QPA EXAM -QUESTIONS AND ANSWERS
LATEST UPDATE 2025/2026
A cash balance plan is a type of defined benefit plan.
True
A defined benefit plan has a "unit benefit" type of formula if it provides a monthly benefit
equal to 1% of average monthly compensation times total years of participation.
True
A defined benefit plan that provides a $500 monthly benefit to all participants has a "flat
benefit" type of formula.
True
The enrolled actuary determines contribution levels for defined benefit plans so that plan
assets are expected to be sufficient to pay expected benefits.
True
Since the funding of a defined benefit plan is based on the benefits provided by the plan,
the amount of contribution budgeted by an employer is irrelevant when designing a defined
benefit plan.
False.
The employer's ability to fund the required contribution level is of primary importance in plan
design.
,Which of the following statement(s) about appropriate approaches to defined benefit plan
funding is/are TRUE?
I. Contributions are determined directly by the terms of the plan.
II. Contributions are determined actuarially, based on assumptions of future events.
III. The employer can (within limits) choose the contribution level, which is then allocated
to the participant accounts as required by the plan.
Only II is appropriate for defined benefit plan funding. I and III apply to types of defined
contribution plans.
All of the following types of plans are considered defined benefit plans, EXCEPT:
A. Floor-offset plan
B. Target benefit plan
C. Unit benefit plan
D. Cash balance plan
E. Flat benefit plan
The correct answer is B. A target benefit plan is a defined contribution plan. The others listed are
defined benefit plans.
All of the following statements describe features that may be in a defined benefit plan,
EXCEPT:
A. A benefit formula that takes into consideration the number of years of service rendered
by an employee
B. Cost-of-living adjustments of benefits
C. The right of the plan sponsor to freeze the benefit accruals.
,D. A provision allowing the amount of money contributed to the plan to be totally subject
to employer discretion
E. A provision allowing alternative benefit forms, such as annuities, a lump sum, or
installments
The correct answer is D. Defined benefit plans require actuarially determined contributions to be
made and the benefits provided must be definitely determinable. The employer's discretion as to
the contribution level is limited, as the minimum required contribution must be satisfied. The
other options are allowed in defined benefit plans.
Which of the following is/are examples of flat-benefit plan formulas?
I. $25 per month
II. 75% of compensation averaged over the high three years of service reduced by 1/30th
for each year of service less than 30 years
III. 50% of compensation averaged over the highest five years of service
The correct answer is E. Each is a flat benefit formula.
All of the following features are allowed in defined benefit plans, EXCEPT:
A. Post-retirement cost of living adjustments to the retirement benefit
B. The right of all plan participants to direct investments
C. Disability benefits
D. Normal retirement benefits offset by benefits provided in a profit-sharing plan
E. The right of participants to choose the form of payment of benefit.
The correct answer is B. Plan participants cannot direct investments in a defined benefit plan.
, All of the following statements regarding defined benefit plans are TRUE, EXCEPT:
A. Termination and death benefits may be provided.
B. The suggested contribution documents a funding strategy that is intended to apply year
after year, setting an expectation for the plan sponsor to meet.
C. Actuaries determine contribution levels making assumptions about future events.
D. A frozen plan cannot provide future accruals to current active participants.
E. The plan formula specifies the benefit provided to the participants at retirement.
The correct answer is D. An example of a frozen plan is one in which currently active
participants continue to accrue benefits, while no new entrants are allowed (so that new
employees do not accrue benefits).
All of the following describe factors that can be part of a traditional defined benefit plan
formula, EXCEPT:
A. A benefit based on a percentage of pay per year of service
B. A benefit reduction if a minimum number of years of service is not attained
C. A benefit based on a dollar amount of benefit per year of service
D. An allocation of actual trust earnings per participant for the year
E. Benefits that reflect permitted disparity
The correct answer is D. Earnings are not allocated in a traditional defined benefit plan on a per
participant basis. The employer bears the investment risk entirely and plan earnings ultimately
affect the amount of contributions the employer is required to make over the life of the plan.
