RPA 1 - FINAL EXAM LATEST 2023 REAL
EXAM 100 QUESTIONS AND DETAILED
ANSWERS (COMPLETE EXAM)
Of the factors in the Black-Scholes option pricing model, which one is generally
deemed to have the most relative impact on the value of the option? - ANSWER-
The expected volatility of the underlying stock's market price
A theory of income taxation that imposes current tax liability on taxpayers who
receive something of reasonable value is known as the doctrine of: - ANSWER-
Economic benefit
Key employees, for purposes of the top-heavy rules, include all: - ANSWER- One
percent owners receiving annual compensation in excess of $150,000
For all defined contribution plans, there is a uniform employer deduction limit of: -
ANSWER- 25% of compensation
Federal law defines normal retirement age to be the age specified in the plan, but it
cannot occur beyond the later of: - ANSWER- Age 65 or the fifth anniversary of
the participant's date of initial participation
Which plan is used in conjunction with debt financing? - ANSWER- An employee
stock ownership plan
The Supreme Court ruled in Arizona Governing Committee v. Norris that: -
ANSWER- Life annuities under an employer-sponsored defined contribution plan
must be provided on a uniform basis.
Under the Employee Retirement Income Security Act of 1974 (ERISA), a
fiduciary shall discharge his (or her) duties with respect to an employee benefit
plan solely in the interest of - ANSWER- The plan's participants and beneficiaries.
To receive tax-preferred treatment under an ineligible Section 457 plan, amounts
deferred must be: - ANSWER- Subject to a substantial risk of forfeiture.
,What statement describes the tax treatment of nonqualified stock options for the
employer? - ANSWER- The employer gets a corporate income tax deduction for
the amount of compensation income the employee realizes at the exercise of the
option.
How did the Pension Protection Act of 2006 change requirements for investment
advice provided to individual retirement account (IRA) owners? - ANSWER- The
Act requires that fees for such advice not be contingent on the investment option
chosen.
The vesting provision of executive retirement arrangements: - ANSWER- Varies
depending on the intent of the executive arrangement
An employee with four years of service participates in a retirement plan. The
vesting schedule in this plan is changed by plan amendment. Under tax law, this
plan participant: - ANSWER- Must be given the election to remain under the pre-
amendment vesting schedule for both pre- and post-amendment benefit accruals.
Contributions to a profit sharing plan must be made on: - ANSWER- A substantial
and recurring basis
Under what situations are premature distributions from individual retirement
accounts (IRAs) exempt from the early distribution penalty tax? - ANSWER-
Distributions because of an Internal Revenue Service levy on the account to pay
taxes.
Under certain conditions, a nonworking spouse may establish an individual
retirement account (IRA) using which of the following types of payments as the
basis for eligibility to make contributions? - ANSWER- Earned income of a
working spouse
In 1948 the National Labor Relations Board (NLRB) found that the provisions of
retirement plans affect conditions of employment and that retirement benefits
constitute: - ANSWER- Wages
Under a technique known as a wage-related formula, the impact of postretirement
inflation on pension income is: - ANSWER- Measured on the basis of current
wage measures to adjust benefits
, For a distribution from a Roth IRA account to receive favorable tax treatment as a
qualified distribution, how long must contributions be in the account? - ANSWER-
5 years
Which Internal Revenue Code Section generally mandates that, except for certain
exceptions that meet specific requirements, income from deferred compensation
arrangements may no longer be deferred beyond the year in which such
compensation is earned? - ANSWER- Section 409A
Under a percentage of earnings per year of service formula, the typical range for
the percentage of earnings credited is: - ANSWER- 1% to 1.25%
In addition to current income taxation, any excess contribution to an individual
retirement account (IRA) is subject to a nondeductible excise tax of: - ANSWER-
6 percent
Under the Pension Protection Act of 2006, a benefit statement must be provided to
a plan participant of a defined contribution plan entitled to direct plan investments:
- ANSWER- Once a quarter
Which of the following are types of eligible Section 457 plans that must be
unfunded? - ANSWER- Plans maintained by nongovernmental tax-exempt
organizations
The limitation on exclusions for elective deferrals under 401(k) plans is: -
ANSWER- Indexed in increments established by the Economic Growth and Tax
Relief Reconciliation Act (EGTRRA)
If you knew that a vendor servicing a 401(k) plan was clearing trades internally
and not using an outside directed trustee, you generally could conclude that: -
ANSWER- The vendor was providing plan services as a bundled service provider.
The most frequently used criterion to establish participation in a supplemental
executive retirement plan (SERP) is: - ANSWER- Position and management status
Those questioning the validity of the human depreciation concept of private
pensions would argue that the employer should be held responsible only for the
increase in the rate of aging caused by: - ANSWER- Occupational hazards
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