RPA 2 EXAM WITH 100% CORRECT ANSWERS

Premature distributions from IRAs exempt from penalty if: Distribution occurred b/c of IRS levy on account to pay taxes. IRA qualified distributions include: Attained age 59 1/2; disabled; died and payment made to beneficiary or estate; pay first-time home buyer expenses, not to exceed $10k. 00:11 01:41 Term used to describe condition that occurs b/c of different accrual patterns when traditional DB plan converted to cash balance plan: Pension wear away Section 409A IRC mandate that income from deferred comp arrangements not be deferred beyond year in which comp is earned. Qualified retirement plans required to have fidelity bond covering what %? 10% Dollar cost averaging Involves investing the same amount of money on periodic basis, whether over- or under-priced. Vesting provisions of executive retirement arrangements: varies depending on intent of executive arrangement Excess contribution to IRA subject to nondeductible excise tax of: 6% Nonworking spouse may establish IRA using what types of payment as basis for eligibility? Earned income of working spouse Fiduciary liable for duly appointed and monitored investment mgr if performance of plan below benchmark? Not liable since investment mgmt svcs delegated Typical range for % of earnings credited under % of earnings per year formula? 1% to 1.25% Tax treatment of NQSO (NQ stock options) for ER: ER gets corporate income tax deduction for amount of comp income EE realizes at exercise of option. 00:02 01:41 Penalty for failure to make required distribution of at least correct amount from qualified retirement plan: Nondeductible excise tax of 50% EEs w/drawing contributions from SIMPLE IRA during initial two-year period, subject to penalty of: 25% When qualified plan hold ER securities, max amount for fidelity bond is: Increased by a significant amount Taxable amount received before 59 1/2 from qualified plan subject to additional penalty of: 10% Surge in investments returns on accumulated pension assets will have what effect on projected plan costs? Reduction effect Unfunded plan maintained by ER for purpose of providing deferred comp for a select group of mgmt or HCEs is: Top-hat plan SERP participation criterion most frequently used: Position and mgmt status Requirement of IRC integration w/ Social Security: That the combined retirement income does not discriminate in favor of HCEs on % basis Retirement plan committee charged w/: Making all decisions necessary regarding administration of retirement plan Highest annual return and greatest volatility? Common stocks Normal retirement age 65, but not to occur later than: Fifth anniversary participant's date of initial participation Theory of income taxation that imposes current tax liability on taxpayers who receive something of reasonable value: Doctrine of economic benefit Wage-related formula technique to reduce impact of postretirement inflation on pension income: Measured on the basis of current wage measures to adjust benefits. If fail to comply w/ Sec 404(c) Statutory relief from fiduciary liability not available Traditional DB plan (often final avg pay) or cash balance plan combined, offering participants both options: Minimum balance pension plan SPD to be provided w/in how many days: 90 Factor w/ highest impact in Black-Scholes pricing model: Expected volatility of underlying stock's market price Tax advantage of ISOs is that there is no regular income tax levied at grant or exercise. However, tax applies in the following way(s): Bargain element upon exercise of ISO is adjustment item for individual AMT purposes and participant of ISO plan is taxed only when he/she sells the stock. Penalties assessed on fiduciary for breach or violations: Personally liable; excise tax of % of amount