TOOLS & TECHNIQUES OF EMPLOYEE BENEFIT AND RETIREMENT PLANNING
11th Edition
College Course Materials
Deanna L. Sharpe, Ph.D., CFP®, CRPC®, CRPS®
Associate Professor
CFP® Program Director
Personal Financial Planning Department
University of Missouri-Columbia
Please Note: Correct answers for each question are indicated in bold type. After each question,
the number of the page containing information relevant to answering the question is given. When
a calculation is necessary or the reasoning behind a given answer may be unclear, a brief
rationale for the correct answer is also given.
Part A: Retirement Planning
Overview
Chapter 1: Designing the Right Retirement Plan
True or False:
1.1
One purpose of a well-designed retirement plan is to discourage collective bargaining.
1.2
An employee cannot contribute to a profit sharing plan.
1.3
Nonqualified plans can provide benefits to executives beyond the limits allowed in qualified
plans.
Answers:
1.1
True [p. 2]
1.2
False [p. 4]
1.3
True [p. 2]
Multiple Choice
1.4
Which of the following cannot be accomplished with a qualified retirement plan?
a.
b.
c.
d.
e.
Help employees save for retirement
Defer taxes for owners and highly compensated employees
Customize benefits for selected executives
Help retire employees
Create an incentive for employees to be more productive
Answer: C [p. 2]
1.5
Employees who value retirement benefits most highly include
a.
b
c.
d.
e.
highly compensated employees
younger employees
employees who do not expect to stay long with an employer
low-paid employees
none of the above
Answer: A [p. 5]
1.6
Which of the following retirement plans would be most effective in encouraging early
retirement?
a.
b.
c.
d.
e.
defined benefit plan
401(k) plan
profit sharing plan
money purchase plan
cash balance plan
Answer: A [p. 14]
Application
1.7.
Dr. I. L. Pullem, Dr. Ben Shur, and Dr. Jana Whitebite, are dentists. They have two full
time and one part time office staff as the only employees in a professional corporation.
The doctors want to maximize tax-favored benefits for themselves and lesser benefits for
their employees. They should consider:
a.
b.
c.
d.
e.
a profit sharing plan
a defined benefit plan
a Section 401(K) plan
a money purchase plan
a cash balance plan
Answer: B [p. 7]
1.8
Richard Leftin, founder of Leftin Manufacturing, Inc. wants to implement a retirement plan
that would allow him and the three managers of his business to set aside up to a fourth of
their earnings from the business in a retirement plan. He does not want to fund a
retirement plan for any of his 50 line workers. Mr. Leftin should consider
a.
b.
c.
d.
e.
a defined contribution plan
a defined benefit plan
a money purchase plan
a profit sharing plan
a nonqualified plan
Answer: E [p. 2]
1.9
Alice Compton, owner of Fashion Design, wants to install a retirement plan that will give
her employees an incentive to maximize their performance. Alice should consider
a.
b.
c.
d.
e.
a defined benefit plan
a money purchase plan
a profit sharing plan
a and b
b and c
Answer: C [p. 13]
1.10
Bob D. Builder, owner of Bob’s Construction, would like to install a retirement plan that
would help reduce turnover. Bob should consider using a
a.
b.
c.
d.
e.
401(k) plan
A profit sharing plan
a savings plan
an age weighted plan
a defined benefit plan
Answer: E [pp. 13-14]