Series 65 – Uniform Investment Adviser Law Exam Retirement Plans and Taxation 2

Question 1

A SEP-IRA allows employers to contribute up to what percentage of an employee's compensation (subject to the annual dollar limit)?

Accepted Answer

25%

Answer

Employers may contribute up to 25% of an employee's compensation (or $69,000 in 2024, whichever is less) to a SEP-IRA.

Question 2

What distinguishes a SIMPLE IRA from a SEP-IRA?

Accepted Answer

SIMPLE IRAs allow employee salary deferrals; SEP-IRAs are funded only by employers

Answer

SIMPLE IRAs allow employees to make salary deferral contributions, while SEP-IRAs are funded exclusively by employer contributions.

Question 3

Under a 403(b) plan, which of the following types of employers is eligible to sponsor the plan?

Accepted Answer

Tax-exempt organizations and public school systems

Answer

403(b) plans are available to employees of tax-exempt organizations under Section 501(c)(3) and public educational institutions.

Question 4

When a participant rolls over funds from a 401(k) plan to a Traditional IRA, what is the tax treatment if done as a direct rollover?

Accepted Answer

The rollover is tax-free and penalty-free with no withholding

Answer

A direct rollover (trustee-to-trustee transfer) is not a taxable event, avoids mandatory 20% withholding, and incurs no early withdrawal penalty.

Question 5

Which of the following best describes 'vesting' in a qualified retirement plan?

Accepted Answer

The employee's ownership rights over employer-contributed funds over time

Answer

Vesting refers to the schedule by which an employee gains nonforfeitable ownership of employer contributions to the retirement plan.

Series 65 – Uniform Investment Adviser Law Exam Practice Test