Practice Test Geeks(CPS) Certified Payroll Specialist Practice Test
← All CPS Flashcard Decks

Investment Strategies Flashcards

7 cards from real CPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Investment Strategies flashcards as text

  1. An employee contributes to a Health Savings Account (HSA) through payroll deductions. What is the primary investment advantage of an HSA?

    Answer: Contributions, growth, and qualified withdrawals are all tax-free

    HSAs offer a triple tax advantage: pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

  2. What is 'dollar-cost averaging' in the context of retirement plan contributions?

    Answer: Investing equal amounts at regular intervals regardless of market price

    Dollar-cost averaging means investing fixed amounts at regular intervals, which results in purchasing more shares when prices are low and fewer when prices are high.

  3. A plan sponsor offers a 401(k) safe harbor plan to automatically satisfy ADP nondiscrimination testing. What is the minimum non-elective safe harbor contribution?

    Answer: 3% of compensation for all eligible employees

    A safe harbor non-elective contribution of at least 3% of compensation to all eligible employees satisfies ADP/ACP nondiscrimination tests.

  4. Which document must participants receive that discloses 401(k) plan fees and investment options' performance?

    Answer: 404(a)(5) fee disclosure notice

    The 404(a)(5) participant fee disclosure notice is required by DOL regulations and must detail plan fees and comparative investment performance information.

  5. A profit-sharing plan contribution for 2024 can be up to what percentage of an eligible employee's compensation?

    Answer: 25%

    Employer profit-sharing contributions are limited to 25% of eligible compensation under IRC Section 404, subject to the Section 415 total limit.

  6. When must Required Minimum Distributions (RMDs) begin for a traditional IRA owner under current law (SECURE 2.0)?

    Answer: Age 73

    Under SECURE 2.0 Act, RMDs from traditional IRAs must begin by April 1 of the year following the year the owner turns 73.

  7. An employee is automatically enrolled in a 401(k) at a 3% deferral rate that increases 1% annually — what feature describes this arrangement?

    Answer: Qualified Automatic Contribution Arrangement (QACA)

    A QACA is an auto-enrollment plan with automatic escalation of deferral rates that satisfies safe harbor nondiscrimination requirements.