Review 3

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=90 BGCOLOR="#006699" TEXT="#080000" bgproperties="fixed" background="07a285a1erlcgo.gif"> <div> <FONT SIZE="5" COLOR="#FFCC66" FACE="Arial" ><B>401 (k) PLANS</B></FONT><B>     |     </B><A HREF="index.htm" TARGET="_top" TITLE="401 (k) PLANS"><U><B>home</B></U></A></div> <div> <B>Review 3</B></div> <div> </div> </td> </tr><tr> <td valign="top" width=210 BGCOLOR="#FFCC66" TEXT="#080000" background="079d2c00dkelyh.gif"> <bR> <div> <A HREF="http://www.wallstreetinstructors.com" TARGET="_top" TITLE="http://www.wallstreetinstructors.com"><U><IMG SRC="080af630.gif" border=0 width="175" height="99" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></U></A></div> <div> <B>Copyright</B><FONT SIZE="2" COLOR="#006699" FACE="Arial" ><B>© </B></FONT><B>2001, 2003, 2007</B><FONT SIZE="2" COLOR="#006699" FACE="Arial" ><B> </B></FONT><B> Wall Street Instructors, Inc.  All rights reserved. </B></div> <div> <TABLE BORDER="2" CELLPADDING="2" CELLSPACING="1" WIDTH="164" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" BGCOLOR=#FFFFFF > <tR> <tD VALIGN=TOP BGCOLOR=#006699 HEIGHT= 20 ><NOBR><div> <A HREF="mailto:instructor@wallstreetinstructors.com" TARGET="_top" TITLE="mailto:instructor@wallstreetinstructors."><U><B>E-Mail An Instructor</B></U></A></div> </NOBR></tD> </tR> </TABLE></div> <bR> </td> <td valign="top" height=390 BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <I><B>Review 3</B></I></div> <bR> <bR> <bR> <bR> <div>   <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>SIMPLE plans may be established in the form of a:</U></A></div> <bR> <div>      I.     401k plan</div> <div>      II.     IRA plan</div> <div>      III.     SEP plan</div> <bR> <div>      a.     I only</div> <div>      b.     II only</div> <div>     <B> c.     I and II only</B></div> <div>      d.     I and III only</div> <bR> <bR> <bR> <div>      <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>The primary advantage of a SIMPLE plan is that employers are relieved of:</U></A></div> <bR> <div>      a.     vesting requirement under ERISA</div> <div>    <B>  b.     non-discrimination rules</B></div> <div>      c.     matching contribution requirements</div> <div>      d.     drawing up plan documents</div> <bR> <bR> <bR> <bR> <div>     <A HREF="id23_eligibility_requirements.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U> Which of following are permitted to offer SIMPLE plans to their employees?</U></A></div> <bR> <div>    <B>  a.     employers with 100 or fewer employees</B></div> <div>      b.     only employers with employees covered by a collective bargaining agreement</div> <div>      c.     employers who offer other qualified retirement plans</div> <div>      d.     any of the above</div> <bR> <bR> <bR> <bR> <bR> <div>      <A HREF="id23_eligibility_requirements.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>When counting employees who are "eligible" for a SIMPLE plan, the employer must count:</U></A></div> <bR> <div>      a.     all employees who worked for the employer during the past two years</div> <div>      b.     only those employees who may make contributions to the plan</div> <div>      c.     only those employees not covered by a collective bargaining agreement </div> <div>      <B>d.     all employees who worked for businesses under the common control of the employer</B></div> <bR> <bR> <bR> <bR> <bR> <div>     <A HREF="id23_establishing_a_simple_401_k_.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U> Which are true of SIMPLE 401k plans?</U></A></div> <bR> <div>      a.     new plans may be established on a fiscal or calendar year </div> <div>      b.     existing plans may continue to operate on a fiscal or calendar year basis</div> <div>      c.     existing plans may continue to operate on a fiscal year basis, but new plans must be established on a calendar year basis only</div> <div>      <B>d.     all SIMPLE plans must operate on a calendar year basis</B></div> <bR> <bR> <bR> <bR> <div>      <A HREF="id23_eligibility_requirements.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>If an employer adopts the most strict "participation rules", which "eligible employees" may participate in the SIMPLE plan, i.e., contribute to the plan?</U></A></div> <bR> <div>      a.     all "eligible" employees may participate</div> <div>      b.     only those "eligible" employees who earned at least $5,000 from the employer this year</div> <div>      c.     only those "eligible" employees who earned at least $5,000 from the employer in the past two years</div> <div>    <B>  d.     only those "eligible" employees who earned at least $5,000 from the employer in any of the past two years</B></div> <bR> <bR> <bR> <bR> <div>      <A HREF="id23_employee_deferrals_and_employer.