F.50 Key factors affecting plan selection for businesses Flashcards
(20 cards)
Which of the following is not a factor to consider when selecting a retirement plan for a business?
a) Employee demographics
b) Plan contribution limits
c) Plan administration fees
d) Employee job titles
Employee job titles. Employee job titles are not a key factor in retirement plan selection.
A small business owner is looking for a retirement plan that offers flexibility in contributions and is not subject to nondiscrimination testing. Which plan would be most appropriate?
a) 401(k) plan
b) SIMPLE IRA
c) Defined benefit plan
d) SEP IRA
SEP IRA. SEP IRAs offer flexibility in contributions and are not subject to nondiscrimination testing.
A business owner wants to offer a retirement plan to his employees but is concerned about high plan administration fees. Which plan would be most appropriate?
a) Defined benefit plan
b) Profit sharing plan
c) 401(k) plan
d) SIMPLE IRA
SIMPLE IRA. SIMPLE IRAs generally have lower administration fees compared to other retirement plans.
Which of the following retirement plans allows for catch-up contributions for employees over age 50?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) 401(k) plan
401(k) plan. 401(k) plans allow employees over age 50 to make catch-up contributions.
A business owner wants to provide a retirement plan that offers a guaranteed income stream to employees. Which plan would be most appropriate?
a) Defined benefit plan
b) Profit sharing plan
c) 401(k) plan
d) SEP IRA
Defined benefit plan. Defined benefit plans offer a guaranteed income stream to employees based on a predetermined formula.
A business owner wants to offer a retirement plan with the highest contribution limits. Which plan would be most appropriate?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) 401(k) plan
Defined benefit plan. Defined benefit plans generally have the highest contribution limits compared to other retirement plans.
A small business owner wants to offer a retirement plan with minimal administrative responsibilities. Which plan would be most appropriate?
a) Profit sharing plan
b) 401(k) plan
c) Defined benefit plan
d) SIMPLE IRA
SIMPLE IRA. SIMPLE IRAs have minimal administrative responsibilities compared to other retirement plans.
Which of the following retirement plans allows for loans to be taken out by participants?
a) Defined benefit plan
b) Profit sharing plan
c) 401(k) plan
d) SEP IRA
401(k) plan. 401(k) plans allow participants to take out loans.
A business owner wants to offer a retirement plan that allows for employer contributions only. Which plan would be most appropriate?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) 401(k) plan
SEP IRA. SEP IRAs allow for employer contributions only.
Which of the following retirement plans is subject to nondiscrimination testing?
a) Defined benefit plan
b) Profit sharing plan
c) 401(k) plan
d) SEP IRA
401(k) plan.
Explanation: 401(k) plans are subject to nondiscrimination testing to ensure that contributions are not disproportionately made to highly compensated employees.
XYZ Company has 50 employees, with a mix of full-time and part-time workers. The business owner wants to offer a retirement plan that is easy to administer and has minimal costs. Which plan would be most appropriate?
a) Defined benefit plan
b) Profit sharing plan
c) 401(k) plan
d) SIMPLE IRA
SIMPLE IRA. A SIMPLE IRA would be most appropriate for XYZ Company since it is easy to administer and has minimal costs. Additionally, the plan does not require discrimination testing and would be a good fit for a small business with a mix of full-time and part-time employees.
ABC Corporation is a large company with over 1,000 employees. The business owner wants to provide a retirement plan that offers a guaranteed income stream to employees. Which plan would be most appropriate?
a) Defined benefit plan
b) Profit sharing plan
c) 401(k) plan
d) SEP IRA
Defined benefit plan. Defined benefit plans are best suited for large companies like ABC Corporation that want to offer a guaranteed income stream to employees. Although they are more expensive to administer, they offer significant benefits to employees who plan to stay with the company for a long time.
DEF Enterprises is a family-owned business with four employees, including the owner. The business owner wants to offer a retirement plan that allows for catch-up contributions for employees over age 50. Which plan would be most appropriate?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) 401(k) plan
401(k) plan. A 401(k) plan would be most appropriate for DEF Enterprises since it allows employees over age 50 to make catch-up contributions.
GHI Corporation is a mid-sized company with 150 employees. The business owner wants to offer a retirement plan that allows for employer contributions only. Which plan would be most appropriate?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) 401(k) plan
SEP IRA. A SEP IRA would be most appropriate for GHI Corporation since it allows for employer contributions only.
JKL Industries is a technology company with a high concentration of highly compensated employees. The business owner wants to offer a retirement plan that maximizes contributions for both highly compensated and non-highly compensated employees. Which plan would be most appropriate?
a) Defined benefit plan
b) Profit sharing plan
c) 401(k) plan
d) SEP IRA
Profit sharing plan. A profit sharing plan would be most appropriate for JKL Industries since it allows for a flexible allocation of contributions that can benefit both highly compensated and non-highly compensated employees. Additionally, profit sharing plans do not require nondiscrimination testing.
MNO Corporation is a consulting firm with 75 employees, including both full-time and part-time workers. The business owner wants to offer a retirement plan with loans available to participants. Which plan would be most appropriate?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) 401(k) plan
401(k) plan. A 401(k) plan would be most appropriate for MNO Corporation since it allows for loans to be taken out by participants.
PQR Company is a small business with 10 employees. The business owner wants to offer a retirement plan that offers a guaranteed income stream to employees. Which plan would be most appropriate?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) 401(k) plan
Defined benefit plan. A defined benefit plan would be most appropriate for PQR Company since it offers a guaranteed income stream to employees. Although more expensive to administer than other plans, defined benefit plans can be a good fit for small businesses with a committed and stable workforce.
STU Enterprises is a startup company with five employees, including the owner. The business owner wants to offer a retirement plan that is easy to administer and has low costs. Which plan would be most appropriate?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) SIMPLE IRA
SIMPLE IRA. A SIMPLE IRA would be most appropriate for STU Enterprises since it is easy to administer and has minimal costs. Additionally, the plan does not require discrimination testing and would be a good fit for a small business with a mix of full-time and part-time employees.
VWX Corporation is a manufacturing company with a highly unionized workforce. The business owner wants to offer a retirement plan that is flexible and can be customized to fit the needs of different employee groups. Which plan would be most appropriate?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) 401(k) plan
401(k) plan. A 401(k) plan would be most appropriate for VWX Corporation since it is a flexible plan that can be customized to fit the needs of different employee groups. Additionally, 401(k) plans are commonly used by unionized workforces.
XYZ Corporation is a large company with over 500 employees. The business owner wants to offer a retirement plan that is easy to administer and has low costs. Which plan would be most appropriate?
a) Defined benefit plan
b) SEP IRA
c) Profit sharing plan
d) 401(k) plan
401(k) plan
Explanation: A 401(k) plan offers flexibility for both the employer and employees, allowing employees to contribute pre-tax dollars while employers can choose to match contributions. For large companies like XYZ Corporation, 401(k) plans can benefit from economies of scale, resulting in potentially lower administrative costs. Additionally, 401(k) plans are widely recognized, making them attractive to potential and current employees.
F.50 Key factors affecting plan selection for businesses
