RPA1 Exam Questions with correct
Answers
Three-legged stool - Answer- A company pension, Social Security, and savings
Economic problems of old age - Answer- Longevity, medical expenses, lack of work,
inflation
Reverse annuity - Answer- An arrangement with a bank where the bank pays the
homeowner a monthly amount for equity in the house.
Tax advantages of qualified retirement plans - Answer- Earnings are not taxed until
distribution, Company contributions are current business expenses and tax-deductible,
Employee contributions can be made without current taxation
Reasons for growth of private retirement plans - Answer- Competitive pressures, Wage
freeze during WWII, Union demands
Business expediency - Answer- The theory that it's in the best interest of a business to
have a retirement plan
Human depreciation concept - Answer- The theory that as workers get older, their ability
to work declines and companies should pay for this "depreciation" by funding a pension
plan.
Deferred wage concept - Answer- The theory that retirement plans are actually earnings
of the employees that are deferred until retirement.
Employee Retirement Income Security Act (ERISA) - Answer- The bedrock law of
benefits passed in 1974
Tax Equity and Fiscal Responsibility Act (TEFRA) - Answer- Passed in 1982 [top-heavy
plans] [reduced maximum benefit and contributions][equity between corporate and self-
employed plans]
Tax Reform Act (TRA'86) - Answer- [coverage tests] [accelerated vesting]
Economic Growth and Tax Relief Act (EGTRRA) - Answer- Passed in 2001, this act led
to major changes in all areas.
Pension Protection Act (PPA) - Answer- Passed in 2006, this led to new funding rules
for DB plans.
, Defined benefit (DB) Plan - Answer- The document defines the benefit at retirement.
The employer has the investment risk.
Defined contribution (DC) Plan - Answer- The document defines how the contribution is
allocated to participants. Participants have the investment risk.
Qualified retirement plan - Answer- A plan that meets the requirements of ERISA, as
amended.
Section 415 compensation - Answer- Compensation used for the purposes of the plan.
HCE/NHCE - Answer- "Highly Compensated Employees: - 5% owner & family, an
employee earning $120,000 or more & family, Non‐Highly Compensated Employees:
Everyone else"
Key requirements of an ERISA qualified plan - Answer- Plan assets can't be
diverted/Plan is for exclusive benefit of employees and beneficiaries/ Permanency
requirement
Sec. 410(b) tests - Answer- Non‐discrimination testing and coverage tests
ERISA disclosure and reporting - Answer- SPD, SMM, Form 5500, SAR
Vesting - Answer- The right a person has to the plan benefits after a certain period of
service.
"Sec. 401(a)(17) limit on includable compensation" - Answer- "$270,000 in 2017
$275,000 in 2018"
Section 415 limits - Answer- "DC - Individual limit: $54,000/100% of pay, Company limit:
25% of covered payroll, DB - Individual benefit: $220,000 annual benefit for 2018/100%
of 3 year avg"
Joint and survivor annuity - Answer- A benefit form required to be offered to married
individual in a pension plan.
Minimum distribution requirements - Answer- Lifetime benefits must begin no later than
age 70 1/2 unless a person is still working. SECURE Act: Changed to age 72
Top‐heavy plans - Answer- When more than 60% of plan benefits go to key employees
Key employees - Answer- A 5% owner and anyone earning over $150,000
Basic features of DB plans - Answer- Eligibility; death/disability benefits; vesting; form of
benefits; early retirement benefits
Answers
Three-legged stool - Answer- A company pension, Social Security, and savings
Economic problems of old age - Answer- Longevity, medical expenses, lack of work,
inflation
Reverse annuity - Answer- An arrangement with a bank where the bank pays the
homeowner a monthly amount for equity in the house.
Tax advantages of qualified retirement plans - Answer- Earnings are not taxed until
distribution, Company contributions are current business expenses and tax-deductible,
Employee contributions can be made without current taxation
Reasons for growth of private retirement plans - Answer- Competitive pressures, Wage
freeze during WWII, Union demands
Business expediency - Answer- The theory that it's in the best interest of a business to
have a retirement plan
Human depreciation concept - Answer- The theory that as workers get older, their ability
to work declines and companies should pay for this "depreciation" by funding a pension
plan.
Deferred wage concept - Answer- The theory that retirement plans are actually earnings
of the employees that are deferred until retirement.
Employee Retirement Income Security Act (ERISA) - Answer- The bedrock law of
benefits passed in 1974
Tax Equity and Fiscal Responsibility Act (TEFRA) - Answer- Passed in 1982 [top-heavy
plans] [reduced maximum benefit and contributions][equity between corporate and self-
employed plans]
Tax Reform Act (TRA'86) - Answer- [coverage tests] [accelerated vesting]
Economic Growth and Tax Relief Act (EGTRRA) - Answer- Passed in 2001, this act led
to major changes in all areas.
Pension Protection Act (PPA) - Answer- Passed in 2006, this led to new funding rules
for DB plans.
, Defined benefit (DB) Plan - Answer- The document defines the benefit at retirement.
The employer has the investment risk.
Defined contribution (DC) Plan - Answer- The document defines how the contribution is
allocated to participants. Participants have the investment risk.
Qualified retirement plan - Answer- A plan that meets the requirements of ERISA, as
amended.
Section 415 compensation - Answer- Compensation used for the purposes of the plan.
HCE/NHCE - Answer- "Highly Compensated Employees: - 5% owner & family, an
employee earning $120,000 or more & family, Non‐Highly Compensated Employees:
Everyone else"
Key requirements of an ERISA qualified plan - Answer- Plan assets can't be
diverted/Plan is for exclusive benefit of employees and beneficiaries/ Permanency
requirement
Sec. 410(b) tests - Answer- Non‐discrimination testing and coverage tests
ERISA disclosure and reporting - Answer- SPD, SMM, Form 5500, SAR
Vesting - Answer- The right a person has to the plan benefits after a certain period of
service.
"Sec. 401(a)(17) limit on includable compensation" - Answer- "$270,000 in 2017
$275,000 in 2018"
Section 415 limits - Answer- "DC - Individual limit: $54,000/100% of pay, Company limit:
25% of covered payroll, DB - Individual benefit: $220,000 annual benefit for 2018/100%
of 3 year avg"
Joint and survivor annuity - Answer- A benefit form required to be offered to married
individual in a pension plan.
Minimum distribution requirements - Answer- Lifetime benefits must begin no later than
age 70 1/2 unless a person is still working. SECURE Act: Changed to age 72
Top‐heavy plans - Answer- When more than 60% of plan benefits go to key employees
Key employees - Answer- A 5% owner and anyone earning over $150,000
Basic features of DB plans - Answer- Eligibility; death/disability benefits; vesting; form of
benefits; early retirement benefits
