Qualified Plans — New York exam
4% of the scored questions — about 4 of 100. This section is general life insurance knowledge, shared with every state's exam.
1 / 8
By when may an employer set up a SEP for a given year?
Answer and explanation
Answer: D. IRS Publication 560 states that a SEP may be set up for any year as late as the due date, including extensions, of the income tax return. That flexibility is part of what makes the SEP simpler than a qualified plan, which must generally be in place earlier.Source: IRS Publication 560 — Pub 560, Timing of SEP set-up
2 / 8
How does IRS guidance classify a 401(k) plan?
Answer and explanation
Answer: A. IRS Publication 560 states that a 401(k) plan is also a qualified plan, alongside profit-sharing, money purchase pension, and defined benefit plans. SEPs are the simplified alternative, and an IRA is an individual arrangement rather than an employer plan.Source: IRS Publication 560 — Pub 560, 401(k) as a qualified plan
3 / 8
How is a SIMPLE IRA plan funded?
Answer and explanation
Answer: B. IRS Publication 560 explains that employees may choose to make salary reduction contributions rather than receiving the amounts as pay, with the employer either matching up to a stated percentage of compensation or making a fixed nonelective contribution. Both sides therefore contribute.Source: IRS Publication 560 — Pub 560, SIMPLE contributions
4 / 8
In which plan does the participant rather than the employer bear the investment risk?
Answer and explanation
Answer: C. In a defined contribution plan the retirement benefit is whatever the account is worth, so investment results fall on the participant. In a defined benefit plan the employer has promised a stated benefit and must fund it whatever the investments do. A trustee holds assets in both but does not absorb the risk.Source: IRS Publication 560 — Pub 560, Who bears the investment risk
5 / 8
What distinguishes a defined benefit plan from a defined contribution plan?
Answer and explanation
Answer: D. A defined benefit plan promises a stated benefit at retirement and the employer contributes what is needed to fund it, while a defined contribution plan fixes what goes into the account and the retirement benefit depends on the account's value. Both are qualified plans established by employers, and deferrals are a feature of particular plan designs rather than the dividing line.Source: IRS Publication 560 — Pub 560, Defined benefit and defined contribution
6 / 8
What feature of a 401(k) plan distinguishes it from a plain profit-sharing plan?
Answer and explanation
Answer: C. A 401(k) is a defined contribution plan carrying an elective deferral feature, so employees may choose to put part of their pay into the plan. Employer-only funding describes a plain profit-sharing plan, a stated benefit describes a defined benefit plan, and the employee threshold belongs to SIMPLE plans.Source: IRS Publication 560 — Pub 560, Elective deferrals
7 / 8
What is a Keogh plan?
Answer and explanation
Answer: C. IRS Publication 560 refers to qualified plans as H.R. 10 or Keogh plans when they cover self-employed individuals, operating under the same rules as other qualified plans. The hundred-employee threshold belongs to SIMPLE plans, and a non-qualified executive arrangement is a different thing entirely.Source: IRS Publication 560 — Pub 560, Keogh and H.R. 10 plans
8 / 8
What is a SEP?
Answer and explanation
Answer: C. IRS Publication 560 describes a SEP as a written plan that allows contributions toward the employer's own retirement and the employees' retirement without getting involved in a more complex qualified plan. Government deferred compensation describes a 457 plan, and a SEP is neither a defined benefit plan nor employee funded.Source: IRS Publication 560 — Pub 560, SEP defining feature
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