Test 68-100 Flashcards
(34 cards)
All the following statements regarding the major challenges older workers typically encounter when they need to convert their defined contribution assets to lifetime income are correct EXCEPT:
A. The many lifetime income options available in defined contribution retirement plans cause many older workers to make poor decisions.
B. Retirement savings may need to last anywhere from 20 to 30 years or more.
C. Many older workers are unable to accurately calculate the amount of savings needed to generate lifetime retirement income.
D. Not many retirees have a formal strategy for how to draw down their savings.
E. Many older workers with moderate savings do not have access to skilled and unbiased financial advisors, or they may not know how to identify and select one.
A
Section 404(a) of the Employee Retirement Income Security Act (ERISA) contains the well-known “prudent man” standard for ERISA fiduciaries. All the following statements regarding this standard are correct EXCEPT:
A. The standard requires fiduciaries to discharge their duties solely in the interest of plan participants and beneficiaries.
B. The standard is for a person who is familiar with such matters.
C. The standard is for an enterprise of a like character, i.e., a similar enterprise.
D. The standard is for an enterprise with like aims, i.e., similar purposes.
E. The standard applies when individuals are performing plan activities such as creating, amending or terminating a plan, so-called settlor functions.
E
All the following statements regarding Social Security benefits and quarters of credit are correct EXCEPT:
A. Survivor benefits are only available if the deceased had attained a fully insured status.
B. A person receives one quarter of credit for a specified amount of covered earnings.
C. Credits can be earned any time during the year.
D. The amount required to earn one credit automatically increases as average wages rise.
E. A person is fully insured if they have 40 credits.
A
All the following statements regarding an investment policy statement (IPS) for an Employee Retirement Income Security Act (ERISA) plan that contains innovative investments are correct EXCEPT:
A. The IPS for a plan that contains innovative investments should be more detailed than an IPS for standard investments.
B. An IPS is expressly required under ERISA for plans that contain innovative investments.
C. The IPS for plans that contain innovative investments should be drafted in a way that provides guidelines for investment fiduciaries but leaves some decisions to their judgement.
D. The IPS for a plan that contains innovative investments should be carefully drafted, typically by an attorney familiar with employee benefit issues.
E. The investment criteria in the IPS for a plan that contains innovative investments should be written in the context of meeting the needs of the participants.
B
All the following statements regarding fraud associated with employee benefit plans are correct EXCEPT:
A. Studies have shown that internal controls are by far the most common method of detecting fraud.
B. Auditors are more concerned with financial statement fraud than misappropriation fraud.
C. Accounting, operations and upper management tend to be the most frequent departments where fraudulent activity occurs.
D. Human resources, boards of directors and legal are three of the departments where fraud occurrences are low.
E. Employee support programs are effective in minimizing fraud because they provide employees with psychiatric and credit counseling at a time when they need it most—before they commit fraud.
A
All the following statements regarding the benefits in Medicare Part A are correct EXCEPT:
A. A benefit period starts when the beneficiary first enters a hospital and ends when there has been a break of at least 60 consecutive days since inpatient hospital or skilled nursing care was provided.
B. There is no limit to the number of benefit periods covered by Part A during a beneficiary’s lifetime.
C. Inpatient hospital care is normally limited to 90 days of inpatient hospital care in a benefit period.
D. Deductibles apply to benefits, but there are no copayment requirements.
E. A “lifetime reserve” of up to 60 total additional days of inpatient hospital care is available to those who exhaust their other benefits.
D
All the following statements concerning the Internal Revenue Service (IRS) and internal controls of employee benefit plans are correct EXCEPT:
A. The IRS has indicated that it looks more favorably upon plans that are governed by a clear set of internal controls.
B. The IRS has made it clear that auditors reconcile financial statements, and it is not the responsibility of auditors to be concerned with internal controls.
C. The IRS has identified many areas as especially important for internal controls.
D. The IRS has provided checklists to help companies keep their plans in compliance.
E. The IRS provides tools on its website that are helpful to companies reviewing or establishing their internal controls.
