Insurance

This org contracts with physicians, hospitals, and other health-care providers to provide covered medical services to policyholders at discounted fees

Preferred provider organization

The small business employer must offer coverage to full-time employees through this program

Small Business Health Options Program

Pays the beneficiary a lump sum in an annuity

cash refund option

All of the following were major health care problems in the U.S. that led to the passage of the Affordable Care Act EXCEPT universal access to medical care. waste and inefficiency in the medical system. rising health care expenditures. harmful insurer practices.

universal access to medical care

An annuity that has a varying rate of return based on the mutual funds in which one has invested. Lifetime income, but income payments vary depending on common stock prices

variable annuity

This allows eligible employees the option of receiving funds as taxable compensation or putting money into the plan on a tax-deferred basis

401k

a tax-deferred investment and savings plan that acts as a personal pension fund for employees

401k

These are designed for employees of public educational systems and tax-exempt organizations. Eligible employees voluntarily invest a fixed amount of their salaries in the plan and the plan can be funded by purchasing an annuity or by investing in mutual funds

403B plan

An expansion of medicaid, most of employers must provide health insurance, have insurance or face surtax, prevents rejection based on pre-existing condition. Also referred to as "Obamacare", has made healthcare more available

Affordable care act

Which of the following statements is (are) true with respect to group life insurance? Most group life insurance in force is term insurance. Evidence of insurability is required, especially if the group is large.

I

Which of the following statements is (are) true with respect to profit sharing plans? Contributions to profit sharing plans can be discretionary or based on profitability. Employers can make unlimited annual contributions to profit sharing plans.

I

A tax-free distribution of cash or other property from one retirement plan, which is deposited into another retirement plan

IRA rollover

Which statement is true with respect to Medicare? All individuals who retire before the full retirement age are eligible immediately for Medicare benefits. Medicare pays 100 percent of hospital and physicians' fees. Part A of Medicare pays for physician and surgeon fees. Part B of Medicare is not funded through a payroll tax; instead, beneficiaries pay monthly premiums in exchange for Part B benefits.

Part B of Medicare is not funded through a payroll tax; instead, beneficiaries pay monthly premiums in exchange for Part B benefits

Employers with 100 or fewer employees and who do not maintain another qualified retirement plan are eligible to establish a type of pension that is exempt from most nondiscrimination and administrative rules. Such plans are called

SIMPLE plans

Reasons for Social Insurance

To help solve complex social problems, To provide coverage for perils that are difficult to insure privately, To provide a base of economic security to the population

partial cash withdraw is added to an annuity with

a rider

What is the earliest age at which workers and their spouses can receive actuarially reduced Social Security old-age benefits?

age 62

primary insurance amount is based on

average indexed monthly earnings

All of the following eligibility requirements must be satisfied to collect Social Security disability-income benefits EXCEPT serving a five-month waiting period. meeting the definition of disability. being injured on the job. being disability insured.

being injured on the job

This annuity pays higher interest rate initially

bonus annuity

Which of the following statements is (are) true with respect to workers compensation? Workers compensation provides unlimited medical benefits. Workers compensation is based on the principle of liability without fault.

both

In an effort to attract workers during a tight labor market, ABC Company decided to alter its employee benefit plan. Under the new plan, employees are offered a wide variety of benefits and are permitted to select the benefits that best meet their specific needs. This type of plan is called a

cafeteria plan

This plan allows employees to select those benefits that meet their specific needs. In many plans, the employer gives each employee a certain number of dollars or credits to spend on benefits, or take as cash

cafeteria plan

These plans cover, on average, less than 60% of the total average cost of care and are available only to certain people

catastrophic plans

Frank is collecting Social Security old-age benefits. Frank just learned that his monthly benefit will be increased in January to maintain the purchasing power of the benefit. This change in benefits is called a(n)

cost of living adjustment

This insurance is offered by banks, provides for the cancellation of outstanding debt if the borrower dies

credit life insurance

This type of IRA can lower your tax bill by allowing you to deduct your contributions on your tax return. you essentially get a refund on the taxes you paid earlier in the year.

