Advanced Diploma of Financial Planning (ADFP) Practice Test

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Prepare for the Advanced Diploma of Financial Planning Exam with comprehensive quizzes on finance principles, investment strategies, and risk management. Improve your knowledge and excel in your financial planning career!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

How are employee contributions to a qualified retirement plan typically treated in terms of vesting?

They are usually 50% vested upon contribution
They are always 100% vested
They become vested after five years
They are vested after reaching retirement age

The correct answer is: They are always 100% vested

Employee contributions to a qualified retirement plan are typically treated as always being 100% vested. This means that employees have full ownership of the money they personally contribute to their retirement accounts, regardless of how long they have been with their employer. This provision ensures that employees have full access to their contributions and can carry them over should they choose to change jobs or retire. In contrast, employer contributions to such plans may have different vesting schedules that can depend on the company’s policies, vesting requirements set by law, or time-based vesting strategies. Hence, while employer contributions may not be fully vested until certain conditions are met (like years of service), the contributions made by the employees are always theirs from the moment they are deposited.