Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

True or False: Keogh plans are required to follow a vesting schedule.

1. True

2. False

3. Only if employer-sponsored

4. Depends on the state

The correct answer is: True

Keogh plans, also known as HR-10 plans, are retirement plans designed for self-employed individuals and their employees. One of the primary requirements for these plans is that they must adhere to specific regulations set forth by the Employee Retirement Income Security Act (ERISA), which includes provisions around vesting schedules. A vesting schedule outlines the process by which participants gain ownership of employer contributions to their retirement accounts over time. This means an employee must work for the employer for a certain period before they earn the right to keep the contributions made by the employer, particularly in plans where the employer is matching employee contributions or providing additional contributions. Given that Keogh plans generally have similar objectives and requirements as other retirement plans in terms of employee benefits, they are indeed required to follow vesting schedules. This inclusion promotes fairness and encourages employees to remain with their employer long enough to fully benefit from the contributions being made on their behalf. Therefore, stating that Keogh plans are required to follow a vesting schedule is accurate.