FIN 420 Retirement Planning Final || 100% Exact Answers.
Which of these federal agencies is tasked with supervising the creation of new qualified
retirement plans?
A. DOL
B. ERISA
C. IRS
D. PBGC correct answers C. IRS
In which of these situations can the Pension Benefit Guaranty Corporation (PBGC) terminate a
defined benefit pension plan?
I. The PBGC does not have the authority to terminate an employer's defined benefit pension
plan.
II. Anne's Aquatics, Inc., has not met the minimum funding standards for the corporation's
defined benefit pension plan.
III. Stacy has retired from her position and her former employer's defined benefit pension plan
cannot pay her retirement benefit because it lacks the funds.
IV. A professional service corporation with 20 active participants cannot meet the minimum
funding standards of the defined benefit pension plan and has previously paid no PBGC
premiums.
A. II and III
B. I and IV
C. I and III
D. II, III, and I correct answers A. II and III
If a qualified plan has been designed using normal eligibility requirements, which of these would
require an employee to be eligible to participate in the plan?
I. 18 years of age
II. 21 years of age
III. Completion of 1 year of service at least 1,000 hours worked per year
IV. Completion of 3 years of service average 600 hours per year
,A. I and III
B. I and IV
C. II and IV
D. II and III correct answers D. II and III
Which of these employees are HCEs of underwood Corporation for the year 2022? Assume the
top 20% election was made by underwood Corporation.
I. Benson, who owns 10% of underwood and is an employee
II. Meredith, the president of underwood, whose compensation was $160,000 last year and is in
the top 20% of all paid employees
III. Janet, an employee salesperson, who earned $200,000 last year and was the top paid
employee at underwood this year
IV. Jeremy, who earned $115,000 last year as underwood's legal counsel and is not in the top
20% of all paid employees
A. I and II
B. II and III
C. I, II, and III
D. II, III, and IV correct answers C. I, II, and III
Merriweather Co. employs 200 eligible employees, 20 of them are HCEs. Sixteen of the 20
HCEs, and 125 of the 180 non-HCEs benefit from the Merriweather qualified pension plan. The
average benefits accrued for the HCEs are 8%. The average benefits accrued for the non-HCEs
are 3%. Which of these is CORRECT with respect to the coverage tests applied to the
Merriweather plan?
A. The plan meets the ratio test and the average benefits percentage test.
B. The plan does not meet the average benefits percentage test, but it meets the ratio test.
C. While the plan does not meet the ratio test, it meets the average benefits percentage test.
D. The plan does not meet the ratio test or the average benefits percentage test correct answers B.
The plan does not meet the average benefits percentage test, but it meets the ratio test.
, Grant, age 42, wants to establish a qualified defined contribution plan for his small business. He
currently earns $115,000 annually. Grant employs four people whose combined salaries are
$58,000 annually and ages range from 24 to 30. The average employment period is 3 1/2 years.
Which vesting schedule is best suited for Grant's qualified plan?
A. Two-to-six-year graded vesting
B. Five-year cliff vesting
C. Three-year cliff vesting
D. Three-to-seven-year graded vesting correct answers A. Two-to-six-year graded vesting
Treetop Corporation maintains an employee includible compensation totaling $100,000. The
employees of Treetop also make elective deferrals to the company's defined contribution
qualified plan of $10,000. What is the total amount that Treetop may take as an employer
deduction for employer contributions made to its qualified plan this year?
A. $10,000
B. $25,000
C. $27,000
D. $100,000 correct answers B. $25,000
Sunset Company sponsors a defined contribution plan that provides a base contribution of 12.3
of employee compensation. Assuming the integration level equals the Social Security taxable
wage base, what is the maximum excess contribution percentage allowed under the permitted
disparity rules?
A. 5.7%
B. 12.3%
C. 25.0%
D. 18.0% correct answers D. 18%
James Somerset earns $157,000 in 2022 working for Jamaica Imports of New York, NY. The
firm has a 10 money purchase plan that is integrated with Social Security. The taxable wage base
for 2022 is $147,000. What would the maximum contribution to the money purchase plan for
James in 2022?
