Exercise

Answer the following questions.

1. 1. What is the most important defining feature of qualified retirement plans?
2. A. These plans allow participants to make contributions to the plan with pre-tax dollars.
3. B. These plans comply with Employee Retirement Income Security Act requirements.
4. C. Pension sponsors must fully fund the participants’ benefits, and the contributed funds must be held separate from other corporate assets.
5. D. Such plans often include employer matching of employee contributions, and employers can deduct employer contributions from their corporate taxes.
6. 2. Which of the following is not a goal of most retirement plans?
7. A. To provide enough income to live on after retirement
8. B. To defer taxes on contributions
9. C. To provide an account in which an investor can accrue earnings that will never be taxed
10. D. To defer taxes on earnings

Answer true or false.

1. 3. _____ If a company is forced to liquidate, retirement fund monies are available for creditor access just like other company assets. (Assume that the company’s retirement plan is subject to ERISA requirements.)
2. 4. _____ Even though both IRS regulations and ERISA requirements state that employer