1. In 2011, what is the maximum amount of employee pretax contribution (elective deferral) that may be made to a traditional profit-sharing Section 401(k) plan by an individual younger than age 50? (Points : 3)
$11,500
$16,500
$22,000
The lesser of 100% of compensation or $49,000 annually
2. Which of the following qualification requirements applies to an employee stock ownership plan (ESOP)? (Points : 3)
Assets may be invested primarily in qualifying employer securities.
Stocks must be issued subject to a right of first refusal in favor of the employee.
Employees age 50 or older with at least 5 years of service must be given a right of diversification.
Stocks must be valued at the lesser of historical cost or fair market value.
3. A state or local government would choose to establish a Section 457 plan for all of the following reasons EXCEPT (Points : 3)
tax-deferred growth of assets
tax deductibility of employer contributions
no early withdrawal penalty on distributions
the ability of a participant to make elective deferrals
4. Which of the following statements describes a basic provision or use of a savings incentive match plan for employees (SIMPLE) IRA? (Points : 3)
Only employers that average fewer than 200 employees can establish a SIMPLE IRA.
A SIMPLE IRA must satisfy special nondiscrimination tests in addition to general rules.
One contribution formula that an employer can use in a SIMPLE IRA is to make a 2% nonelective contribution on behalf of eligible employees.
A SIMPLE IRA is primarily suitable for large corporate type of employers.
5. What is the maximum annual amount that may be contributed to a simplified employee pension (SEP) on behalf of an employee during 2011? (Points : 3)
$5,000
The lesser of 100% of compensation or $245,000 annually
The lesser of 25% of compensation or $49,000 annually
Whatever amount is necessary to fund the benefit
6. Terry and Nancy Andersen, both age 39, each plan to contribute $5,000 to their traditional IRAs for the 2011 tax year. They are both employed and file a joint tax return. However, only Terry is eligible for and participates in his employer's retirement plan. Terry and Nancy's modified AGI and earned income for the year 2011 is $99,000. What amount, if any, can Nancy deduct for her IRA contribution? (Points : 3)
$200
$2,500
$4,800
$5,000
7. Which of the following investments may be held in an IRA account? (Points : 3)
Canadian gold coin
US gold coin
German silver coin
Krugerrand
8. Which of the following allows a qualifying lump-sum distribution from a qualified plan to receive favorable income tax treatment? (Points : 3)
The employee's attaining age 59½
The participant's purchase of a primary residence
Financial hardship
A qualifying loan provision in the plan
9. If a loan is to be provided from a Section 401(k) profit-sharing plan and is NOT to be considered a taxable distribution, it must be (Points : 3)
available to all owners over age 59½
adequately secured with negotiable collateral
an amount no greater than $100,000
generally repaid within 5 years
10. Which of the following statements correctly describe the favorable tax treatment possibly available for a qualifying lump-sum distribution from a qualified retirement plan? (Points : 3)
Tax free if taken after the taxpayer's Social Security (full) retirement age
10-year forward averaging for individuals born before January 2, 1936
Long-term capital gain treatment for the entire distribution amount
Tax-free treatment similar to that given to Roth IRA distributions