CRPC Social Security and Pensions 2 — Questions and Answers
Question 1: A widow age 60 wants to claim survivor benefits. How does early claiming affect her benefit compared to claiming at her full retirement age?
- No reduction applies to survivor benefits claimed at 60
- Benefit is reduced to 71.5% of the deceased spouse's PIA (Correct answer)
- Benefit is reduced to 82.5% of the deceased spouse's PIA
- Benefit is reduced by 5/9 of 1% per month before FRA
Correct answer: Benefit is reduced to 71.5% of the deceased spouse's PIA
A widow claiming survivor benefits at age 60 receives 71.5% of the deceased worker's PIA due to early claiming.
Question 2: Under a defined benefit pension plan, which integration method credits the Social Security covered compensation level when calculating benefits?
- Offset integration
- Step-rate integration (Correct answer)
- Unit credit integration
- Final average pay formula
Correct answer: Step-rate integration
Step-rate (excess) integration provides a higher accrual rate on earnings above the Social Security covered compensation level.
Question 3: An employee has 30 years of substantial earnings under Social Security. How does this affect the Windfall Elimination Provision (WEP)?
- WEP is fully eliminated after 30 years of substantial earnings (Correct answer)
- WEP reduction is reduced by 50% after 30 years
- WEP applies at the maximum reduction regardless
- WEP is eliminated after 35 years of substantial earnings
Correct answer: WEP is fully eliminated after 30 years of substantial earnings
Workers with 30 or more years of substantial Social Security earnings are completely exempt from the WEP reduction.
Question 4: Which Social Security benefit rule allows a divorced spouse to claim on an ex-spouse's record without affecting the ex-spouse's own benefit?
- Spousal offset rule
- Independent entitlement rule (Correct answer)
- Deemed filing exemption
- Dual entitlement rule
Correct answer: Independent entitlement rule
Under independent entitlement, a divorced spouse's claim on an ex-spouse's record does not reduce or affect the ex-spouse's benefits.
Question 5: A pension plan uses a 5-year cliff vesting schedule. An employee leaves after 4 years and 11 months. What is their vested percentage?
- 100% vested
- 80% vested
- 0% vested (Correct answer)
- 60% vested
Correct answer: 0% vested
Under cliff vesting, an employee must complete the full required years (5) to be vested; leaving before that date results in 0% vesting.
Question 6: What is the primary purpose of the Government Pension Offset (GPO)?
- Reduce benefits for high-income Social Security recipients
- Offset spousal or survivor Social Security benefits for those receiving a non-covered government pension (Correct answer)
- Eliminate WEP for federal employees
- Reduce pension benefits for those also receiving Social Security
Correct answer: Offset spousal or survivor Social Security benefits for those receiving a non-covered government pension
The GPO reduces Social Security spousal or survivor benefits by two-thirds of the non-covered government pension amount.
Question 7: A participant in a cash balance plan has an account balance of $400,000. The plan uses a 5% annual interest crediting rate. What is the projected balance after 3 years with no additional pay credits?
- $420,000
- $460,000
- $463,050 (Correct answer)
- $400,000
Correct answer: $463,050
Compounding $400,000 at 5% for 3 years: $400,000 × 1.05³ = $463,050.
CRPC Social Security and Pensions 2
A widow age 60 wants to claim survivor benefits.
How does early claiming affect her benefit compared to claiming at her full retirement age?