Pcc Exam Week 3

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| By Laurie Wilkinson
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Laurie Wilkinson
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Quizzes Created: 3 | Total Attempts: 446
Questions: 34 | Attempts: 159

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Pcc Exam Week 3 - Quiz

Exam 3 will test your knowledge over information taught during week 1, 2, and 3 of new hire training.
This exam is open book. Please feel free to use your notes and all other available resources to complete the exam. However, CSRs should not discuss questions or answers with on another.


Questions and Answers
  • 1. 

    Catch up contributions for Small Market plans can be matched.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Catch up contributions refer to additional contributions that individuals aged 50 or older can make to their retirement plans. These contributions are allowed to help individuals "catch up" on their retirement savings if they haven't saved enough in previous years. Small Market plans are retirement plans designed for small businesses. The statement suggests that catch up contributions for Small Market plans can be matched, meaning that the employer may also contribute an additional amount to match the catch up contributions made by the employee. Therefore, the statement is true.

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  • 2. 

    Checks mailed to residences outside of the United States will require a mandatory withholding of 40% for federal income tax.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Checks mailed to residences outside of the United States do not require a mandatory withholding of 40% for federal income tax. The statement is false because the withholding rate for federal income tax on checks mailed to residences outside of the United States can vary depending on the specific tax treaty between the United States and the recipient's country of residence.

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  • 3. 

    A participant (lives in CA, age 45, no longer employed, vested balance is $10,000) that terminated their retirement account as a lump sum will require 20% withheld for federal tax , ___ for state tax, and may be subject to pay an IRS early withdrawal penalty.

    • A.

      10% of the federal withholding amount = $200

    • B.

      20% of the federal withholding amount = $400

    • C.

      1% of the distribution amount = $100

    • D.

      5% of the distribution amount = $500

    Correct Answer
    A. 10% of the federal withholding amount = $200
    Explanation
    The participant will have 20% of their distribution withheld for federal tax, which amounts to $400. This is calculated by multiplying the federal withholding amount of $200 by 2 since 10% is equal to $200.

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  • 4. 

    Distributions that require ADP Approval will be approved ____

    • A.

      Once the Plan Administrator approves the request

    • B.

      Within 30 business days

    • C.

      Within 15 business days

    • D.

      Within 2-3 business days

    Correct Answer
    D. Within 2-3 business days
    Explanation
    Distributions that require ADP Approval will be approved within 2-3 business days.

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  • 5. 

    Straight through processing means the distribution will be processed within 3-5 business days after the PA approves the request. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The statement is false because straight through processing refers to a fully automated process that eliminates the need for manual intervention. It is designed to be completed quickly and efficiently, often within seconds or minutes, rather than taking 3-5 business days.

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  • 6. 

    To determine who approves in-service withdrawal requests, CSRs can check PES screen KC04 "Web Features".

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The given statement suggests that CSRs can use the PES screen KC04 "Web Features" to determine who approves in-service withdrawal requests. Since the statement says this is possible, it implies that the answer is true.

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  • 7. 

    Participants can request for ADP to reverse a lump sum distribution check we processed into a rollover check to another financial institution and vice versa.  This is called a Change of Mind transaction.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Participants can indeed request for ADP to reverse a lump sum distribution check that has been processed into a rollover check to another financial institution, and vice versa. This type of transaction is referred to as a Change of Mind transaction.

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  • 8. 

    Beneficiaries that inherit an account and distribute it as a lump sum payout are required to have  ____ withheld for federal taxes.

    • A.

      Optional

    • B.

      20%

    • C.

      10%

    • D.

      15%

    Correct Answer
    B. 20%
    Explanation
    When beneficiaries inherit an account and distribute it as a lump sum payout, they are required to have 20% withheld for federal taxes. This means that a portion of the payout will be set aside and sent directly to the government to cover the beneficiary's tax liability. This helps ensure that the beneficiary meets their tax obligations and avoids any potential penalties or issues with the IRS.

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  • 9. 

    This type of withdrawal becomes available if the participant rolls over assets from another financial institution into an ADP retirement account. This withdrawal will also only show and be available if the plan allows this type of withdrawal. 

    • A.

      Hardship

    • B.

      After-tax Withdrawal

    • C.

      Rollover Withdrawal

    • D.

      Age Based Withdrawal

    Correct Answer
    C. Rollover Withdrawal
    Explanation
    A rollover withdrawal is a type of withdrawal that becomes available when a participant transfers their assets from another financial institution into an ADP retirement account. This withdrawal option will only be visible and accessible if the retirement plan allows for this type of withdrawal.

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  • 10. 