B
Social insurance programs have characteristics that distinguish them from other government insurance programs. All the following are included among these distinguishing characteristics EXCEPT:
A. Emphasis on individual equity rather than social adequacy B. Benefits loosely related to earnings C. Full funding unnecessary D. Financially self-supporting E. Compulsory participation
A
The Employee Retirement Income Security Act generally requires qualified retirement plan assets to be diversified. However, there is an exception to this important diversification requirement. What is this exception?
A. Assets need not be diversified if, under the circumstances, it is clearly prudent not to do so.
B. Assets need not be diversified if the plan has total assets exceeding a specified amount.
C. Assets need not be diversified if the plan obtains approval of the appropriate regulatory authorities.
D. Assets need not be diversified if the plan assets consist entirely of U.S. government securities.
E. Assets need not be diversified if the plan contains no innovative investments.
A
All the following have been designated as very important reporting and disclosure documents required by the Employee Retirement Income Security Act for health and welfare employee benefit plans EXCEPT:
A. A Summary Plan Description B. A Summary of Financial Assumptions C. A Summary of Material Modifications D. An Annual Financial Report (Form 5500) E. A Summary Annual Report
NO RESPONSE
All the following are common organizational structures that multinational companies use for international assignments EXCEPT:
A. Foreign employer—The employee is simply made an employee of the host jurisdiction employer and is no longer an employee of the home jurisdiction employer.
B. Self-employed—The employee becomes self-employed for the duration of the assignment.
C. Employer with secondment—The employee is kept as an employee of the home jurisdiction employer and merely “seconded” from the home jurisdiction employer to the host jurisdiction employer.
D. Dual employment—The employee becomes an employee of both the home jurisdiction employer and the host jurisdiction employer, and the two organizations agree upon some type of split regarding the employee’s compensation.
E. Special services company—The employee is made an employee of a special services company (usually located in a tax haven jurisdiction), which seconds the employee to the host jurisdiction employer.
B
All the following are characteristics or features of health savings accounts (HSAs) EXCEPT:
A. HSAs are tax-advantaged accounts used by employees to pay for medical expenses for themselves, their spouses and dependents.
B. Contributions can be made to HSAs even after the individual enrolls in Medicare.
C. Employers can offer HSAs to employees who are enrolled in a high-deductible health plan.
D. Annual caps apply to the amount of contributions that may be made to HSAs.
E. Extra catch-up contributions can be made to HSAs by individuals aged 55 and older.
B
It is considered prudent to include all the following items in an Employee Retirement Income Security Act (ERISA) plan document EXCEPT:
A. Funding requirements for the plan
B. Process for identifying and ensuring separate individuals for the roles of plan administrators and plan advocates
C. Method for distribution of plan assets upon plan termination
D. Claims and appeals procedures
E. A description of how benefit payments will be made
B
All the following statements regarding Employee Retirement Income Security Act (ERISA) plan investments are correct EXCEPT:
A. Mutual funds issue redeemable shares, meaning investors wishing to leave the mutual fund can sell their shares back to the fund.
B. Mutual funds are subject to direct regulation by ERISA.
C. A mutual fund is required to provide appropriate disclosure documents, meaning the fiduciaries of a participant-directed plan do not need to design customized fund descriptions for participants.
D. Collective investment trusts are pooled investment funds that are offered by a bank and only to benefit plans.
E. Closed-end funds generally do not redeem their shares.
B
All the following statements regarding the situation when a plan administrator fails or refuses to produce certain plan documents in a timely manner are correct EXCEPT:
A. Under Section 502(c)(1)B) the administrator’s penalty can be a maximum of a statutory per day amount, but additional financial penalties can be incurred under other regulatory sections.
B. The power to invoke penalties against plan administrators for failing or refusing to produce certain plan documents has been used often.
C. If the plan does not identify the plan administrator, the plan sponsor will be designated as the plan administrator.
D. The purpose of the civil penalty is to compensate participants or beneficiaries for injuries.
E. Only participants and beneficiaries may recover the civil penalty under Section 502(c)(1).
D
All the following types of employee welfare benefit plans are not covered under the Employee Retirement Income Security Act and are specifically excluded under the statute EXCEPT:
A. Government plans
B. Church plans
C. Plans maintained to comply with state laws on workers’ compensation
D. Plans that cover self-employed individuals plus one or more “common law employees”
E. Plans that cover only married shareholders of a corporation
D
All the following statements regarding the composition of the investment committee for an Employee Retirement Income Security Act plan are correct EXCEPT:
A. The investment committee should not include the chief operating officer (COO) or the chief financial officer (CFO) because their attendance will inhibit free discussion.
