retirement ought to take following moves - ANS-Establish
ordinary retirement age in advance than 65; offer no actuarial discount of EE retires after
achieving some min. Age; no reductin thing if early retirement happens whilst EE's age and
