Question 1

Rick says that his employees are complaining that their benefits plan isn't fair to everyone working in the company. To check if this is true, what should be recommended for Rick to do?

Accepted Answer

A) Provide more benefits. 
B) Create different plans for each employee. 
C) Terminate the plan and offer no benefits. 
D) Complete a cross-testing analysis.

Question 2

What usually determines the best successor to a business?

Accepted Answer

A) Family ties 
B) Abilities and motivation 
C) The person to inherit money needed to run the business 
D) The wishes of the preceding owner

Question 3

What type of qualified plan must be "substantial and recurring" with non-discriminatory allocation of contributions?

Accepted Answer

A) Profit Sharing 
B) Money Purchase Plans 
C) Age-weighted 
D) 401 (k) Plans

Question 4

What percentage of family businesses successfully transition from the first generation of ownership to the second generation?

Accepted Answer

A) 20% 
B) 30% 
C) 50% 
D) 70%

Question 5

Seth wishes to circumvent the controlled group rules set forth in ERISA by opening a first service organization offering engineering services as an "A" organization. What is concept is Seth attempting to apply?

Accepted Answer

A) IRA Intervention 
B) Affiliated Service Groups 
C) Corporate Affiliation Practices 
D) Service Unity Groups

Question 6

What type of qualified plan limits sponsored company stock to 10 percent and generally does not produce large contributions or deductions for older employees?

Accepted Answer

A) Profit Sharing 
B) Money Purchase Plans 
C) Age-weighted 
D) 401 (k) Plans

Question 7

Your new client owns her own company and is 10 years from retiring, what would be the best plan for the client to consider?

Accepted Answer

A) Cash Balance Plan 
B) Money Purchase Plans 
C) 412 (i) plan 
D) Thrift Plan

Question 8

What are the major types of qualified plan categories?

Accepted Answer

A) Defined Benefit Plans and Defined Contribution Plans 
B) Vesting Plans and Quasi-vesting Plans 
C) Defined Benefit Plans and Vesting Plans 
D) Defined Contribution Plans and Quasi-vesting Plans

Question 9

There are tax consequences for committing a prohibitive transaction between a retirement plan and a disqualified persons or party; however, there are exemptions under the Prohibited Transactions Rules. Which is not an exception?

Accepted Answer

A) Receipt of benefits under terms of the plan. 
B) Providing office space or services for the plan for "reasonable" compensation. 
C) Loans made to an ESOP. 
D) None of the above.

Question 10

Mitch is happy to know there will be some funds coming in the house for his children after his wife passed-away after 11 years of marriage. But the monies are not really enough to maintain their standard of living. What should Mitch be informed of?

Accepted Answer

A) There is nothing he can do when it comes to benefits to help out. 
B) Mitch can receive up to 10 percent of the employee's benefits once the children move out. 
C) Mitch can receive a percentage of his wife's employee's benefits once he is 62 years old. 
D) That he is entitled to 50 percent of his wife's employee benefits as long as the children are under the age of 16 years.

Question 11

Which of the following is a decision required during the distribution phase?

Accepted Answer

A) Time value of money calculations 
B) Tax and estate planning 
C) Risk management 
D) All of the above

Question 12

Most family business owners prefer to do what?

Accepted Answer

A) Keep the business within the family 
B) Sell the business to a large corporation at retirement 
C) Close the business at retirement 
D) Sell the business to another small business owner at retirement

Question 13

Nonqualified vesting schedules pertain to whom within a company?

Accepted Answer

A) Day laborers 
B) Hourly workers 
C) Owners 
D) Executives

Question 14

Mary wants to take a lump sum payout from one of her three benefits plans. Which plan can she use the lump sum distribution option?

Accepted Answer

A) Money Purchase Plan 
B) Target Benefit 
C) Both A and B 
D) Neither A nor B

Question 15

Martha and Matt are retiring in 30 years and they want to make sure they have enough funds to maintain their lifestyle until they pass away. As a financial planner you know a comprehensive income-need analysis must be calculated. What calculation type would you not take into consideration for the analysis?

Accepted Answer

A) Present Value 
B) Interest Rate 
C) Paid Bills 
D) Number of periods

Question 16

The Internal Revenue Code excludes individual from withdrawal penalties. Which item is not excluded?

Accepted Answer

A) On the date or after the participant are 59 ½ years old 
B) A payment to an alternate payee pursuant to a qualified domestic relations order 
C) Corrective distributions 
D) Prevention of eviction or foreclosure

Question 17

Fred's company has committed a prohibited transaction by lending money from the company's retirement plan. The tax consequences that will be imposed are:

Accepted Answer

A) One-tiered 
B) Two-tiered 
C) Three-tiered 
D) Four-tiered

Question 18

What is the amount of countable assets a married couple can retain when applying for Medicaid?

Accepted Answer

A) $2,000 
B) $3,000 
C) $4,000 
D) $6,000

Question 19

Mitch is a stay-at-home Dad with 8 year old twins. His wife just passed-away and he is not sure what to do with his financial situation. There are some savings from his wife's law firm and Mitch will receive monies from the firm as part owner. What should you inform Mitch of?

Accepted Answer

A) He has the right to apply for survivor benefits. 
B) There is a one-time death benefit of $255. 
C) He will receive benefits until the children are 18 years of age. 
D) All the above.

Question 20

John has broken his tow and insists he can no longer work - ever! He insists you help him start getting disability payments. You try to explain to John that:

Accepted Answer

A) Has a five-month waiting period if not exempted and his toe would already be healed. 
B) You'll get the paperwork started and the first check will be mailed within a week. 
C) A and B 
D) Neither A nor B

Exam 6: Retirement Savings and Income Planning