    The state tax withholding for the state of Vermont is 27% of the federal withholding amount.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The statement is false because the state tax withholding for the state of Vermont is not 27% of the federal withholding amount. The specific percentage for state tax withholding in Vermont may vary depending on the individual's income and tax bracket.

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  • 11. 

    After a participant terminates their retirement plan, they will have access to the participant website for ____ before their access gets deactivated.

    • A.

      6 months

    • B.

      3 months

    • C.

      30 days

    • D.

      1 year

    Correct Answer
    D. 1 year
    Explanation
    After a participant terminates their retirement plan, they will have access to the participant website for 1 year before their access gets deactivated. This means that even after terminating their retirement plan, the participant will still be able to access the participant website and its features for a period of 1 year before their access is completely deactivated.

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  • 12. 

    If a participant terminated employment at age 40 but waits to terminate and distribute their account until age 70, they will not have to pay the early withdrawal penalty.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    If a participant terminates employment at age 40 but waits until age 70 to distribute their account, they will not have to pay the early withdrawal penalty. This is because the early withdrawal penalty typically applies to distributions made before the age of 59 1/2. Since the participant is waiting until age 70, they have surpassed this age threshold and are therefore exempt from the penalty.

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  • 13. 

    CSRs are required to read the ______ with all online withdrawal and termination requests.(Choose the most applicable option)

    • A.

      IRS Special Tax Notice Waiver

    • B.

      Fee Disclosure Script

    • C.

      American Century Rollover Script

    • D.

      Fee Disclosure Document

    Correct Answer
    A. IRS Special Tax Notice Waiver
    Explanation
    CSRs are required to read the IRS Special Tax Notice Waiver with all online withdrawal and termination requests. This document is important because it provides information about the potential tax implications of withdrawing or terminating an account. By reading this waiver, CSRs can ensure that they are providing accurate and necessary information to customers regarding their financial decisions.

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  • 14. 

    For most plans, all of the following are online distribution options EXCEPT____

    • A.

      Lump Sum DIstribution

    • B.

      Direct Transfer

    • C.

      Lump Sum and Direct Transfer

    • D.

      Installments

    Correct Answer
    D. Installments
    Explanation
    The question asks for the online distribution option that is not included in most plans. The options provided are Lump Sum Distribution, Direct Transfer, Lump Sum and Direct Transfer, and Installments. The correct answer is Installments because it is the only option that is not mentioned as an online distribution option.

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  • 15. 

    During after-tax in-service distributions, _______ money is pulled from both the employee after-tax contribution and its earnings. This means distribution requests cannot consist of employee after-tax money principal alone in order to avoid paying taxes on the distribution amount. 

    • A.

      Post 86

    • B.

      Pre 86

    • C.

      Post 87

    • D.

      Pre 87

    Correct Answer
    A. Post 86
    Explanation
    During after-tax in-service distributions, money is pulled from both the employee after-tax contribution and its earnings. This means that distribution requests cannot consist of employee after-tax money principal alone in order to avoid paying taxes on the distribution amount. "Post 86" refers to the period after 1986 when certain tax laws were changed, specifically regarding after-tax contributions to retirement plans. Therefore, the correct answer is "Post 86" as this is the time period when the described rules and regulations apply.

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  • 16. 

    If a terminated plan participant calls to withdrawal funds from their retirement account, CSRs should discuss all in-service withdrawal, hardship, and loan options.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    CSRs should not discuss all in-service withdrawal, hardship, and loan options with a terminated plan participant calling to withdraw funds from their retirement account. Since the participant is already terminated, they may not be eligible for certain options such as in-service withdrawals or loans. Therefore, it is not necessary to discuss these options with them.

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  • 17. 

    A Small Market participant can take a final distribution and rollover to 3 separate rollover institutions. 

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    A Small Market participant has the option to take a final distribution from their retirement account and then rollover the funds to three separate rollover institutions. This means that they can divide the distribution amount and transfer it to multiple institutions for investment or further management. This flexibility allows the participant to diversify their investments and potentially maximize their returns.

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  • 18. 

    The 401(k) plan allows for hardship withdrawals of elective contribution accounts for the allowable safe harbor reasons.  Which of the following participants are eligible for a hardship? 

    • A.

      Frederick is buying a vacation home (actively employed)

    • B.

      Jeanne is paying for her son’s college tuition (actively employed)

    • C.

      Michael needs to pay for his wife’s funeral expenses (not actively employed)

    • D.

