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
ERISA and Tax Rules for Qualified Plans
Chapter 12: ERISA Reporting and Disclosure
True/False
12.1
The employee benefit plans of state, federal, or local governments or governmental
organizations are exempt from ERISA.
12.2
To comply with the pension plan reporting and disclosure rules under ERISA, employers
must use the Annual Report to describe major provisions of the plan to plan participants in
plain language.
12.3
All group insurance programs offered to employees must comply with ERISA reporting and
disclosure requirements.
Answers:
12.1 true [p. 113]
12.2 false [p. 114]
12.3 false [p. 115]
Multiple Choice
12.4
A severance pay plan is not treated as a pension plan under ERISA if:
a. payments do not depend directly or indirectly on retirement of employee
b. total plan payments are less than twice the employee’s annual compensation the year
immediately before separation from service
c. all payments to any employee are generally completed within 2 years of separation
from service
d. all of the above
e. only a and b
Answer: D [p. 113-14]
12.5
ERISA requires report and disclosure of benefits to plan participants under
a.
b.
c.
d.
e.
the Summary Plan Description
the Summary Annual Report
the Individual Accrued Benefit Statement
all of the above
only a and b
Answer: D [p. 114]
12.6
The “small welfare plan exemption” that exempts an employer from filing an annual report
applies to welfare plans
a.
b.
c.
d.
e.
with fewer than 100 participants
that are fully insured
that are paid out of employer’s general assets
all of the above
only a and b
Answer: D [p. 115]
Application
12.7
The retirement plan for Bethel Shalom synagogue must adhere to ERISA reporting and
disclosure rules.
a. true
b. false
Answer: B [p. 113]
12.8
Harper Engineering, Inc. offers several benefits to employees. Which of its benefits would
be exempt from the ERISA reporting and disclosure requirements?
a. Harper pays for life insurance to provide for employee dependents if the employee dies
b. Harper gives each employee a small gift worth less than $5 on St. Patrick’s Day
c. Harper has a scholarship program that pays for employee tuition for industry-relevant
continuing education according to employee’s grade for the course, out the employer’s
general assets
d. b and c
e. a and c
Answer: D [p. 115]
12.9
Harvest Cannery, Inc. has a number of employee benefits. Which of the following types of
compensation would be exempt from the reporting and disclosure requirements of ERISA?
a.
b.
c.
d.
e.
paying working on the 7-11p.m. shift ten cents an hour more than other workers
an on-site first aid center at Harvest
an on-site dining facility at Harvest
all of the above
a and c
Answer: D [p. 115]
12.10 Wheels, a small bike sales and repair shop, has ten employees, 5 full time and 5 part time.
Walt Morgan, the owner, can’t afford to provide many employee benefits, but he does
provide all employees three full pay sick days a year. He funds the sick pay out of his
general assets. He also provides his full time employees with basic health insurance that
has a high deductible to keep costs down. Walt pays an annual premium for this insurance
out of his general assets. Under ERISA:
a.
b.
c.
d.
e.
Walt must file an annual report to the IRS
Walt must provide employees with a Summary Plan Description
Walt must do either a or b
Walt must to both a and b
Walt qualifies for the small welfare plan exemption
Answer: E [p. 115]