Which of the Following Statements About Section 401(k)plans Is True

question 43

Multiple Choice

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• A)Elective salary deferrals to these plans are free of federal income taxation until the funds are actually withdrawn.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.

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Definitions:

Coupon Rate

Annual interest rate on a bond, shown as a percentage based on its face value.

Clean Price

The price of a bond without the addition of accrued interest, reflecting just the bond's face value and market conditions.

Coupon Rate

The yearly payment rate on a bond, expressed in percentage relative to its face value.

Yield

A measure often used in finance to indicate the earnings generated and realized on an investment over a particular period, expressed as a percentage of the investment's cost.