deductible

This annuity pays periodic income payments at some future date

deferred annuity

pension plan that guarantees a specified level of retirement income

defined benefit plan

Most newly installed qualified retirement plans are

defined contribution plans

All of the following statements are true with regard to defined benefit plans and defined contribution plans EXCEPT determining the annual employer contribution is easier under a defined contribution plan than under a defined benefit plan. defined contribution plans do not provide past service credits. employees are given a choice of where to invest funds under a defined benefit plan. under a defined benefit plan, the employer bears the investment risk

employees are given a choice of where to invest funds under a defined benefit plan

this variable annuity rider comes in the form of a death benefit rider that offers monthly or annual "step-ups"

enhanced death benefit

part a of medicare is entitled/ voluntary

entitled

Some insurers offer a fixed, deferred annuity that allows the annuity owner to participate in the growth of the stock market and also provides downside protection against the loss of principal and prior interest earnings if the annuity is held to term. Such an annuity is called a(n)

equity indexed annuity

Both unemployment insurance and workers compensation plans may take the past loss history of an employer into consideration when determining insurance premiums. This practice is called

experience rating

One funding instrument that is used to accumulate funds for pension plans is an arrangement in which an insurer promises to pay a specified interest rate for a number of years on a lump sum deposit. This funding instrument is called a(n)

guaranteed investment contract

Part A of Medicare

hospital insurance

All of the following are ways in which workers compensation benefits may be funded EXCEPT purchasing coverage from a private insurer. insuring through the federal workers compensation fund. self-insuring workers compensation. purchasing insurance from a state workers compensation fund.

insuring through the federal workers compensation fund

self employed plans are also called

keogh plans

Part B of Medicare

medical services

Which of the following statements is (are) true with respect to the characteristics of social insurance programs? Social insurance benefits are based on individual equity rather than social adequacy. Social insurance benefits are available only if a means (needs) test is satisfied.

neither

Most group dental insurance plans include a provision specifying that if the cost of care is above a specified amount, the dentist must submit a treatment plan to the insurer. The insurer specifies what will be covered under the plan. This information is shared with the employee who then decides whether to proceed with the treatment. This provision is called a

predetermination-of-benefits provision

Part D Medicare

prescription drug coverage

Monthly retirement benefit is based on the worker's

primary insurance amount

full benefit in group life insurance is called

principal sum

The percentage of non-highly compensated employees covered under the plan must be at least 70% of the percentage of highly compensated employees who are covered

ratio percentage test

This is designed to encourage low- to moderate-income earners to save for retirement. These tax credits reduce the actual amount of tax owed on a dollar-for-dollar basis up to some maximum limit

saver's credit

Unemployment insurance benefits are paid during periods of

short-term involuntary unemployment

A retirement plan in which the employer contributes to an IRA established for each eligible employee

simplified employee pension

Types of Deferred Annuities (3)

single premium, flexible premium, longevity

Characteristics of this type of insurance: compulsory, floor of income, benefits based on social adequacy not networth,

social insurance

OASDI is also called

social security

Virtually all private-sector employees, and a majority of state and local government employees are covered in this plan

social security

Variable annuity owners pay a number of fees and expenses. One expense that is levied is forfeiture of a percentage of the account balance if the annuity is terminated in the early years. This fee is typically 7% of the account balance in the first year, declining one percent per year for the next 6 years. This fee is called the

surrender charge

All of the following benefits are payable through the Social Security program EXCEPT unemployment benefits. survivor benefits. disability benefits. retirement benefits.

unemployment benefits

This is helping unemployed workers (through local employment offices) find jobs Encouraging employers to stabilize employment

unemployment insurance

part b of medicare is entitled/ voluntary

voluntary

This is a social insurance program that provides medical care, cash benefits, and rehabilitation services to workers who are injured or sick from job-related accidents or disease

workers comp

Which of the following statements is (are) true with respect to group disability income plans? Short-term disability plans typically replace 100 percent of lost income. Long-term disability plans usually use a dual definition of disability that considers the employee's own job initially, and later considers any job for which the employee is reasonably suited.

II

Shelton Manufacturing Company (SMC) employs over 5,000 workers. All of the company's operations are conducted in the same city. Shelton's group health insurance expenditures have increased significantly in recent years. To contain costs, SMC entered into an agreement with Community Hospital (CH). Under the agreement, CH will provide services to SMC employees at a discounted rate. SMC will provide a financial incentive for its employees to use CH. Although workers are not required to use CH, the reimbursement rate for care provided by CH is higher than if another hospital is used. What is this type of managed care plan called?

PPO

To which of the following distributions from a traditional Individual Retirement Account (IRA) before age 59 1/2 does the 10 percent penalty tax apply?

a distribution in the form of a lump-sum payment

All of the following are characteristics of medical expense plans currently offered EXCEPT coinsurance. annual out-of-pocket limits. annual and lifetime limits. broad range of benefits.

annual and lifetime limits

The average benefit for non-highly compensated employees must be at least 70% of the average benefit provided to all highly compensated employees

average benefits test

This annuity allows the owner to participate in the growth of the stock market, and provides downside protection against the loss of principal and prior interest earnings if the annuity is held to term. distinguished by interest yield return being partially based upon equities index

equity indexed annuity

A financial institution that provides for the accumulation or administration of the funds that will be used to pay pension benefits

funding agency

Is typically structured as an HMO, but members are allowed to go outside the network for medical care

point of service plan

This option that allows the coverage to continue if the employee leaves

portable term insurance

Prior to the passage of the Affordable Care Act, health insurers could deny coverage for medical impairments that were present prior to the effective date of the coverage. For adults, starting on January 1, 2014, insurers may no longer exclude these impairments. What are these impairments called?

pre existing conditions

Gerald paid $45,000 for an immediate annuity. Gerald's insurer will pay him $500 per month for as long as he lives. Gerald's life expectancy is 15 years. For tax purposes, what is Gerald's exclusion ratio for this annuity?

