2-15 Ch 10-14 Quizzes
7. Herbert and Olga, both age 48, have been married for 10 years. They have no children, and each has a well-paying job. However, neither is covered by an employer retirement plan. What is the maximum amount they may set aside together in tax-deductible, traditional IRA funds in 2020?
$12,000
5. Jan, a single, working mother, dies at age 40. Dave, her only son, would receive a one-time lump-sum benefit of
$255
11. Bob, age 43, owns a traditional IRA and a Roth IRA. What is the maximum amount that he can contribute to both accounts in 2020 without being penalized?
$6,000
9. If David sets up a traditional IRA, what is the maximum contribution he can make and deduct from taxes in 2020?
$6,000
2. When a cash value life insurance policy is converted into an annuity in a nontaxable transaction, that event is generally known as a
1035 exchange
5. James died after receiving $180 monthly for six years from a $25,000 installment refund annuity. His wife, Lucy, as beneficiary, now will receive the same monthly income until her payments total
12,040
3. Bill is self-employed. The FICA tax rate for Bill is
15.3 percent
7. Which of the following statements about key-person insurance is CORRECT?
Because the business has complete control over the policy, it can be considered a business asset.
9. Which of the following statements regarding equity index contract factors is most CORRECT?
Cash values of equity index contracts usually grow at a minimum interest rate.
10. Which of the following statements correctly describes the tax advantage of a qualified retirement plan?
Earnings of the plan are taxable to the employee only when he or she receives benefits.
13. All of the following employed persons who have no employer-sponsored retirement plan would be eligible to set up and contribute to a traditional IRA EXCEPT
Edna, age 72, nurse
4. "Annuity payments are taxable to the extent that they represent interest earned rather than capital returned." When an annuitized payout option is chosen, what method is used to determine the taxable portion of each payment?
Exclusion ratio
1. Rolland is 45 years old and married. He has a son, age 19, a freshman at a local university and a daughter, age 8. Decreasing term insurance would be recommended for Rolland in order to accomplish which of the following reasons?
Guarantee a college education for the son
3. Which of the following statements regarding annuity payout options is NOT correct?
In a cash refund annuity, the annuitant's beneficiary always receives an amount equal to the beginning annuity fund plus all interest.
1. Which of the following examples pertaining to Social Security benefits is CORRECT?
Mason, who is married with one son, age 16, is a fully insured retired worker receiving Social Security benefits. In addition, his spouse is eligible for benefits at age 62 and his son, normally, is eligible for benefits until he is 18 years old.
10. Which of the following statements describes equity index contracts?
Most of the investments backing equity index contracts are similar to those for non-index contracts.
6. A partnership owns, pays for and is the beneficiary of the life insurance policies on the lives of its individual partners. This is known as a(n)
entity buy-sell plan
8. Rudy is eligible for full death, retirement and disability benefits under Social Security. His worker status is
fully insured
11. All of the following statements regarding annuities are correct EXCEPT
generally, annuity contracts issued today require fixed, level funding payments
2. All of the following statements correctly describe the purpose of Social Security EXCEPT
it provides a source of income for a meaningful standard of living during retirement
12. Before he died, Gary received a total of $9,200 in monthly income payments from his $15,000 straight life annuity. He also was the insured under a $25,000 life insurance policy that named his wife, Darlene, as primary beneficiary. Considering the two contracts, Darlene would receive death benefits totaling
25,000
4. Ellen works part time to supplement her family's income. Last year she earned $6,500 and worked at least part of every month. With how many quarters of coverage will she be credited?
4
3. All of the following types of plans are reserved for small employers EXCEPT
401(k)s
9. With three partners in a business, how many life insurance policies would be required to insure a cross-purchase buy-sell plan?
6
6. A distribution received from an employer-sponsored retirement plan or from an IRA is eligible for a tax-free rollover if it is reinvested in an IRA within how many days after the distribution?
60
6. Which of the following statements regarding Social Security survivor benefits is NOT correct?
A healthy dependent child of a deceased worker will be entitled to an income benefit until age 18, or to age 22, if he or she attends college.
8. What annuity payout option provides for lifetime payments to the annuitant but guarantees a certain minimum term of payments, whether or not the annuitant is living?
Life with period certain
2. With regard to group insurance plans, which of the following statements is CORRECT?
Per unit of benefits, group insurance generally is available at rates lower than those for individual plans.
5. Which of the following scenarios pertaining to IRAs is NOT correct?
Peter inherits $15,000 in IRA benefits from his father, who died in 2008. Peter can set up a tax-favored rollover IRA with the money and defer current income tax on the benefits received.
7. In determining Social Security retirement benefits, which of the following statements is CORRECT?
The PIA is a determination of the amount equal to the worker's full retirement benefit at his or her full retirement age.
2. Which of the following phrases best describes vesting?
The employee's right to funds or benefits, contributed by the employer, should he or she leave that employer
10. Which of the following statements regarding ways to determine the proper amount of life insurance is CORRECT?
There are two basic approaches to determining the amount of life insurance that is needed: the human life value approach and the needs approach
1. Which of the following statements about 401(k) plans is CORRECT?
There is a limit on employee deferrals
4. Which of the following statements regarding key-person insurance is NOT correct?
Premiums for a key-person life insurance policy are a tax-deductible expense to the business.
8. Which of the following statements regarding deferred compensation plans is CORRECT?
They permit a business to provide extra benefits to officers, executives and other highly paid employees.
6. Albert has purchased an annuity that will pay him a monthly income for the rest of his life. If Albert dies before the annuity has paid back as much as he put into it, the insurance company has agreed to pay the difference to Albert's daughter. What annuity payout option did Albert select?
a cash refund
8. All of the following should be eligible to establish a Keogh retirement plan EXCEPT
a major stockholder-employee in a family corporation
12. All of the following statements about SIMPLE plans are correct EXCEPT
an employer must make a nonelective contribution of 2 percent of compensation on behalf of each eligible employee
4. All of the following statements pertain to the conversion privilege of group term life insurance are correct EXCEPT
an insured employee must convert to the same type of coverage as was provided under the group plan (that is, term)
1. The type of insurance most frequently used in group life plans is
annually renewable term
3. Group insurance plans that require employees to pay a portion of the premium are called
contributory
3. Three business partners individually agree to acquire the interest of a deceased partner and own life insurance on each of the other partners in the amount of his or her share of the business's buyout value. What is described here is a(n)
cross-purchase buy-sell plan
7. Joanna and her husband, Tom, have a $40,000 annuity that pays them $200 a month. Tom dies and Joanna continues receiving the $200 monthly check as long as she lives. When Joanna dies, the annuity payments cease. This is an example of a(n)
joint and full survivor annuity
1. All of the following statements about variable annuities are correct EXCEPT
once a variable annuity has been annuitized, the amount of monthly annuity income cannot fluctuate
2. Robert and his employer agree on the purchase of split-dollar life insurance policy and the usual split-dollar approach to premium payments. Each year, the employer will contribute to the premium an amount equal to
the increase in the policy's cash value
5. All of the following statements regarding survivor financial needs are correct EXCEPT
the term "dependency period" refers to the 20-year period immediately following the insured's death during which the widowed spouse must depend on Social Security
4. All of the following statements regarding Roth IRAs are true EXCEPT
they mandate distributions no later than age 70 1/2