CSP Legal & Regulatory Compliance 2

Question 1

Under the Employee Retirement Income Security Act (ERISA), which fiduciary duty requires plan administrators to act solely in the interest of plan participants and beneficiaries?

Accepted Answer

Duty of loyalty

Answer

ERISA's duty of loyalty requires fiduciaries to act exclusively for the benefit of plan participants and beneficiaries, not for any other party.

Question 2

Which federal law governs the transfer of retirement plan assets upon an employee's death and requires that a surviving spouse be the primary beneficiary unless a waiver is signed?

Accepted Answer

ERISA

Answer

ERISA requires that qualified retirement plans designate the surviving spouse as the default primary beneficiary, and the spouse must consent in writing to any alternative designation.

Question 3

A buy-sell agreement funded by life insurance triggers a tax concern under IRC Section 101(j) if the policy is owned by a corporation on a key employee who has not provided written consent. What is this issue called?

Accepted Answer

Corporate-owned life insurance (COLI) notice and consent rule

Answer

IRC Section 101(j) requires employers to obtain written consent from insured employees before issuing COLI policies, or death benefits may lose their income-tax-free status.

Question 4

When a succession plan involves transferring ownership of an S-corporation, which of the following is a critical legal restriction that must be observed?

Accepted Answer

S-corporations cannot have more than 100 shareholders or certain ineligible shareholders

Answer

S-corporations are limited to 100 shareholders and cannot have ineligible shareholders such as non-resident aliens or certain trusts, which constrains succession transfer options.

Question 5

Which legal doctrine can cause a family limited partnership (FLP) to be included in a decedent's taxable estate if the IRS finds the arrangement lacked legitimate non-tax business purposes?

Accepted Answer

All of the above doctrines may apply

Answer

The IRS and courts have applied the step transaction, economic substance, and substance over form doctrines to collapse FLP arrangements that lack genuine business purposes.

(CSP) Certified Succession Planner Practice Test

(CSP) Certified Succession Planner Practice Test

CSP Legal & Regulatory Compliance 2