Review Questions Module 1

Why are nonqualified plans increasingly popular?

A  Benefits paid from a deferred compensation plan are tax-free
B  Deferred compensation payments to a beneficiary are not subject to estate tax
C  Qualified plans are subject to complex nondiscrimination rules
D  Earnings on assets held in a qualified plan are not sheltered from current income tax

Which of the following is NOT a qualified plan requirement?

A.     Minimum coverage requirement
B.     Non-discrimination requirement
C.     Vesting requirement
D.     Cost recovery requirement

Which of the following is NOT a business need that could be met through a nonqualified plan?

A.     Obtaining compensation for the death of a key executive
B.     Attracting key talent
C.     Retaining key executives
D.     Rewarding high-impact achievers

Which of the following benefits is NOT typically found in nonqualified plans?

A.     Employer tax-deductibility of plan contributions
B.     The ability to tailor a plan to fit the executive’s needs
C.     Employer cost recovery
D.     The ability to favor one key employee

Which of the following business needs may be met through a nonqualified plan?

A.     Humanely retiring all of a firm’s employees
B.     Attracting a key executive
C.     Arranging for business succession
D.     Funding an ESOP