LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's employer offers a deferred profit sharing plan. In the review the agent should record that:
- The plan is funded by employer contributions, vests within a set period and creates a pension adjustment
- BThe employee may contribute alongside the employer, using personal registered room
- CWithdrawals are received tax-free, since the employer has already paid tax on the profits contributed
- DThe plan is a registered pension plan and guarantees a formula benefit at retirement
Correct answer: A) The plan is funded by employer contributions, vests within a set period and creates a pension adjustment
Employee contributions are not permitted, vesting is capped by the tax rules and the pension adjustment reduces the member's own registered room for the following year.
Why the other options are wrong
- BEmployees cannot contribute to this type of plan.
- CWithdrawals are taxable to the member.
- DIt is a profit sharing arrangement, not a pension plan.
Exam tip
Employer-funded, vesting capped, room reduced.
Common mistake
Ignoring the pension adjustment when calculating a member's room.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.