50%

Which of the following statements is (are) true with respect to the Roth IRA? Roth IRA contributions are tax deductible. Roth IRA contributions accumulate income tax free and qualified distributions are not taxable if certain requirements are met.

II

Long-term care insurance policies include a provision that determines whether the insured is eligible to receive benefits. One example of this provision requires the insured to be unable to perform a certain number of activities of daily living in order to qualify for benefits. What is this policy provision used in long-term care insurance policies called?

benefit trigger provision

Annette purchased a life annuity at age 65 and started to receive monthly payments from the insurer. Annette's monthly payments consist of all of the following EXECPT unliquidated principal of annuitants who die early. interest earnings. life insurance proceeds from annuitants who live too long. premium payments.

life insurance proceeds from annuitants who live too long

All of the following statements about traditional IRAs are true EXCEPT Traditional IRA contributions are always tax deductible. A participant must have taxable income during the year in order to make a traditional IRA contribution. Even if an individual is covered by an employer-sponsored pension plan, his or her traditional IRA contribution may be tax deductible if his or her modified adjusted gross income is below a specified level. Distributions from traditional IRAs funded exclusively with pre-tax dollars are taxed as ordinary income.

Traditional IRA contributions are always tax deductible

Which of the following statements is (are) true with regard to defined benefit and defined contribution retirement plans? Prior to retirement, employees have a better idea of what their retirement benefit will be under defined benefit plans than under defined contribution plans. Defined benefit plans are more complicated and expensive to administer and fund than are defined contribution plans.

both

Which of the following statements is (are) true with regard to retirement plans for the self-employed (Keogh plans)? Sole proprietorships and partnerships can establish Keogh plans. The tax advantages enjoyed by qualified corporate plans also apply to Keogh plans.

both

Form of defined benefit plan that defines the promised benefit in terms of a hypothetical account balance and features benefit portability

cash balance plan

HMOs place heavy emphasis on

cost control

An arrangement in which the insurer guarantees the interest rate for a number of years on a lump-sum deposit

guaranteed investment contract

the employer pays the entire cost of group life insurance

noncontributory

retirement plan in which the employer sets up an individual account for each employee and specifies the size of the investment into that account. the contribution rate is fixed.

defined contribution plan

This annuity's income payments terminate when the death of the first covered person dies

joint annuity

This annuity is low cost and provides protection against the risk of depleting your financial assets at an advanced age

longevity annuity

A generic name for medical expense plans that provide covered services to the members in a cost-effective manner

managed care

Which of the following statements is (are) true with respect to disability income insurance? A standard definition of disability is used in all disability income insurance policies. The longer the elimination (waiting) period in a disability income insurance policy, the higher the premium for the policy.

neither

Curtis purchased medical expense insurance. The policy has a calendar-year deductible of $500 and 80-20 coinsurance. Curtis was hospitalized with a covered illness on January 23rd. This hospitalization was his first claim under the major medical policy for the calendar year. His covered medical expenses were $20,500. How much of this amount will the insurer pay, and how much will Curtis be required to pay?

The insurer will pay $16,000 and Curtis will pay $4,500

At the time the variable annuity benefits are to be paid out to the annuitant, the accumulation units in the participant's individual account are converted into these

annuity units

Many employers have converted their traditional defined-benefit plans to a newer type of plan. Under this type of plan, benefits are defined in terms of a hypothetical account balance, with actual retirement benefits dependent on the value of a participant's account value at retirement. This type of plan is called a(n)

cash balance plan

Group medical expense plans usually include a provision that specifies how claims will be settled if more than one group health plan covers the claim. For example, a man may be covered under both his own group plan and under his wife's group plan. This provision is called a

coordination-of-benefits provision

This is a requirement by law for certain persons to purchase or otherwise obtain a good or service

individual mandate

A plan that contracts with healthcare providers to provide certain medical services to members at discounted fees

preferred provider organization

You make contributions with after-tax dollars, and qualified distributions at retirement are received income-tax free.

roth 401k

All of the following are characteristics of profit sharing plans EXCEPT profit sharing plans encourage employees to work more efficiently. profit sharing plans offer greater flexibility in employer contributions than do other qualified plans. there are no annual limits on the amount contributed to an employee's account. the employer's cost is not affected by the age and number of covered employees.

