Which of the Following Is True with Regard to 401(k)

question 53

Multiple Choice

Which of the following is true with regard to 401(k) plans?

• A) If an employee leaves the job, his/her 401(k) plan expires.
• B) These plans give all employees a minimum level of benefits and a set amount to spend on flexible benefits, such as additional healthcare or vacation time.
• C) A 401(k) plan is a plan set up by the organization in which employees directly deposit money from their paycheck.
• D) Employee Retirement Income Security Act (ERISA) makes it mandatory for employers to offer a pension or 401(k) plan.
• E) These plans are freely available and do not create an additional administrative cost for the company.

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Definitions:

Cumulative Preferred Stock

A type of preferred stock that entitles shareholders to receive dividends in arrears before common stockholders can be paid dividends.

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation and a claim on part of the corporation's profits or losses.

Dividends Per Share

Dividends per share is a measure reflecting the amount of declared dividends for each share of common stock, revealing how much a company pays out in dividends relative to its share price.

Fiscal Year

A one-year period selected for accounting purposes, which does not necessarily correspond to the calendar year.