RPA 1 - FINAL EXAM LATEST 2023 REAL EXAM 100 QUESTIONS AND DETAILED ANSWERS (COMPLETE EXAM)

RPA 1 - FINAL EXAM LATEST 2023 REAL EXAM 100 QUESTIONS AND DETAILED ANSWERS (COMPLETE EXAM) Of the 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? - ANSWERThe expected volatility of the underlying stock's market price A theory of income taxation that imposes current tax liability on taxpayers who receive something of reasonable value is known as the doctrine of: - ANSWEREconomic benefit Key employees, for purposes of the top-heavy rules, include all: - ANSWER- One percent owners receiving annual compensation in excess of $150,000 For all defined contribution plans, there is a uniform employer deduction limit of: - ANSWER- 25% of compensation 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 Which plan is used in conjunction with debt financing? - ANSWER- An employee stock ownership plan 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. 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. To receive tax-preferred treatment under an ineligible Section 457 plan, amounts deferred must be: - ANSWER- Subject to a substantial risk of forfeiture. What statement describes the tax treatment of nonqualified stock options for the employer? - ANSWER- The employer gets a corporate income tax deduction for the amount of compensation income the employee realizes at the exercise of the option. How did the Pension Protection Act of 2006 change requirements for investment advice provided to individual retirement account (IRA) owners? - ANSWER- The Act requires that fees for such advice not be contingent on the investment option chosen. The vesting provision of executive retirement arrangements: - ANSWER- Varies depending on the intent of the executive arrangement 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 preamendment vesting schedule for both pre- and post-amendment benefit accruals. Contributions to a profit sharing plan must be made on: - ANSWER- A substantial and recurring basis Under what situations are premature distributions from individual retirement accounts (IRAs) exempt from the early distribution penalty tax? - ANSWERDistributions because of an Internal Revenue Service levy on the account to pay taxes. Under certain conditions, a nonworking spouse may establish an individual retirement account (IRA) using which of the following types of payments as the basis for eligibility to make contributions? - ANSWER- Earned income of a working spouse 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 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 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? - ANSWER5 years 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 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% In addition to current income taxation, any excess contribution to an individual retirement account (IRA) is subject to a nondeductible excise tax of: - ANSWER6 percent 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 Which of the following are types of eligible Section 457 plans that must be unfunded? - ANSWER- Plans maintained by nongovernmental tax-exempt organizations The limitation on exclusions for elective deferrals under 401(k) plans is: - ANSWER- Indexed in increments established by the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) 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.