Test Your Knowledge

Instructions: Choose an answer for each question and then click on the "Get Results" button at the end of the quiz.

1. Why is it important to align retirement plan objectives with organizational strategies?
A. To ensure they support organization’s strategies
B. To encourage employees to plan for retirement
C. To ensure employer contributions are tax deductible
D. To provide additional income security to employees

2. Which of the following best describes a typical post-retirement change that may affect an individual’s retirement income needs?
A. Retirees are no longer paying Social Security taxes.
B. Medicare covers 100% of health care expenses.
C. Distributions from retirement accounts are not classified as taxable income.
D. The effective income tax rate does not apply to retirees.

3. What does a 401(k) feature in a defined contribution plan do?
A. Enables qualified employees to buy company stock at a reduced price
B. Includes a predetermined and defined formula for allocating profit shares among participants
C. Enables employees to make pre-tax contributions through salary reduction agreements
D. Credits employee accounts with varying contribution percentages calculated individually at the time of the plan inception

4. Which of the following best describes a money purchase plan?
A. An employer contributes to the employee’s account based on a formula, regardless of profits.
B. Employees’ retirement funds are comprised mostly of company stock.
C. Stock ownership in private organizations is transferred from owners to employees.
D. Employees share in the success of the organization.

5. Which of the following describes the period of employment recognized in a benefit formula for retirement calculation purposes?
A. Eligibility
B. Contributions
C. Vesting
D. Credited service

6. Which form of retirement contribution allows participants to make after-tax contributions and then take those contributions and earnings completely tax-free at retirement?
A. Pre-tax
B. Post-tax
C. Roth
D. Catch-up

7. Section 410(b), the minimum coverage rule, tests for which of the following?
A. Whether or not the plan’s contributions are nondiscriminatory
B. Whether or not the plan’s coverage is nondiscriminatory
C. Whether or not the plan has enough participants
D. Whether or not the plan’s benefits are nondiscriminatory

8. The Actual Deferral Percentage (ADP) test applies to which of the following?
A. Money purchase plan contributions
B. Matching contributions that are not immediately vested
C. After-tax contributions
D. Pre-tax contributions

9. Which one of the following is a prohibited transaction involving the use of plan assets?
A. Managing plan investments
B. Providing investment advice for a fee
C. Lending money or extending credit
D. Diversifying plan investments

10. Which of the following is classified by DOL as rendering investment advice?
A. Disclosing asset allocation materials
B. Distributing plan information
C. Explaining dollar cost averaging and risk tolerance
D. Providing individualized education based on an employee’s particular