Certified Payroll Professional Practice Exam

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Prepare for the Certified Payroll Professional Exam with comprehensive flashcards and multiple choice questions. Each question is accompanied by detailed hints and explanations to aid your understanding. Get ready to ace your Certified Payroll Professional Exam!

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Which type of plan is described as employer-sponsored with benefits based on a formula?

Cafeteria Plan/Sec 125
Defined benefit plan
Defined contribution plan
Qualified plan

The correct answer is: Defined benefit plan

A defined benefit plan is the correct answer because it is an employer-sponsored retirement plan where benefits are based on a specific formula, such as years of service and salary history. This type of plan guarantees a specified monthly benefit at retirement, providing employees with a predictable income stream. The other options are not the correct answer: - A cafeteria plan/Section 125 and qualified plans are types of employee benefit plans but do not specifically have benefits based on a formula. - Defined contribution plans, unlike defined benefit plans, do not guarantee a specific benefit amount at retirement and instead rely on contributions and investment performance to determine the final account balance available to employees at retirement.