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>An "eligible" employee works for two unrelated employers, earning $20,000 from each for the past two years.  Each employer offers a SIMPLE 401k. If the employee is eligible to contribute to Employer A's plan this year, the employee:</U></A></div> <bR> <div>      a.     may not contribute to Employer B's plan this year </div> <div>      b.     may contribute to either Employer A of Employer B's plan, but not both during the same year     </div> <div>      c.     may contribute the annual SIMPLE maximum to Employer A's plan and the annual SIMPLE maximum to Employer B's plan this year</div> <div>    <B>  d.     may contribute the annual SIMPLE maximum this year between both Employer A and Employer B's plan</B></div> <bR> <bR> <div> .</div> <bR> <bR> <div>      <A HREF="id23_employee_deferrals_and_employer.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Which of the following are mandatory in a SIMPLE 401k plan?</U></A></div> <bR> <div>      I.       employee elective deferrals</div> <div>      II.      employee voluntary contributions</div> <div>      III.     employer matching contributions</div> <div>      IV.    employer non-elective contributions</div> <bR> <div>      a.     I only</div> <div>      b.     I or II only</div> <div>      c.     III or IV only</div> <div>   <B>   d.     I, III or IV only</B></div> <bR> <bR> <bR> <bR> <div>      <A HREF="id23_employee_deferrals_and_employer.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Which of the following are NOT permitted in a SIMPLE 401k plan?</U></A></div> <bR> <div>      a.     employee elective deferrals</div> <div>    <B>  b.     employee voluntary contributions</B></div> <div>      c.     employer matching contributions</div> <div>      d.     employer non-elective contributions</div> <bR> <bR> <bR> <bR> <div>      <A HREF="id23_employee_deferrals_and_employer.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>The maximum allowable employee elective contribution to a SIMPLE 401k plan is:</U></A></div> <bR> <div>     <B> a.     less than that allowed in a SIMPLE 401k</B></div> <div>      b.     more than that allowed in a SIMPLE 401k</div> <div>      c.     the same as that allowed in a SIMPLE 401k</div> <div>      d.     offset by contributions to the employer's SIMPLE 401k</div> <bR> <bR> <bR> <div>     <A HREF="id23_employee_deferrals_and_employer.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U> An employer offering a SIMPLE 401k plan must either:</U></A></div> <bR> <div>      I.     match employee elective deferrals dollar-for dollar </div> <div>      II.     match employee elective deferrals dollar-for dollar up to 3% of compensation</div> <div>      III.     contribute no more than 2% of the employee's compensation as a non-elective contribution</div> <div>      IV.     contribute 2%  of the employee's compensation as a non-elective contribution</div> <bR> <div>      a.     I or III</div> <div>      b.     I or IV</div> <div>      c.     II or III</div> <div> <B>     d.     II or IV</B></div> <bR> <bR> <bR> <bR> <div>      <A HREF="id23_employee_deferrals_and_employer.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>An employer's contribution to an employee's SIMPLE 401 (k) account, is based on the employee's:</U></A></div> <bR> <div>      a.     compensation</div> <div>      b.    <B> compensation up to a maximum of $150,000 adjusted from inflation</B></div> <div>      c.     years of service</div> <div>      d.     earnings history</div> <bR> <bR> <bR> <bR> <div>     <A HREF="id23_notification_and_election.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U> Employers must notify participants in a SIMPLE plan of the employer's contribution method for the year no later than:</U></A></div> <bR> <div>      a.     the start of the election period</div> <div>      b.     30 days before the election period</div> <div>    <B>  c.     60 days before the election period</B></div> <div>      d.     90 days before the election period</div> <bR> <bR> <bR> <bR> <bR> <div>      <A HREF="id23_notification_and_election.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Employees may terminate participation, i.e. elective deferrals, in a SIMPLE plan:</U></A></div> <div>      </div> <div>      a.     only on the election date</div> <div>      b.     by giving notice within 30 days of the election date</div> <div>      c.     by giving notice within 60 days of the election date</div> <div>      <B>d.     at any time</B></div> <bR> <bR> <bR> <bR> <div>    <A HREF="id23_vesting.