Question 64

A 1,500-employee for-profit corporation can establish a 401(k) retirement plan.

A 401(k) plan is a defined contribution retirement plan that is commonly adopted by for-profit corporations, including those with a large employee base like a 1,500-employee company. This plan allows employees to save for retirement on a tax-deferred basis.

A) 401(k).

This option is correct because a 401(k) plan is specifically designed for for-profit businesses and is suitable for corporations of any size, including those with 1,500 employees. It provides employees with the ability to contribute a portion of their salary to retirement savings, often with employer matching contributions.

B) 403(b).

This option is incorrect since a 403(b) plan is intended for non-profit organizations, educational institutions, and certain government entities. A for-profit corporation would not be eligible to establish a 403(b) plan for its employees.

C) Keogh.

This option is incorrect because a Keogh plan is primarily meant for self-employed individuals and unincorporated businesses, not for-profit corporations with a significant number of employees. A 1,500-employee corporation would not typically utilize a Keogh plan.

D) Simplified Employee Pension Plan.

This option is incorrect as well, as a Simplified Employee Pension Plan (SEP) is generally used by small businesses and self-employed individuals. While a larger corporation could technically establish a SEP, it is not the most common or efficient plan for a corporation of this size.

Conclusion

The 401(k) plan is the most appropriate and widely used retirement plan for a for-profit corporation with 1,500 employees, allowing significant employee participation and tax advantages. Other options, such as 403(b), Keogh, and SEP, either do not apply to for-profit entities or are not suited for larger employee bases, reinforcing the validity of the 401(k) as the correct choice.