Chapter 11 – Nonqualified Deferred Compensation Plans for Executives
Chapter 11
Nonqualified Deferred Compensation Plans for Executives
True / False Questions
1. Excess benefit plans generally have longer vesting periods than SERPs. (Supplemental
Executive Retirement Plans (SERPs))
2. Corporate-owned life insurance can be used by employers to recover the costs of
nonqualified deferred compensation. (Corporate-Owned Life Insurance)
3. Pension plans that do not meet all the ERISA minimum standards are known as nonqualified
plans. (ERISA Qualification Criteria)
4. The IRS limits the annual benefit amounts for a defined benefit plans to the lesser of
$185,000 in 2012. (Objectives of Nonqualified Plans)
5. Coverage requirements limit the freedom of employers to exclude employees from
participation. (ERISA Qualification Criteria)
6. Unfunded plans are subject to employee rights protection under ERISA. (Funding Status)
7. Funded plans allocate money to trust funds or insurance companies in an executive’s name.
(Funding Status)
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website,
in whole or part.
Multiple Choice Questions
30. This type of executive retirement plan is unfunded and can be issued upon retirement or
termination without cause, but the assets must be released to creditors if the company files for
insolvency or bankruptcy. (Rabbi Trusts)
31. Nonqualified retirement plans for executives are generally divided into these two broad
classes. (Nonqualified Retirement Plans for Executives)
32. What was the IRS limit for annual earnings amount for determining qualified plan benefits
in 2012? (Objectives of Nonqualified Plans)
33. Which of the following ERISA Title I parts does not apply to nonqualified plans?
(Supplemental Executive Retirement Plans (SERPs))
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34. Which is not a factor associated with the decision to fund a nonqualified plan? (Funding
Status)
35. Which of the following is not a feature of excess benefits plans? (Excess Benefit Plans)
36. Top hat plans are exempt from which ERISA Title I regulation? (Supplemental Executive
Retirement Plans (SERPs))
37. Which one of the following is not an unfunded plan? (Secular Trusts)
38. Which of the following is not true of the endorsement approach under the split dollar
insurance plan? (Split-Dollar Life Insurance)
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39. Which of the following is not a type of stock ownership plan? (Stock and Stock Option
Plans for Incentive Compensation and Retirement)
40. Which one of the following is not true about stock appreciation rights? (Stock Appreciation
Rights)
41. Rabbi trusts are characterized by which one of the following features? (Rabbi Trusts)
42. Which one of the following is not a characteristic of employee owned annuities?
(Employee-Owned Annuities)
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47. Discount stocks are similar to which one of the following? (Discount Stock Options)
48. Who are executives? Explain. (Defining Executive Employment Status)
Main Points
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49. Briefly discuss the issue of mandatory retirement age with regard to nonqualified plans.
(Mandatory Retirement Age)
50. Discuss the main features of top hat plans. (Supplemental Executive Retirement Plans
(SERPs))
Main Points
11–11
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or
distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website,
in whole or part.
• Neither the Department of Labor nor the Treasury Department has issued regulations to
clarify the meaning of unfunded.
• Instead, companies currently rely on Department of Labor Advisory Opinion letters or
on often-conflicting court rulings for guidance