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U> All contributions to a SIMPLE 401k plan must fully vest no slower than:</U></A></div> <div>      </div> <div>      a.     three year cliff vesting</div> <div>      b.     five year cliff vesting</div> <div>      c.     three-to-seven year graded vesting</div> <div>     <B> d.     immediately</B></div> <bR> <bR> <bR> <bR> <bR> <div>      <A HREF="id23_vesting.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Which of the following are "immediately and fully" vested in a  SIMPLE 401k plan?</U></A></div> <bR> <div>      I.      employee elective deferrals</div> <div>      II.     employee voluntary contributions</div> <div>      III.     employer matching contributions</div> <div>      IV.     employer non-elective contributions</div> <bR> <div>      a.     I only</div> <div>      b.     I and II only</div> <div>      c.     III and IV only</div> <div>    <B>  d.     I, III and IV only</B></div> <bR> <bR> <bR> <bR> <div>      <A HREF="id23_top_heavy_and_non_discrimination_rules.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Which of the following non-discrimination tests must be met in a SIMPLE 401k plan?</U></A></div> <bR> <div>      a.     actual deferral test (ADP)</div> <div>      b.     actual contribution test (ACP)</div> <div>   <B>   c.     neither a or b</B></div> <div>      b.     either a or b</div> <bR> <bR> <bR> <bR> <bR> <div>    <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>  Which of following are treated the same in a "regular 401k" and a  SIMPLE 401k plan?</U></A></div> <bR> <div>      a.     vesting</div> <div>      b.     non-discrimination</div> <div>     <B> c.     premature distributions</B></div> <div>      d.     reporting requirements</div> <bR> <bR> <bR> <bR> <bR> <div>     <A HREF="id23_loans.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U> The maximum amount that may be borrowed from a SIMPLE 401k plan is:   </U></A>  </div> <div>  </div> <div>      a.     less than that allowed in a SIMPLE 401k</div> <div>      b.     more than that allowed in a SIMPLE 401k</div> <div>      c.     <B>the same as that allowed in a SIMPLE 401k</B></div> <div>      d.     offset by loans taken from SIMPLE 401ks</div> <bR> <bR> <bR> <bR> <bR> <div> <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>When compared to other 401(k)s, what is the primary disadvantage of a SIMPLE 401k:</U></A></div> <bR> <div> a.  more strict "top heavy" rules</div> <div> <B>b.   lower contribution limits</B></div> <div> c.   longer vesting periods</div> <div> d.   less flexible plan adminstration</div> <bR> <bR> <bR> <bR> <bR> <div> <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>XYZ Corporation employs 35 full-time non-unionized employees. XYZ's parent company ABC Corporation </U></A></div> <div> <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>employs 110 full-time workers.  Which of the following is true of SIMPLE 401k plans:</U></A></div> <bR> <div> a.  both ABC and XYZ may each establish SIMPLE 401k plans</div> <div> b.  ABC may establish a SIMPLE 401k plan, XYZ may not</div> <div> c.  XYZ may establish a SIMPLE 401k plan, ABC may not</div> <div> <B>d.  neither ABC nor XYZ may establish SIMPLE 401k plans</B></div> <bR> <bR> <bR> <bR> <div> <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Digitex Corporation employs 25 full-time non-unionized employees and 80 full-time unionized employees.  Which of the following is true of SIMPLE plans?</U></A></div> <bR> <div> a.  Digitex may establish a SIMPLE plan for all of its employees</div> <div> b.  Digitex may establish a SIMPLE plan for its non-union employees</div> <div> c.  Digitex may establish a SIMPLE plan for its unionized employees</div> <div> <B>d.  Digitex may not establish a SIMPLE plan</B></div> <bR> <bR> <bR> <bR> <div> <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Which of the following is true of employer size when establishing a SIMPLE plan?</U></A></div> <bR> <div> a.  Employers must count any unionized employees when determining if the employer qualifies to set up a SIMPLE plan</div> <div> b.  Employers must count any part-time employees when determining if the employer qualifies to set up a SIMPLE plan</div> <div> c.  