      Jeremy is needing to pay for the security deposit on his new apartment (actively employed)

    Correct Answer
    B. Jeanne is paying for her son’s college tuition (actively employed)
    Explanation
    Participants in a 401(k) plan are eligible for a hardship withdrawal if they have an immediate and heavy financial need. In this scenario, Jeanne's situation of paying for her son's college tuition qualifies as an allowable safe harbor reason for a hardship withdrawal. This is because college tuition expenses can be considered an immediate and heavy financial need. The other participants' reasons, such as buying a vacation home, paying for funeral expenses, or paying for a security deposit, do not meet the criteria for a hardship withdrawal.

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  • 19. 

    Janie (age 26) was part of a recent layoff at the manufacturing facility. When she takes a distribution of her 401(k) balance it will be which type of distribution?

    • A.

      Death

    • B.

      Disability

    • C.

      Separation from Service

    • D.

      Retirement

    Correct Answer
    C. Separation from Service
    Explanation
    When Janie was laid off from the manufacturing facility, she became separated from her employment. Therefore, when she takes a distribution of her 401(k) balance, it will be considered a "Separation from Service" distribution.

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  • 20. 

    Jerry recently retired from his job as a sales manager. He is reviewing the distribution packet he received regarding his 401(k) plan. He is reading about how a lump sum distribution is taxed, how a rollover distribution is not taxed and information regarding federal tax withholding. Which notice or consent is Jerry reviewing?

    • A.

      Notice of Distribution Options

    • B.

      Special Tax Notice

    • C.

      Distribution Form

    • D.

      J&S Spousal Consent Distribution Form

    Correct Answer
    B. Special Tax Notice
    Explanation
    Jerry is reviewing the Special Tax Notice because it provides information about how a lump sum distribution is taxed and how a rollover distribution is not taxed. It also includes information about federal tax withholding. The other options mentioned do not specifically pertain to tax implications and distribution options related to a 401(k) plan.

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  • 21. 

    Ella just quit her job to go back to graduate school. She is 28 and unmarried. She has a balance in the 401(k) plan. During her exit interview, the HR Director gave her a distribution packet to review. Which notices and consents are included in her packet? (Select 2 that apply)

    • A.

      Distribution Form

    • B.

      Form 1099-R

    • C.

      Special Tax Notice

    • D.

      Salary deferral Election Form

    Correct Answer(s)
    A. Distribution Form
    C. Special Tax Notice
    Explanation
    The distribution form is included in Ella's packet because she is leaving her job and may be eligible to withdraw or roll over her 401(k) funds. The special tax notice is included because it provides information about the tax implications of taking a distribution from the 401(k) plan. Both of these documents are important for Ella to review and understand before making any decisions about her retirement funds.

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  • 22. 

    Dominic is age 35 and recently resigned his position as a toy store manager. He elects to take a lump sum distribution from his 401(k) plan. His vested balance is $28,000. Which of the following statements describe Dominic’s situation? (Select 3 that apply)

    • A.

      The distribution will automatically be paid out unless he returns the distribution form within 30 days of his resignation.

    • B.

      The distribution could be subject to an additional 10% excise tax.

    • C.

      The distribution is subject to mandatory 20% federal tax withholding.

    • D.

      He will receive a Form 1099-R to report the distribution when he files his taxes the following year.

    Correct Answer(s)
    B. The distribution could be subject to an additional 10% excise tax.
    C. The distribution is subject to mandatory 20% federal tax withholding.
    D. He will receive a Form 1099-R to report the distribution when he files his taxes the following year.
    Explanation
    Dominic's situation is described by the following three statements: The distribution could be subject to an additional 10% excise tax, the distribution is subject to mandatory 20% federal tax withholding, and he will receive a Form 1099-R to report the distribution when he files his taxes the following year.

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  • 23. 

    Angela is age 42 and recently received a hardship withdrawal from her 401(k) plan. Her withdrawal totaled $10,000. Which of the following statements describe Angela’s situation? (Select 3 that apply)

    • A.

      The withdrawal is eligible for rollover as long as she does it within 60 days of receiving her check.

    • B.

      She will be suspended from making deferral elections for 6 months following the withdrawal.

    • C.

      She will receive a Form 1099-R to report the withdrawal when she files her taxes.

    • D.

      The withdrawal could be subject to an additional 10% excise tax.

