Review Questions Module 4
SIMPLE IRAs

Unless otherwise noted, assume the following questions relate to participants under age 50.



     Employers must notify participants in a SIMPLE plan of the employer's contribution method for the year no later than:

     a.     the start of the election period
     b.     30 days before the election period
     c.     60 days before the election period
     d.     90 days before the election period



   An employer's matching contribution to an employee's SIMPLE IRA account, is based on the employee's:

     a.     compensation
     b.     compensation up to a maximum of $150,000 -- adjusted for inflation
     c.     years of service
     d.     earnings history



    An employer offering a SIMPLE IRA plan must either:

     I.     match employee elective deferrals dollar-for-dollar
     II.     match employee elective deferrals dollar-for-dollar up to 3% of compensation
     III.     contribute no more than 2% of the employee's compensation as a non-elective contribution
     IV.     contribute 2%  of the employee's compensation as a non-elective contribution

     a.     I or III
     b.     I or IV
     c.     II or III
     d.     II or IV


     The maximum allowable employee elective contribution to a SIMPLE IRA plan is:

     a.     less than that allowed in a "regular" IRA
     b.     more than that allowed in a "regular" IRA
     c.     the same as that allowed in a "regular IRA
     d.     offset by contributions to "regular" IRAs


   SIMPLE plans may be established in the form of a:

     I.     401(k) plan
     II.     IRA plan
     III.     SEP plan

     a.     I only
     b.     II only
     c.     I and II only
     d.     I and III only



   The primary advantage of a SIMPLE plan is that employers are relieved of:

     a.     vesting requirements under ERISA
     b.     non-discrimination rules
     c.     matching contribution requirements
     d.     drawing up plan documents



   Which of following are permitted to offer SIMPLE plans to their      employees?

     a.     employers with fewer than 100 employees
     b.     only employers with employees covered by a collective bargaining agreement
     c.     employers who offer other qualified retirement plans
     d.     any of the above




     When counting employees who are "eligible" for a SIMPLE plan, the employer must count:

     a.     all employees who worked for the employer during the year
     b.     only those employees who may make contributions to the plan
     c.     only those employees not covered by a collective bargaining agreement
     d.     only those employees who have one year of service and are age 21 or older


   Which are true of SIMPLE IRA plans?

     a.     new plans may be established on a fiscal or calendar year
     b.     existing plans may continue to operate on a fiscal or calendar year basis
     c.     existing plans may continue to operate on a fiscal year basis, but new plans must be established on a calendar year basis
     d.     all SIMPLE plans must operate on a calendar year basis



    If an employer adopts the most strict "participation rules", which "eligible employees" may participate in the SIMPLE plan, i.e., contribute to the plan?

     a.     all "eligible" employees may participate
     b.     only those "eligible" employees who expect to earn at least $5,000 from the employer this year
     c.     only those "eligible" employees who earned at least $5,000 from the employer in any of the past two years
     d.     only those "eligible" employees who expect to earn at least $5,000 from the employer this year and who earned at least $5,000 from the employer in any of the past two years




     An "eligible" employee works for two unrelated employers, earning $40,000 from each in the past two years.  Both employers offer a SIMPLE IRA. If the employee is eligible to contribute to Employer A's plan this year, the employee:

     a.     may not contribute to Employer B's plan this year
     b.     may contribute to either Employer A or Employer B's plan, but not both during the same year     
     c.     may contribute up to the annual SIMPLE contribution limit to Employer A's plan and up to the annual SIMPLE contribution limit to Employer B's plan this year
     d.     may contribute up to the annual SIMPLE contribution limit this year in split between Employer A and Employer B's plans


    Which of the following are mandatory in a SIMPLE IRA?

     I.     employee elective deferrals
     II.     employee voluntary contributions
     III.     employer matching contributions
     IV.     employer non-elective contributions

     a.     I only
     b.     I or II only
     c.     III or IV only
     d.     I, III or IV only



    Which of the following are NOT permitted in a SIMPLE IRA?

     a.     employee elective deferrals
     b.     employee voluntary, after-tax contributions
     c.     employer matching contributions
     d.     employer non-elective contributions


   Employees may terminate participation, i.e. elective deferrals, in a  SIMPLE plan:
     a.     only on the election date
     b.     by giving notice within 30 days of the election date
     c.     by giving notice within 60 days of the election date
     d.     at any time



    Employers must "segregate" participating employees' elective      deferrals into the SIMPLE IRA plan:

     a.     as quickly as possible
     b.     by the 30th day after the end of the month in which the employee would have otherwise received the deferral in cash
     c.     by the end of the employer's tax year
     d.     by the filing date of the employer's tax return

     Employers may deposit their matching or non-elective contributions into the SIMPLE IRA plan:

     a.     as soon as is reasonably possible
     b.     by the 30th day after the end of the month in which the employee would have otherwise received the deferral in cash
     c.     by the end of the employer's tax year
     d.     by the filing date of the employer's tax return



    All contributions to a SIMPLE IRA plan must vest no slower than:
     a.     three-year cliff vesting
     b.     five-year cliff vesting
     c.     three-to-seven year graded vesting
     d.     immediately



   Which of the following are "immediately and fully" vested in a SIMPLE IRA plan?

     I.     employee elective deferrals
     II.     employee voluntary contributions
     III.     employer matching contributions
     IV.     employer non-elective contributions

     a.     I only
     b.     I and II only
     c.     III and IV only
     d.     I, III and IV only