Employers must count any employees under "common control" when determining if the employer qualifies to set up a SIMPLE plan</div> <div> <B>d.  all of the above are true</B></div> <bR> <bR> <bR> <bR> <bR> <div> <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>SIMPLE 401k plans must conform with:</U></A></div> <bR> <div> a.  actual deferral percentage (ADP) test</div> <div> b.  actual contribution percentage (ACP) test</div> <div> c.  both a and b</div> <div> <B>d.  neither a nor b</B></div> <bR> <bR> <bR> <bR> <bR> <div> <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Joe, a plumbing  contractor, established a "regular"  401k plan several years ago to cover his 32 employees.  The plan operates on a fiscal year calendar.  Joe decides to convert his 401k into a SIMPLE plan.  Which of the following is true?</U></A></div> <bR> <div> a.  Joe may simply convert the existing plan into a SIMPLE plan</div> <div> <B>b.  Joe must change the existing plan to a calendar-year accounting before converting the plan to a SIMPLE plan</B></div> <div> c.  Joe must terminate the existing plan and establish a new plan as a SIMPLE plan</div> <div> d.  Joe may not establish a SIMPLE plan</div> <bR> <bR> <bR> <div>      </div> <div> <A HREF="id23_employee_deferrals_and_employer.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>The catch-up contributions to a SIMPLE 401k plan for those aged 50 or older are:</U></A></div> <bR> <div>     <B> a.     less than that allowed in a "regular" 401k</B></div> <div>      b.     more than that allowed in a "regular" 401k</div> <div>      c.     the same as that allowed in a "regular" 401k</div> <div>      d.     offset by contributions to the employer's "regular" 401k</div> <bR> <bR> <bR> <div>      </div> <div> <A HREF="id23_employee_deferrals_and_employer.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>The loan provision for SIMPLE 401k plans:</U></A></div> <bR> <div>      a.     are less than that allowed in a "regular" 401k</div> <div>      b.     are more than that allowed in a "regular" 401k</div> <div> <B>     c.     are the same as that allowed in a "regular" 401k</B></div> <div>      d.     prohibit loans in SIMPLE plans</div> <bR> <bR> <bR> <bR> <div> <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Jane and Sally's Floral Designs offers a SIMPLE 401k plan that covers the partners,  Jane and Sally, and nine other eligible employees.  The partners and three other employees decide to make elective contributions to the plan this year.  If the company chooses to make a 2% non-elective contribution to the SIMPLE plan this year:</U></A></div> <bR> <div> a.  only the partners and three employees who contributed to the to the plan will have employer contributions credited to their retirement savings</div> <div> b.  only the three employees, but not the partners,  who contributed to the plan will have employer contributions credited to their retirement savings</div> <div> <B>c.  all nine employees and the partners will have employer contributions credited to their retirement savings</B></div> <div> d.  all nine employees, but not the partners, will have employer contributions credited to their reitrement savings </div> <bR> <bR> <bR> <bR> <bR> <div> <A HREF="id23.htm" TARGET="_top" TITLE="SIMPLE 401k PLANS"><U>Jane and Sally's Floral Designs offers a SIMPLE 401k plan that covers the partners,  Jane and Sally, and nine other eligible employees.  The partners and three other employees decide to make elective contributions to the plan this year.  If the company chooses to make matching contributions of 3% to the SIMPLE plan this year:</U></A></div> <bR> <div> <B>a.  only the partners and three employees who contributed to the to the plan will have employer contributions credited to their retirement savings</B></div> <div> b.  only the three employees, but not the partners,  who contributed to the plan will have employer contributions credited to their retirement savings</div> <div> c.  all nine employees and the partners will have employer contributions credited to their retirement savings</div> <div> d.  all nine employees, but not the partners, will have employer contributions credited to their reitrement savings </div> <bR> <bR> <bR> <div> <A HREF="id21_safe_harbor_401k.htm" TARGET="_top" TITLE="NONDISCRIMINATION RULES"><U>Employers wishing to establish a 401(k) plan may avoid the nondiscrimination tests by setting up a:</U></A></div> <div> a. Safe Harbor 401(k)</div> <div> b. SIMPLE 401(k)</div> <div> c. qualified automatic enrollment plan</div> <div> <B>d. all of the above are not subject to the nondiscrimination tests </B></div> <bR> <bR> </td> </tr></table></body>