RMA Regulatory Compliance & Legal Framework 3 — Questions and Answers
Question 1: The SEC's Regulation Best Interest (Reg BI) requires broker-dealers to act in the client's best interest at the time of which event?
- Account opening
- Making a recommendation (Correct answer)
- Annual review
- Portfolio rebalancing
Correct answer: Making a recommendation
Reg BI imposes the best-interest obligation specifically at the moment a recommendation is made to a retail customer.
Question 2: Which ERISA vesting schedule allows a participant to be 100% vested after three years of service?
- Cliff vesting (Correct answer)
- Graded vesting
- Immediate vesting
- Pro-rata vesting
Correct answer: Cliff vesting
Under cliff vesting, participants become fully vested all at once, which ERISA allows after no more than three years for employer contributions.
Question 3: A plan administrator fails to provide a Summary Plan Description within 90 days of a participant's eligibility. Which agency enforces this requirement?
- IRS
- SEC
- DOL Employee Benefits Security Administration (Correct answer)
- PBGC
Correct answer: DOL Employee Benefits Security Administration
The DOL's Employee Benefits Security Administration (EBSA) enforces ERISA's disclosure requirements, including timely SPD delivery.
Question 4: Under HIPAA, which retirement plan provision restricts the use of health information for plan enrollment eligibility?
- HIPAA nondiscrimination rules for group health plans (Correct answer)
- ERISA Section 510 anti-cutback
- COBRA continuation coverage rules
- ADA reasonable accommodation standard
Correct answer: HIPAA nondiscrimination rules for group health plans
HIPAA's nondiscrimination rules prohibit group health plans from denying enrollment or charging higher premiums based on health status.
Question 5: The annual additions limit under IRC Section 415(c) for defined contribution plans in 2024 is:
- $23,000
- $46,000
- $69,000 (Correct answer)
- $76,500
Correct answer: $69,000
The Section 415(c) annual additions limit for defined contribution plans is $69,000 for 2024, covering all employer and employee contributions.
Question 6: Under ERISA Section 3(38), an investment manager must be which of the following to accept fiduciary responsibility for investment decisions?
- A bank, insurance company, or registered investment adviser (Correct answer)
- Any licensed financial professional
- A CPA with Plan advisory certification
- A named fiduciary designated in the plan document
Correct answer: A bank, insurance company, or registered investment adviser
ERISA Section 3(38) defines an investment manager as a bank, insurance company, or RIA that acknowledges fiduciary status in writing.
Question 7: Which rule requires that top-heavy plans provide minimum contributions to non-key employees?
- IRC Section 416 top-heavy rules (Correct answer)
- ADP/ACP testing
- IRC Section 415 limits
- ERISA Section 204(g) anti-cutback
Correct answer: IRC Section 416 top-heavy rules
IRC Section 416 mandates that top-heavy plans contribute at least 3% of compensation to non-key employees.
RMA Regulatory Compliance & Legal Framework 3
The SEC's Regulation Best Interest (Reg BI) requires broker-dealers to act in the client's best interest at the time of which event?