CHAPTER 16
1. The Omnibus Budget Reconciliation Act of 1993 placed a ________ cap on deductible
compensation of the top five executive officers of an organization.
(a) $500,000
(b) $750,000
(c) $1,000,000
(d) $1,500,000
2. Nonqualified stock plans include all but which one of the following?
(a) Incentive Stock Options
(b) variable price stock options,
(c) restricted stock options
(d) tax-offset stock option plan
3. Which one of the following features is least common in golden parachutes?
(a) opens with a change of 20 percent in ownership
(b) provides continuation of base pay from one to five years
(c) permits immediate vesting of any stock option
(d) grants employee continuation of supplemental benefits
4. Which one of the following would not be considered a “perk”?
(a) company car,
(b) ESOP
(c) spouse travel allowance
(d) kidnap and ransom protection
5. Stock acquisition plans provide for all of the following except
(a) promote substantial organization ownership rights
(b) avoid federal income tax obligation
(c) assist employees develop an estate
(d) enhance employee willingness to save for the future
6. SEC regulations regarding compensation include disclosure information on all but which one of
the following?
(a) cash remuneration of ten highest-paid executives
(b) stock options and exercises during the fiscal year
(c) golden parachutes valued at $60,000 or more
(d) incremental cost to the company of perquisites valued at $25,000 or more
7. FASB has increased its influence on executive compensation by
(a) increasing income tax rates on executive compensation
(b) forbidding organizations to offer certain kinds of perquisites
(c) restricting time when executives can buy or sell stock
(d) establishing accounting treatment for various kinds of stock-based incentive plans
8.
Supplemental Executive Retirement Plans (SERPs) are used for all but which one of the
following?
(a) overcome ERISA-imposed limits on qualified pension plans
(b) guarantee employees that future retirement payments will be made
(c) promote executive fulfillment of contractual obligations
(d) retain control of assets by employers
9. Trusts include all but which one of the following?
(a) trustee
(b) grantor
(c) government overseer
(d) beneficiary
10. Which one of the following is not a compensation plan used by organizations to overcome
ERISA-imposed limits on qualified pension plans?
(a) COLI
(b) rabbi trust
(c) SEP
(d) SERP
11. Which one of the following is not included in defining an insider for SEC requirements?
(a) has annual cash remuneration of $150,000
(b) has annual cash remuneration of at least $60,000 and is one of the five highest-paid
executive officers
(c) receives annual perquisites valued at $25,000
(d) has available a golden parachute valued at $60,000 or more
12. The title given to those employees of US companies in a foreign country whose basic residence is
the host country is
(a) locals
(b) expatriates
(c) third-country nationals
(d) repatriots
13. The hiring of TCNs rather than expatriates includes all but which one of the following factors?
(a) accept lower salaries
(b) understand local customs
(c) better understanding of corporate policies
(d) reduced relocation costs
Match the description of a tax-related term listed in the right-hand column with the appropriate term listed
in the left-hand column:
Tax Term Description/Example
14. Nonqualified (a) Employee must not have control over
funds
15. Top-Heavy Plan (b) Employee does not have ownership to
any of plan funds
16. Constructive Receipt (c) Employer cannot take a tax deduction
until employee is required to include it
as taxable income
17. Nonfunded (d) Accumulated benefits accruing to key
employees exceed 60 percent of present
value of accrued benefits of all
participants in plan
Match the description of a feature of the corporate insurance program listed in the right-hand column with
the appropriate insurance program listed in the left-hand column:
Corporate Insurance Feature
18. Section 79 (a) Can provide employees with up to
$50,000 of tax-free group life insurance
19. Split Dollar (b) Combines low-cost term insurance with
tax-sheltered investment opportunities
20. Supplemental Incentive Plan (SIP) (c) Resulting cash value of plan can fund a
deferred compensation agreement
21. GULP (d) A future income contract between
employer and employee that provides
supplemental income payments for a
specified period of time or until death
Chapter 16