Which of the following statements about Section 401(k) plans is true?
A) Elective salary deferrals to these plans are free of federal income taxation until the funds are actually withdrawn.
B) These plans are exempt from rules that prevent discrimination in favor of highly compensated employees.
C) There is no limit on the actual percentage of salary that can be deferred by highly compensated employees under a qualified plan.
D) If an employee takes the funds made available to him or her in cash, the money received is not taxable.
Question 2
Which of the following statements about pension funding agencies and funding instruments is true?
A) Under a trust-fund plan, individual annuities are purchased each year for employees participating in the plan.
B) A separate investment account is a group pension account with a life insurance company.
C) If the funding instrument is a commercial bank, the plan is called an insured plan.
D) Under a guaranteed investment contract, the insurer guarantees the principal of a lump sum deposit but does not guarantee the interest rate.
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