Finance Retirement Planning

Quiz 14.
Read Chapter 3 of the Retirement Planning Textbook to complete this quiz. You may wish to consider keeping the quiz open as you read to help you focus on
the most essential information.
Question 15 pts
Match the following plan types to their defining characteristic:
Pension plan
[ Choose ] makes calculable contribution to the employee’s individual retirement savings account. The employer supports a personalsavings plan by
contributing money to the plan. An employer’s promise to pay a calculated benefit to its employees after they retire. pays a calculable benefit in retirement.
Profit-sharing plan
[ Choose ] makes calculable contribution to the employee’s individual retirement savings account. The employer supports a personalsavings plan by
contributing money to the plan. An employer’s promise to pay a calculated benefit to its employees after they retire. pays a calculable benefit in retirement.
Defined benefit plan
[ Choose ] makes calculable contribution to the employee’s individual retirement savings account. The employer supports a personalsavings plan by
contributing money to the plan. An employer’s promise to pay a calculated benefit to its employees after they retire. pays a calculable benefit in retirement.
Defined contribution plan
[ Choose ] makes calculable contribution to the employee’s individual retirement savings account. The employer supports a personalsavings plan by
contributing money to the plan. An employer’s promise to pay a calculated benefit to its employees after they retire. pays a calculable benefit in retirement.
Question 22 pts
Use the employee census below to determine which employees would be considered highly compensated, under ERISA.
Age Salary Owner Service
Sara 52 $150,000 80% 19 years
Joe 39 $90,000 20% 10 years
Heather 44 $130,000 5 years
Bill 38 $44,000 8 years
Michelle 31 $31,000 2 years
Pete 22 $29,000 4 months
Amanda 18 $19,000 2 years
Mike* 21 $18,000 3 years *part –time <1000 hours Sara Joe Heather Bill Michelle Pete Amanda Mike Question 31 pts Mike has come to you pondering whether to switch jobs. One concern he has is how much of his qualified plan he can take with him due to the vesting rules. This is the end of Mike’s 4th year of employment. If this DC plan uses the 6-year graduated vesting schedule(most stringent); how much of the following contributions could Mike take with him if he leaves this job? Employee Contributions: $20,000 Employer Non-Elective Contributions: $10,000 Employer Matching Contributions: $20,000 Total Account Balance $50,000 Question 41 pts Why does ERISA require qualified plans to pass the general safe harbor test, ratio percentage test, and/or the average benefits test? to ensure that the benefits of the plan are fairly available to all employees, not just the owners and executives. to prevent plan providers from attempting to evade paying taxes plan proceeds. to prevent fraudulent and deceptive investment practices. to permit high levels of savings for those with high levels of income.