RMA Regulatory Compliance & Legal Framework 2

Question 1

Under ERISA, which party holds the highest standard of care when managing plan assets?

Accepted Answer

Named fiduciary

Answer

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?

Accepted Answer

IRAs and qualified plans

Answer

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?

Accepted Answer

DOL Regulation 2550.404a-1

Answer

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?

Accepted Answer

Corrective distributions within 2.5 months

Answer

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?

Accepted Answer

Section 406

Answer

ERISA Section 406 prohibits transactions between a plan and a party in interest, such as loans or asset sales that benefit the fiduciary.

RMA Practice Test

RMA Practice Test

RMA Regulatory Compliance & Legal Framework 2