    Correct Answer(s)
    B. She will be suspended from making deferral elections for 6 months following the withdrawal.
    C. She will receive a Form 1099-R to report the withdrawal when she files her taxes.
    D. The withdrawal could be subject to an additional 10% excise tax.
    Explanation
    Angela's situation is described by the following statements:
    1. She will be suspended from making deferral elections for 6 months following the withdrawal. This means that Angela will not be able to contribute to her 401(k) plan for a period of 6 months after taking the withdrawal.
    2. She will receive a Form 1099-R to report the withdrawal when she files her taxes. This form is used to report distributions from retirement accounts, such as a 401(k), to the IRS for tax purposes.
    3. The withdrawal could be subject to an additional 10% excise tax. Depending on Angela's age and the specific circumstances of the withdrawal, she may be required to pay an additional 10% tax on the amount withdrawn as a penalty for early withdrawal.

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  • 24. 

    Tanya terminated employment last year and is 80% vested on all employer contributions.  Her before-tax contribution amount is $4,200.00.Her employer match is $2,750.00.Her employer NEC is $500.00.What is her distribution amount before taxes and fees?

    • A.

      $5,960.00

    • B.

      $6,060.00

    • C.

      $6,800.00

    • D.

      $7,450.00

    Correct Answer
    C. $6,800.00
    Explanation
    Tanya's distribution amount before taxes and fees is $6,800.00. This can be calculated by adding her before-tax contribution amount ($4,200.00), her employer match ($2,750.00), and her employer NEC ($500.00). Thus, $4,200.00 + $2,750.00 + $500.00 = $6,800.00.

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  • 25. 

    Doreen lost her savings investing in a business venture with a friend. She has several large expenses and she is thinking about taking a withdrawal from her 401(k) plan. Which of these situations qualify as a safe harbor hardship withdrawal? (Select 3 that apply)

    • A.

      Prevent foreclosure on her vacation home.

    • B.

      Expenses to repair her roof from a tree that fell on her house.

    • C.

      Medical expenses for her recent liver transplant.

    • D.

      Room and board for her son’s next year at college.

    Correct Answer(s)
    B. Expenses to repair her roof from a tree that fell on her house.
    C. Medical expenses for her recent liver transplant.
    D. Room and board for her son’s next year at college.
    Explanation
    The three situations that qualify as safe harbor hardship withdrawals are expenses to repair her roof from a tree that fell on her house, medical expenses for her recent liver transplant, and room and board for her son's next year at college. These situations meet the criteria for a safe harbor hardship withdrawal, which includes expenses related to the purchase of a principal residence, expenses to prevent eviction or foreclosure, and medical expenses.

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  • 26. 

    Michael has been saving in his company’s 401(k) plan for over 10 years. He wants to take a withdrawal from the plan for various expenses. Which of the below expenses would not be considered a safe harbor hardship reason?

    • A.

      Prevent eviction from his apartment

    • B.

      Medical expenses for his wife’s knee replacement

    • C.

      Closing costs on the purchase of a new home

    • D.

      Tuition for his daughter’s private high school

    Correct Answer
    D. Tuition for his daughter’s private high school
    Explanation
    While the other expenses listed can be considered safe harbor hardship reasons, tuition for a private high school is not typically considered a safe harbor hardship reason for taking a withdrawal from a 401(k) plan. Safe harbor hardship reasons usually include expenses such as preventing eviction or foreclosure, medical expenses, funeral expenses, or costs related to the purchase of a primary residence.

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  • 27. 

    Marie is age 60 and is still actively employed, but has elected to take an in-service withdrawal of her entire account balance (which her plan allows).  Which of the following statements describe Marie’s situation? (Select all that apply)

    • A.

      She may elect to rollover the withdrawal to her IRA.

    • B.

      She will need to stop making elective contributions as she is over 59.5 and withdrawing all of her funds.

    • C.

      Her lump sum distribution would be subject to an additional 10% excise tax.

    • D.

      She will receive a Form 1099-R to report the distribution when she files her taxes.

    Correct Answer(s)
    A. She may elect to rollover the withdrawal to her IRA.
    D. She will receive a Form 1099-R to report the distribution when she files her taxes.
    Explanation
    Marie's situation allows her to elect to rollover the withdrawal to her IRA because her plan allows it. She will also receive a Form 1099-R to report the distribution when she files her taxes.

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  • 28. 

    Loan payment money comes out of a participant's pay check pre-tax (gross).

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    This statement is false. Loan payment money does not come out of a participant's pay check pre-tax. Loan payments are typically deducted from a participant's net pay, after taxes have been deducted.

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  • 29. 

    If a participant is specifically needing something to show that hardship withdrawals do not have to be paid back, what should a PCC CSR offer them?

    • A.

      Summary Plan Description

    • B.

      Hardship Withdrawal Form

    • C.

      Letter of Acceptance

    • D.

