SIE Exam Question 671: Answer and Explanation

Question: 671

Which of the following describes the difference between a 401(k) plan and a 457 plan?

• A. A 401(k) plan is a qualified plan, and a 457 plan is not a qualified plan.
• B. A 457 plan is a qualified plan, and a 401(k) plan is not a qualified plan.
• C. A 401(k) plan allows loans, and a 457 plan does not allow loans.
• D. A 501(c)(3) organization may establish a 457 plan but cannot establish a 401(k) plan.

Correct Answer: A

Explanation:

A 401(k) plan is a qualified plan, and a 457 plan is not a qualified plan.