Which of these federal agencies is tasked with supervising the creation of new qualified
retirement plans?
A. DOL
B. ERISA
C. IRS
D. PBGC correct answers C. IRS
In which of these situations can the Pension Benefit Guaranty Corporation (PBGC) terminate a
defined benefit pension plan?
I. The PBGC does not have the authority to terminate an employer's defined benefit pension
plan.
II. Anne's Aquatics, Inc., has not met the minimum funding standards for the corporation's
defined benefit pension plan.
III. Stacy has retired from her position and her former employer's defined benefit pension plan
cannot pay her retirement benefit because it lacks the funds.
IV. A professional service corporation with 20 active participants cannot meet the minimum
funding standards of the defined benefit pension plan and has previously paid no PBGC
premiums.
A. II and III
B. I and IV
C. I and III
D. II, III, and I correct answers A. II and III
If a qualified plan has been designed using normal eligibility requirements, which of these would
require an employee to be eligible to participate in the plan?
I. 18 years of age
II. 21 years of age
III. Completion of 1 year of service at least 1,000 hours worked per year
IV. Completion of 3 years of service average 600 hours per year
,A. I and III
B. I and IV
C. II and IV
D. II and III correct answers D. II and III
Which of these employees are HCEs of underwood Corporation for the year 2022? Assume the
top 20% election was made by underwood Corporation.
I. Benson, who owns 10% of underwood and is an employee
II. Meredith, the president of underwood, whose compensation was $160,000 last year and is in
the top 20% of all paid employees
III. Janet, an employee salesperson, who earned $200,000 last year and was the top paid
employee at underwood this year
IV. Jeremy, who earned $115,000 last year as underwood's legal counsel and is not in the top
20% of all paid employees
A. I and II
B. II and III
C. I, II, and III
D. II, III, and IV correct answers C. I, II, and III
Merriweather Co. employs 200 eligible employees, 20 of them are HCEs. Sixteen of the 20
HCEs, and 125 of the 180 non-HCEs benefit from the Merriweather qualified pension plan. The
average benefits accrued for the HCEs are 8%. The average benefits accrued for the non-HCEs
are 3%. Which of these is CORRECT with respect to the coverage tests applied to the
Merriweather plan?
A. The plan meets the ratio test and the average benefits percentage test.
B. The plan does not meet the average benefits percentage test, but it meets the ratio test.
C. While the plan does not meet the ratio test, it meets the average benefits percentage test.
D. The plan does not meet the ratio test or the average benefits percentage test correct answers B.
The plan does not meet the average benefits percentage test, but it meets the ratio test.
, Grant, age 42, wants to establish a qualified defined contribution plan for his small business. He
currently earns $115,000 annually. Grant employs four people whose combined salaries are
$58,000 annually and ages range from 24 to 30. The average employment period is 3 1/2 years.
Which vesting schedule is best suited for Grant's qualified plan?
A. Two-to-six-year graded vesting
B. Five-year cliff vesting
C. Three-year cliff vesting
D. Three-to-seven-year graded vesting correct answers A. Two-to-six-year graded vesting
Treetop Corporation maintains an employee includible compensation totaling $100,000. The
employees of Treetop also make elective deferrals to the company's defined contribution
qualified plan of $10,000. What is the total amount that Treetop may take as an employer
deduction for employer contributions made to its qualified plan this year?
A. $10,000
B. $25,000
C. $27,000
D. $100,000 correct answers B. $25,000
Sunset Company sponsors a defined contribution plan that provides a base contribution of 12.3
of employee compensation. Assuming the integration level equals the Social Security taxable
wage base, what is the maximum excess contribution percentage allowed under the permitted
disparity rules?
A. 5.7%
B. 12.3%
C. 25.0%
D. 18.0% correct answers D. 18%
James Somerset earns $157,000 in 2022 working for Jamaica Imports of New York, NY. The
firm has a 10 money purchase plan that is integrated with Social Security. The taxable wage base
for 2022 is $147,000. What would the maximum contribution to the money purchase plan for
James in 2022?
