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Lesson 9 Quiz

The following quiz is provided for your information to help you measure your retention level on the material covered within this lesson. It is not graded. Only the final examination is graded.

Answer or complete each question to the best of your knowledge and click on the "Check your answer" button. If your answer is incorrect, you will be instructed where to find the correct answer. It is not necessary to repeat the quiz if you exit this page; however, your answers will not be saved once you exit. This feature is provided for future practice purposes.

1
Qualified vs. Nonqualified Plans

Retirement plans that meet federal government approval and receive tax benefits are known as ___________ plans.

a) qualified
b) nonqualified
c) exempt
d) unqualified
CORRECTTRY AGAIN (Lesson 9.1)
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2

The basic concept for plan regulation is to attempt to make all employees equally eligible for retirement benefits and to eliminate favoring highly compensated employees.

a) True
b) False
CORRECTTRY AGAIN (Lesson 9.1.1)
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3
ERISA

ERISA was created to protect employees from possible loopholes in retirement plans and to allow them to receive their own contributions along with company contributions for retirement.

a) True
b) False
CORRECTTRY AGAIN (Lesson 9.2)
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4
Tax Treatments

Participation, coverage, vesting, funding, and contributions are basic requirement categories retirement plans must fulfill in order to be approved by the:

a) Internal Revenue Service.
b) Social Security Administration.
c) Insurance Commissioner.
d) individual employer.
CORRECTTRY AGAIN (Lesson 9.3)
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5

The earnings of investments in a qualified plan are exempt from income taxation.

a) True
b) False
CORRECTTRY AGAIN (Lesson 9.3)
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6

In order for a retirement plan to be qualified, it must be:

a) nonprofit.
b) funded.
c) a stock bonus plan.
d) a profit sharing plan.
CORRECTTRY AGAIN (Lesson 9.3)
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7

In order for retirement plans to be approved by the IRS for favorable tax treatment, they must fulfill the basic requirement categories of:

a) participation and coverage.
b) participation, coverage, and vesting.
c) participation, coverage, vesting, and funding.
d) participation, coverage, vesting, funding, and contributions.
CORRECTTRY AGAIN (Lesson 9.3)
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8
Defined Plans

A is a tax qualified retirement plan in which annual contributions are determined by a formula set forth in the plan. Benefits paid vary with the amount of contributions made and length of service. A is a pension plan under which benefits are determined by a specific benefit formula.


Word bank: defined benefit plan, defined contribution plan

A defined contribution plan is a tax qualified retirement plan in which annual contributions are determined by a formula set forth in the plan. Benefits paid vary with the amount of contributions made and length of service. A defined benefit plan is a pension plan under which benefits are determined by a specific benefit formula.

(Lessons 9.4 and 9.5)Check your answer

9
IRAs

Anyone under the age of 70 1/2 with earned income can open an IRA.

a) True
b) False
CORRECTTRY AGAIN (Lesson 9.8.1)
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10

No cash withdrawals from a traditional IRA are permitted prior to the policyowner reaching the age of 59 1/2 without having to pay a ______ excise tax, with few exceptions.

a) 3%
b) 5%
c) 7%
d) 10%
CORRECTTRY AGAIN (Lesson 9.8.1)
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11

In a Roth IRA qualified withdrawal, earnings are distributed tax-free.

a) True
b) False
CORRECTTRY AGAIN (Lesson 9.8.2)
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12

In a Roth IRA nonqualified withdrawal, earnings are taxable.

a) True
b) False
CORRECTTRY AGAIN (Lesson 9.8.2)
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13

With the , contributions are nontaxable as income until the funds are withdrawn. With the , the funds are taxed as income before the contribution is made.


Word bank: Roth IRA, Traditional IRA

With the Traditional IRA, contributions are nontaxable as income until the funds are withdrawn. With the Roth IRA, the funds are taxed as income before the contribution is made.

Lesson 9.8.2Check your answer

14
Definitions

Match the following retirement plans with their respective descriptions.

a) Deferred compensation plan for employees of state and local governments in which amounts deferred will not be included in gross income until they are actually received or made available.
b) type of qualified retirement plan under which the employer contributes to an individual retirement account set up and maintained by the employee.
c) An individual retirement account established with funds transferred from another IRA or qualified retirement plan that the owner had terminated.
d) A tax sheltered annuity plan similar to a 401(k) plan except it is for nonprofit organizations.
e) Plan allowing employees to take the money as usual in their paycheck or defer a specific amount from their paycheck. Typically, the employer will match the contribution made by the employee. Amounts deferred are not included in the employee's gross income and the funds and earnings are not taxable until distribution.
f) Designed to fund retirement of self-employed individuals, under which contributions to such plans are given favorable tax treatment.
a) Section 457 Plans

b) Simplified Employee Pension Plan (SEP)

c) Rollover IRA

d) 403(b) Plans

e) 401(k) Plans

f) Keogh Plans

(Key Concepts)

CONGRATULATIONS on completing Lesson 9. Now complete Florida study manual Chapter 13 Questions for Review.
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