RFRA PI U3

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School

York University *

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FINANCIAL

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Finance

Date

Apr 28, 2024

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pdf

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Uploaded by PresidentFrog3372

2/9/2016 VirtualUniversity.CIFP.ca https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp 1/4 Assessment >> Formal Assessment Assessment: Registered Financial and Retirement Advisor Course Part I Unit 3 PostAssessment (C240V14U3L0A25Q10) Date Submitted: 02/09/2016 12:00:00 AM Total Correct Answers: 10 Total Incorrect Answers: 0 Your Mark (total correct percentage): 100% 1 Romeo does not know the amount that his employer will contribute to his pension plan each year. He does know that his pension will be based on 2% of his earnings for each year of employment, based on the average of his best five years of income. From the following types of pension plans, to which one does Romeo belong? Correct The correct answer: bestearnings plan Your answer: bestearnings plan Solution: A bestearnings pension plan is a definedbenefit plan based on the unit percentage applied to the average of the best years of pensionable service. 2 Dietrich is a member of a careeraverage, definedbenefit pension plan with a 2% unit. He joined the plan five years before retiring. At the time he joined the plan, his salary was $55,000 and his income will increase by $2,000 at the beginning of each year. What will be Dietrich's annual pension upon retirement? Correct The correct answer: $5,900 Your answer: $5,900 Solution: When Dietrich retires, he will have benefited from four pay increases since he joined the plan. He will receive an annual pension of $5,900, calculated as (((the average of his earnings for the years he was in the plan) x % unit) x years of service) or (((($55,000 + $57,000 + $59,000 + $61,000 + $63,000) ÷ 5) × 2%) × 5). 3 Don has participated in a 1.5% per year of service, careeraverage, definedbenefit pension plan for the last four years. During those four years, his annual salary each year was $25,000, $25,000, $30,000 and $30,000. What annual pension entitlement has Don earned to date? Correct The correct answer: $1,650.00 Your answer: $1,650.00 Solution: Don's accrued pension entitlement is $1,650.00, calculated as (((the average of his earnings for the years he was in the plan) x % unit) x years of service) or (((($25,000 + $25,000 + $30,000 + $30,000) ÷ 4) x 1.5%) x 4). 4 Wendel is a member of a definedbenefit pension plan. When he joined the company and the pension plan 15 years ago, his starting salary was low. After five years, he received a promotion that doubled his salary. He enjoyed regular salary increases over the next five years until he suffered ill health that forced him to leave his position. The company provided him with a low stress clerical position at a reduced salary where he expects to remain until his retirement in two

2/9/2016 VirtualUniversity.CIFP.ca https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp 2/4 years time. Which of the following types of pension plans is best for Wendel? Correct The correct answer: Best earnings Your answer: Best earnings Solution: A bestearnings pension plan is the most favourable form of pension plan for Wendel because benefit calculations would be based on his best three or five years of pensionable service. A flatbenefit plan is not the best form of pension plan for Wendel because such plans pay a flat rate benefit regardless of earnings and the full benefit is usually available to those with a minimum length of service, such as 25 years. Nor is a careeraverage pension plan suitable for Wendel because the benefit calculations would include the low starting salary, which would reduce his average earnings. A finalearnings plan would result in a pension based on the lower earnings at the end of his career and would not include the higher earnings at the middle of his career. 5 Samantha has belonged to a final earnings over three years, 2% unit, definedbenefit pension plan for the past 12 years. In her 10th, 11th and 12th year, she earned $45,000, $50,000 and $55,000, respectively. Samantha plans to retire after another 8 years. What pension entitlement has Samantha earned to date? Correct The correct answer: $12,000 Your answer: $12,000 Solution: For the purpose of calculating her pension entitlement, Samantha's earnings in her final three years are averaged to $50,000, calculated as (($45,000 + $50,000 + $55,000) ÷ 3). Her accrued pension entitlement is $12,000, calculated as (12 × (2% × $50,000)). 6 Klare is the owner/operator of a successful metal shop. Klare is 32 years old, and draws a regular annual salary of $185,000. What response represents the MOST SIGNIFICANT deterrent to Klare establishing an individual pension plan for himself? Correct The correct answer: He is only 32 years old. Your answer: He is only 32 years old. Solution: Individuals who are under 4045 years of age generally will not receive maximum tax deferral benefits through an IPP. 7 One of your clients, Jill, died recently at the age of 59. Her adult son, Robert, has asked you to explain the entitlements of Jill's estate to Jill's company pension plan. Jill was a widow and a vested member of the plan that has an NRA of 60. Jill's estate will receive: Correct The correct answer: at least Jill's contributions plus interest. Your answer: at least Jill's contributions plus interest. Solution: If death occurs within ten years of normal retirement age (NRA), the deceased is deemed to have been eligible for a reduced early retirement pension, payable on a joint and last survivor basis. If there is no surviving spouse, the death benefit to a designated beneficiary or estate must at least equal the employee's contribution plus interest.

2/9/2016 VirtualUniversity.CIFP.ca https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp 3/4 8 Rhiannan is about to retire, and she was hoping to receive a cash settlement from her pension fund instead of a monthly annuity. Rhiannan may be able to receive a cash settlement for any of the following reasons, EXCEPT: Correct The correct answer: She already has considerable retirement savings. Your answer: She already has considerable retirement savings. Solution: The purpose of a pension plan is to provide a continuous income upon retirement, and it is with this intent that provincial legislation restricts access to pension funds. Even if Rhiannan has a large amount of savings at the time of retirement, this does not mean that she will use it wisely to provide for her continued income for the remainder of her lifetime. Thus, having a significant retirement nest egg is not sufficient to warrant a cash settlement. 9 Rickie joined a federallyregulated, definedcontribution pension plan three years ago. He asks you to explain vesting as it applies to his pension plan. Which of the following statements is TRUE? Correct The correct answer: The contributions made by Rickie's employer are now vested. Your answer: The contributions made by Rickie's employer are now vested. Solution: That is correct. Vesting refers to the point in time when the employer's contributions to the pension plan become the property of the employee. Once the employer's contributions have vested with the employee, they legally belong to the employee and must be used to provide him with a retirement income. Since January 1, 1987, all pension credits accruing in federal plans must vest after two years of membership. Therefore, the contributions made by Rickie's employer are now vested and legally belong to Rickie. Prior to 1987, federal legislation provided for vesting of the employer's contributions once the employee had reached age 45 and had attained 10 years of service. 10 Reese had met the vesting and lockingin requirements of his employer's registered pension plan when his employment was terminated. The plan is governed by the federal PBSA. His new employer has an RPP. Reese can do any of the following, EXCEPT: Correct The correct answer: receive a cash refund of his own contributions, plus interest. Your answer: receive a cash refund of his own contributions, plus interest. Solution: Because Reese is a vested member, he is entitled to benefit from both his own and his employer's contributions to the RPP. However, both contributions are lockedin, meaning that the combined funds must be used to provide a retirement income. Therefore, he cannot receive a cash refund. Close CFP ® , CERTIFIED FINANCIAL PLANNER ® and are certification marks owned outside the U.S. by Financial Planning Standards Board Ltd. (FPSB). Financial Planning Standards Council is the marks licensing authority for the CFP marks in Canada, through agreement with FPSB. Copyright ©20022016 www.CIFP.ca. All rights reserved.

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2/9/2016 VirtualUniversity.CIFP.ca https://virtualuniversity.cifp.ca/TestScore/English/Assessment/AssessmentFormalAsResult.asp 4/4 Powered by 724Learning.net. CP3 (3618550) 2/9/2016 12:00:14 AM