      Special Tax Notice

    Correct Answer
    A. Summary Plan Description
    Explanation
    A Summary Plan Description is a document that provides detailed information about a retirement plan, including the rules and regulations regarding hardship withdrawals. It outlines the eligibility criteria, the process for requesting a withdrawal, and any repayment requirements. By offering the participant a Summary Plan Description, the PCC CSR can provide them with the necessary information to understand that hardship withdrawals do not have to be paid back.

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  • 30. 

    Which of the following is required in order to determine if a participant has a loan available from their 401(k)?  (Select 3 that apply)

    • A.

      Participant's account balance

    • B.

      Employment status

    • C.

      Any current outstanding loans

    • D.

      Participant's credit score

    Correct Answer(s)
    A. Participant's account balance
    B. Employment status
    C. Any current outstanding loans
    Explanation
    To determine if a participant has a loan available from their 401(k), three factors need to be considered. Firstly, the participant's account balance is necessary to determine if there are enough funds available for a loan. Secondly, the participant's employment status is important as some plans may require participants to be currently employed in order to take out a loan. Lastly, any current outstanding loans are relevant as the participant may not be eligible for an additional loan until the existing ones are paid off. The participant's credit score, however, is not required for determining loan availability from a 401(k).

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  • 31. 

    Based on the following information, determine the maximum loan amount available as of February 8, 2016:- The plan allows for one outstanding loan at a time.- The participant has never requested a loan before.- The participant’s vested account balance is $45,000.

    • A.

      $0

    • B.

      $22,500

    • C.

      $45,000

    • D.

      $50,000

    Correct Answer
    B. $22,500
    Explanation
    The maximum loan amount available is $22,500. This is because the plan allows for one outstanding loan at a time and the participant has never requested a loan before. The loan amount is typically limited to 50% of the participant's vested account balance, which in this case is $45,000. Therefore, the maximum loan amount available would be $22,500.

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  • 32. 

    Based on the following information, determine the maximum loan amount available as of July 31, 2016:- The plan allows for two outstanding loans at a time.- The participant took a loan of $45,000 on March 1, 2016.- The participant’s outstanding loan balance is $0 as of July 31, 2016.- The participant’s outstanding loan balance is $0 as of July 31, 2015.- The participant’s vested account balance is $150,000.

    • A.

      $0

    • B.

      $5,000

    • C.

      $50,000

    • D.

      $75,000

    Correct Answer
    B. $5,000
    Explanation
    The maximum loan amount available as of July 31, 2016 is $5,000. This is because the plan allows for two outstanding loans at a time, and the participant took a loan of $45,000 on March 1, 2016. Since the participant's outstanding loan balance is $0 as of July 31, 2016, they have one available loan slot. The maximum loan amount for this slot is typically 50% of the participant's vested account balance, which in this case is $150,000. Therefore, the maximum loan amount available is $5,000.

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  • 33. 

    Based on the following information, determine the maximum loan amount available as of June 15, 2016:- The plan allows for two outstanding loans at a time.- The participant took a loan of $50,000 on March 1, 2016 and this was his first loan he's ever taken from the plan.-The participant's outstanding loan balance is $30,000 as of June 15, 2016.-The participant's vested account balance is $125,000

    • A.

      $0

    • B.

      $10,000

    • C.

      $20,000

    • D.

      $30,000

    Correct Answer
    A. $0
    Explanation
    The maximum loan amount available as of June 15, 2016 is $0. This is because the participant already has an outstanding loan balance of $30,000, and the plan only allows for two outstanding loans at a time. Since the participant took a loan of $50,000 on March 1, 2016, this means that they already have two outstanding loans. Therefore, they are not eligible for any additional loans at this time.

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  • 34. 

    Which of the following are consequences of failing to repay a loan? (Select all that apply)

    • A.

      The outstanding loan balance is reported as taxable income.

    • B.

      The participant is not eligible to make salary deferral contributions for six months following a loan default.

    • C.

      The participant's loan continues to accrue interest until there is a distributable event.

    • D.

      The participant may not be eligible for another loan from the plan.

    Correct Answer(s)
    A. The outstanding loan balance is reported as taxable income.
    C. The participant's loan continues to accrue interest until there is a distributable event.
    D. The participant may not be eligible for another loan from the plan.
    Explanation
    Failing to repay a loan can have several consequences. First, the outstanding loan balance is reported as taxable income, meaning the borrower will have to pay taxes on the remaining loan amount. Second, the participant's loan continues to accrue interest until there is a distributable event, which means the borrower will continue to accumulate interest on the loan even if they are not making payments. Lastly, the participant may not be eligible for another loan from the plan, indicating that if they fail to repay a loan, they may not be able to borrow again in the future.

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