Practice Quiz

Financial Planner

Category - Retirement Savings and Income Planning

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Rick says that his employees are complaining that their benefits plan isn’t fair to everyone working in the company. To check if this is true, what should be recommended for Rick to do?
  1. Provide more benefits.
  2. Create different plans for each employee.
  3. Terminate the plan and offer no benefits.
  4. Complete a cross-testing analysis.
Explanation
Answer: D - If it seems that a benefits plan is not fair to all employees a cross-testing analysis should be completed. With this method, non-discrimination in a defined contribution plan is determined by looking at projected benefits under the plan at each employee’s retirement age, rather than looking at the amounts contributed by the employer each year.
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