SIE Exam Question 795: Answer and Explanation

Question: 795

Which of the following is/are correct regarding profit sharing plans?

(1) Profit sharing plans are a type of defined contribution pension plan.

(2) The minimum funding standard requires the employer to make an annual contribution.

  • A. (1) only
  • B. (2) only
  • C. Both (1) and (2) are correct.
  • D. Neither (1) or (2) are correct.

Correct Answer: D

Explanation:

A profit sharing plan is a type of defined contribution plan other than a pension plan. Contributions must be substantial and recurring, but are not required annually.

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