B. A fiduciary to the plan should be a member of this committee.
C. The organization’s legal counsel should either be on the committee or simply attend meetings in an advisory capacity.
D. Although they are not usually voting members, representatives of plan providers, such as the record keeper, should attend committee meetings.
E. It is important that the committee represent the participants, and committees may want to include members from different disciplines and different areas of the organization.
A
All the following are cyber threats to Employee Retirement Income Security Act plans that have been cited by various sources EXCEPT:
A. Phishing, where fraudulent e-mails are sent with the objective of enticing the user to interact and inadvertently provide an avenue for a cybercriminal to infiltrate a computer network
B. Malware via external devices, where intrusive and harmful software is stored on an external drive and executed when that drive is inserted into a network computer
C. Wire transfer e-mail fraud, where cybercriminals pretend to be federal regulators assessing hefty penalties on plans and ask fiduciaries to wire transfer fines
D. Ransomware, where cybercriminals encrypt and seize an entire hard drive and will only release it for a high ransom
E. Cyber breach, where an outside vendor is hacked and its credentials are used to access the targeted resource
C
An audit engagement letter should detail the responsibilities of the plan auditor. The plan auditor’s responsibilities include all the following EXCEPT:
A. Conducting the audit in accordance with generally accepted accounting standards (GAAS)
B. Obtaining absolute assurance about whether the financial statements are free of material misstatements, whether caused by error or fraud
C. Obtaining an understanding of the plan and its environment, including its internal controls, to assess the risks of material misstatement of the financial statements
D. Obtaining an understanding of the plan to possibly design the nature, timing and extent of further audit procedures
E. The expression of an opinion on the plan’s financial statements
B
Employer contributions toward health insurance must be made under a plan to receive favorable tax treatment. A plan exists if the plan meets any one of the elements from a specified list of requirements and if it benefits employees and their dependents. All the following are included in this list EXCEPT:
A. The plan is in writing, and copies of the health insurance plan are made available to employees.
B. The plan is referred to in an employment contract.
C. The plan allocates all contributions to a trust account.
D. The employer can document that employees contribute to the plan.
E. Employer contributions are kept in a separate account from the employer’s salary account.
C
All the following statements regarding the maintenance of electronic records by plan administrators are correct EXCEPT:
A. It must be possible to index, retain, preserve and retrieve the records in a safe and accessible place.
B. With today’s technology, all records may be electronically stored.
C. The records must be adequately secured, organized, backed up and maintained by established procedures.
D. The electronic records must be capable of being converted to a legible paper form.
E. There must be no access restrictions (e.g., time or location) that would impair an individual’s ability to comply with reporting and disclosure requirements.
B
All the following statements regarding Summary Annual Reports (SARs) are correct EXCEPT:
A. An SAR is considered a plan disclosure requirement under the Employee Retirement Income Security Act (ERISA).
B. An SAR is a summary of certain information contained in the plan’s Form 5500.
C. An SAR must be filed with the Department of Labor.
D. ERISA requires that an SAR be given to each participant, including former employees who are still covered by the plan.
E. An SAR does not have to be provided if the plan is totally an unfunded welfare plan under which benefits are paid solely from the general assets of the employer or employee organization maintaining the plan.
C
In developing an outline for establishing and administering a qualified retirement plan, all the following are key areas of responsibilities EXCEPT:
A. Plan design and implementation
B. Human resources (HR) requirements
C. Fiduciary responsibilities and plan investments
D. Internal Revenue Service and Department of Labor compliance
E. Operational compliance
B
When differentiating between the core services provided by third- party administrators (TPAs) and those provided by plan advisors, all the following are typically core services provided by TPAs EXCEPT:
A. Preparation and maintenance of plan documents B. Compliance testing C. Form 5500 preparation D. Processing of loans and distributions E. One-on-one employee counseling
E
