PFS Employee Benefits Planning 2

Question 1

What is the maximum annual elective deferral an employee can contribute to a 401(k) plan in 2024 (excluding catch-up contributions)?

Accepted Answer

$23,000

Answer

For 2024, the IRS elective deferral limit for 401(k) plans is $23,000, up from $22,500 in 2023, allowing contributions on a pre-tax or Roth basis.

Question 2

An employer sponsors a SIMPLE IRA plan. Which of the following employer contribution formulas is required by the IRS?

Accepted Answer

Either a matching contribution of up to 3% of compensation or a 2% non-elective contribution

Answer

SIMPLE IRA employers must contribute either a match of up to 3% of compensation (reducible to 1% in 2 of 5 years) or a 2% non-elective contribution for all eligible employees.

Question 3

What distinguishes a SEP-IRA from a SIMPLE IRA regarding who is permitted to make contributions?

Accepted Answer

SEP-IRAs allow only employer contributions; SIMPLE IRAs allow both employer and employee contributions

Answer

In a SEP-IRA only the employer contributes; in a SIMPLE IRA both the employer (mandatory) and employees (via elective deferrals) can contribute.

Question 4

A defined benefit pension plan credits employees with 2% of final salary per year of service. An employee retires after 30 years with a final salary of $80,000. What is the annual pension benefit?

Accepted Answer

$48,000

Answer

The annual benefit equals 2% × 30 years × $80,000 = 60% × $80,000 = $48,000.

Question 5

Which of the following best describes the 'triple tax advantage' of a Health Savings Account (HSA)?

Accepted Answer

Contributions are pre-tax, growth is tax-deferred, and qualified withdrawals are tax-free

Answer

HSAs offer tax-deductible (or pre-tax payroll) contributions, tax-deferred investment growth, and tax-free withdrawals for qualified medical expenses.

(PFS) Personal Financial Specialist Practice Test

(PFS) Personal Financial Specialist Practice Test

PFS Employee Benefits Planning 2