LLQP Segregated Funds & Annuities · Component 2.4 · 30% of the exam
A group plan member never selected an investment option when he enrolled. The agent should explain that his contributions have been:
- Areturned to the employer each pay period until an investment instruction is received
- Bheld in cash earning no return at all since the date the member first enrolled in the plan
- Cinvested in the highest returning fund available under the plan during each calendar year
- invested in the plan's default option, which the member should now review for suitability
Correct answer: D) invested in the plan's default option, which the member should now review for suitability
Capital accumulation plans specify a default option for members who make no choice, often a balanced or target date fund. The sponsor must disclose it, and the member should check that it still matches the horizon and risk tolerance.
Why the other options are wrong
- AContributions are invested in the default; they are not returned to the employer.
- BA default option is an investment, not an uninvested cash balance.
- CNo plan chases the best performing fund on the member's behalf each year.
Exam tip
No member choice means the default option applied, so review it for suitability.
Common mistake
Assuming a silent member is uninvested rather than sitting in the default fund.
What this tests
CISRO competency component 2.4 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.