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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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.

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