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The ability for unions to negotiate for pension benefits is due to which of the following:
A. Pension and Welfare Disclosure Act
B. Ruling by the National Labor Relations Board
C. Ruling by the US Supreme Court
D. Series of strikes by large unions
E. Employee’s Income Retirement Security Act
B. [pg 12] The NLRB ruling clarified that benefits were part of the wages and conditions of employment. This was prior to ERISA or the Pension and Welfare Disclosure Act.
Which of the following environmental factors should be considered in the pension plan design process?
A. The state laws governing pension plans in the states where the employer has offices.
B. The demands of the union but only if the company has union employees
C. The characteristics of the employees of the company
D. The ERISA requirement that all companies with greater than 100 employees must offer a retirement plan
E. The options presented by the marketing representative
C. A is incorrect because State laws do not govern pension plans – ERISA pre-emption. B is incorrect because union in a similar company will have an impact because the company wants to keep a union out of the company and so wants to reduce the level of dissatisfaction by the employees; D is incorrect because ERISA does not mandate retirement plans for any size company and E is incorrect because the reasons should be based on the needs of the company, although it often does become a factor.
Which of the following are the basic economic factors facing the elderly?
Improvement in longevity
Desire to slow down and live a simpler life in retirement
Wide range of well-paying jobs
A. I only
B. II only
C. II and III
D. I and III
E. All of the above
A. [page 63] While there may be a desire to slow down and live a simpler life for some, others are interested in travel or moving ot a new community. There are very few well paying jobs for individuals over age 65.
Which of the following influence the design of a retirement plan for a specific company?
Availability of alternate funding mechanisms
Permissible plan provisions
A. None of the above
B. I only
C. II only
D. I and III only
E. All of the above
E. All of the above. This was discussed in Chapter 2. Each company will have differing weights given to these factors, but the funding, plan costs and plan provisions will play a role in determine which plan to use.
All of the following are principal tax advantages of qualified retirement plans except:
A. Deductibility of interest and capital gains earned within the plan [page 10]
B. Deductibility of contributions made to the plan
C. No current income taxation to the employee for plan contributions
D. Some preferable taxation of benefits upon distribution
E. Employee pays taxes upon receipt in retirement, often at a lower tax rate than while employed
A. The interest and capital gains within a plan are never deductible. For a non-Roth plan, these elements would be taxed as regular income upon the distribution to the participant. For Roth plans, these will not be taxed, but they are not deducted from the income.
All of the following are typical income-replacement objectives that an employer might have in designing a retirement plan except:
A. Providing a higher percentage of pay from the plan for the longer-term employees
B. Providing a benefit that when combined with the employee’s Social Security benefit provides at least 100% of final pay for employee’s with 10 years of service
C. Providing a higher percentage of pay benefit for the lower-paid employees
D. Designing the benefit based on the final salary (possibly averaged over the last 3 or 5 years) received by the employee
E. Providing a retirement benefit that comes jointly from the employer’s and employee’s contributions
B. a company would not typically provide for 100% of pay for any employee, let alone for one with only 10 years of service.