It is permissible to front-load benefits.
True
LATEST UPDATE 2025/2026
A cash balance plan is a type of defined benefit plan.
True
A defined benefit plan has a "unit benefit" type of formula if it provides a monthly benefit
equal to 1% of average monthly compensation times total years of participation.
True
A defined benefit plan that provides a $500 monthly benefit to all participants has a "flat
benefit" type of formula.
True
The enrolled actuary determines contribution levels for defined benefit plans so that plan
assets are expected to be sufficient to pay expected benefits.
True
Since the funding of a defined benefit plan is based on the benefits provided by the plan,
the amount of contribution budgeted by an employer is irrelevant when designing a defined
benefit plan.
False.
The employer's ability to fund the required contribution level is of primary importance in plan
design.
,Which of the following statement(s) about appropriate approaches to defined benefit plan
funding is/are TRUE?
I. Contributions are determined directly by the terms of the plan.
II. Contributions are determined actuarially, based on assumptions of future events.
III. The employer can (within limits) choose the contribution level, which is then allocated
to the participant accounts as required by the plan.
Only II is appropriate for defined benefit plan funding. I and III apply to types of defined
contribution plans.
All of the following types of plans are considered defined benefit plans, EXCEPT:
A. Floor-offset plan
B. Target benefit plan
C. Unit benefit plan
D. Cash balance plan
E. Flat benefit plan
The correct answer is B. A target benefit plan is a defined contribution plan. The others listed are
defined benefit plans.
All of the following statements describe features that may be in a defined benefit plan,
EXCEPT:
A. A benefit formula that takes into consideration the number of years of service rendered
by an employee
B. Cost-of-living adjustments of benefits
C. The right of the plan sponsor to freeze the benefit accruals.
,D. A provision allowing the amount of money contributed to the plan to be totally subject
to employer discretion
E. A provision allowing alternative benefit forms, such as annuities, a lump sum, or
installments
The correct answer is D. Defined benefit plans require actuarially determined contributions to be
made and the benefits provided must be definitely determinable. The employer's discretion as to
the contribution level is limited, as the minimum required contribution must be satisfied. The
other options are allowed in defined benefit plans.
Which of the following is/are examples of flat-benefit plan formulas?
I. $25 per month
II. 75% of compensation averaged over the high three years of service reduced by 1/30th
for each year of service less than 30 years
III. 50% of compensation averaged over the highest five years of service
The correct answer is E. Each is a flat benefit formula.
All of the following features are allowed in defined benefit plans, EXCEPT:
A. Post-retirement cost of living adjustments to the retirement benefit
B. The right of all plan participants to direct investments
C. Disability benefits
D. Normal retirement benefits offset by benefits provided in a profit-sharing plan
E. The right of participants to choose the form of payment of benefit.
The correct answer is B. Plan participants cannot direct investments in a defined benefit plan.
, All of the following statements regarding defined benefit plans are TRUE, EXCEPT:
A. Termination and death benefits may be provided.
B. The suggested contribution documents a funding strategy that is intended to apply year
after year, setting an expectation for the plan sponsor to meet.
C. Actuaries determine contribution levels making assumptions about future events.
D. A frozen plan cannot provide future accruals to current active participants.
E. The plan formula specifies the benefit provided to the participants at retirement.
The correct answer is D. An example of a frozen plan is one in which currently active
participants continue to accrue benefits, while no new entrants are allowed (so that new
employees do not accrue benefits).
All of the following describe factors that can be part of a traditional defined benefit plan
formula, EXCEPT:
A. A benefit based on a percentage of pay per year of service
B. A benefit reduction if a minimum number of years of service is not attained
C. A benefit based on a dollar amount of benefit per year of service
D. An allocation of actual trust earnings per participant for the year
E. Benefits that reflect permitted disparity
The correct answer is D. Earnings are not allocated in a traditional defined benefit plan on a per
participant basis. The employer bears the investment risk entirely and plan earnings ultimately
affect the amount of contributions the employer is required to make over the life of the plan.
It is permissible to front-load benefits.
True
