RMA Regulatory Compliance & Legal Framework 2 — Questions and Answers
Question 1: Under ERISA, which party holds the highest standard of care when managing plan assets?
- Plan sponsor
- Named fiduciary (Correct answer)
- Investment manager
- Third-party administrator
Correct answer: Named fiduciary
The named fiduciary bears the highest standard of care under ERISA and must act solely in the interest of plan participants.
Question 2: The IRS prohibited transaction rules under IRC Section 4975 apply primarily to which type of accounts?
- 401(k) plans only
- IRAs and qualified plans (Correct answer)
- 403(b) plans only
- Non-qualified deferred compensation plans
Correct answer: IRAs and qualified plans
Section 4975 covers both IRAs and qualified plans, imposing excise taxes on prohibited transactions involving disqualified persons.
Question 3: Which DOL regulation requires plan fiduciaries to follow a documented process when selecting and monitoring investment options?
- ERISA Section 404(c)
- DOL Regulation 2550.404a-1 (Correct answer)
- ERISA Section 406
- DOL Field Assistance Bulletin 2012-02
Correct answer: DOL Regulation 2550.404a-1
DOL Regulation 2550.404a-1 codifies the prudent investor standard by requiring fiduciaries to use a documented, process-oriented approach to investment selection.
Question 4: A retirement plan fails the ADP test. Which corrective action allows the plan to avoid disqualification by distributing excess contributions?
- QNECs
- ACP correction
- Corrective distributions within 2.5 months (Correct answer)
- Corrective distributions within 12 months
Correct answer: Corrective distributions within 2.5 months
Corrective distributions made within 2.5 months after the plan year end avoid the 10% excise tax and prevent plan disqualification.
Question 5: Which provision of ERISA generally prohibits a plan from using plan assets to benefit a party in interest?
- Section 402
- Section 404
- Section 406 (Correct answer)
- Section 408
Correct answer: Section 406
ERISA Section 406 prohibits transactions between a plan and a party in interest, such as loans or asset sales that benefit the fiduciary.
Question 6: Under the Pension Protection Act of 2006, which automatic enrollment feature provides a safe harbor for qualified default investment alternatives?
- SIMPLE IRA default
- QDIA safe harbor (Correct answer)
- EACA correction window
- Safe harbor 401(k) match
Correct answer: QDIA safe harbor
The QDIA safe harbor allows fiduciaries protection from liability when defaulting participants into approved investments such as target-date funds.
Question 7: If a 403(b) plan is subject to ERISA, which filing requirement applies annually?
- Form 5500-EZ
- Form 5500 (Correct answer)
- Form 990
- Form 1099-R only
Correct answer: Form 5500
ERISA-covered 403(b) plans must file Form 5500 annually, reporting plan assets, participants, and financial condition.
RMA Regulatory Compliance & Legal Framework 2
Under ERISA, which party holds the highest standard of care when managing plan assets?