there are no annual limits on the amount contributed to an employee's account

Jack is afraid that if he quits his job, he will lose the pension contributions that his employer has been setting aside for him for the past 12 years. An employee's right to pension contributions if employment terminates prior to retirement is known as

vesting

an employee's right to at least a portion of the benefits accrued under an employer pension plan, even if the employee leaves the company before retiring

vesting

This annuity pays until last person dies in annuity

joint and survivor annuity

The minimum coverage requirements for qualified pension plans are designed to prevent discrimination. In the context of employee benefits, discrimination refers to slanting benefits to favor

highly paid employees versus lower paid employees

A fixed sum of money paid to someone each year, typically for the rest of their life Person who receives payments is the annuitant

individual annuity

Pays a life income to the annuitant; after the annuitant's death, payments continue to a beneficiary until they equal the purchase price

installment refund option

Provides periodic payments that are adjusted for inflation in an annuity

inflation-indexed annuity option

Bob and Jasmine Davis are a married couple who are both 67 years old. Bob and Jasmine purchased an annuity covering both of their lives. The settlement option will provide payments until Bob and Jasmine are both deceased. The settlement option Bob and Jasmine selected is a(n)

joint and survivor

An IRA for which you can deduct your contribution each year from your taxable income

Traditional IRA

During the funding period, variable annuity premiums are used to purchase

accumulation units

this protects someone if they outlive their savings

annuity

All of the following are reforms included in the Affordable Care Act EXCEPT: Insurers are permitted to use annual and lifetime benefit limits. Young adults are permitted to remain on their parents' health coverage until age 26. Not allowing insurers to rescind health insurance policies if there was an unintentional error on the application. Insurers must payout at least a specified percentage of premiums in medical claims and medical claims expenses.

Insurers are permitted to use annual and lifetime benefit limits

Which of the follow statements is true with regard to the Affordable Care Act? The Act provides a tax credit for a portion of a small employer's premium cost. The Act requires that insurers must allow young adults to remain on their parents' insurance plan until age 30. The Act permits insurers to exclude pre-existing conditions that were present prior to implementation of the Act. The Act restricts annual benefit limits to $250,000 and lifetime benefit limits to $500,000.

The Act provides a tax credit for a portion of a small employer's premium cost

Which of the following statements is true regarding health savings accounts (HSAs)?

To establish an HSA and receive favorable tax treatment, you must be covered by a high-deductible health plan

Test required by the Employee Retirement Income Security Act to ensure that highly compensated employees do not receive greater benefits from a 401(k) plan than those received by other employees.

actual deferral percentage test

this variable annuity rider protects the principal against loss due to market declines

guaranteed death benefit

Tax exempt account established exclusively for the purpose of paying qualified medical expenses

health savings accounts

An arrangement where each participant has an individual account, and the employer's contribution is a fixed percentage of the participant's compensation

money purchase plan

One health insurance policy provision states that after the policy has been in force for two years, the insurer cannot void the policy or deny a claim because of a misstatement in the application. This provision is called the

time limit on certain defenses provision

Which of the following statements is (are) true regarding annuities? Insurers pool the risk of excessive longevity when offering life annuities. An annuity can provide a lifetime income that cannot be outlived.

both

One type of consumer-directed health plan combines insurance, a health savings account (HSA), and a large level of retention by the employee. After an employee has paid a large out-of-pocket amount, then insurance which may include a coinsurance requirement is available. This type of plan is called a

high deductible health plan

Period in which funds are paid out

liquidation period

This is paid to an insured whose earned income is reduced because of an accident or sickness

pro rata disability benefit

Some group insurance plans require new employees to satisfy a period of one to three months before they can participate in the group insurance plan. This time period is called a

probationary period

Contributions to this plan depend on how much the company makes

profit sharing plan

These enhance the economic security of individuals and families and are partly or fully paid for by employers

benefits

All of the following statements concerning group insurance underwriting are correct EXCEPT insurance should be incidental to the formation of the group. it is best to have few people joining or leaving the group. benefits should be automatically determined to preclude individual selection of benefits. a minimum percentage of eligible employees must participate in the plan.

it is best to have few people joining or leaving the group

Premiums are used to purchase accumulation units during the period prior to retirement in this annuity

variable annuity

annuity payments consist of these three sources of $

Premium payments Interest earnings Unliquidated principal of those who die early

An individual retirement account allowing a person to set aside after-tax income up to a specified amount each year

Roth IRA

An organized system of health care that provides comprehensive medical services to its members on a prepaid basis

Health maintenance organization

Allows workers with taxable compensation to make annual contributions to a retirement plan up to certain limits and receive favorable income tax treatment

IRA

Paula, a 42 year-old surgeon, purchased disability income insurance. The policy defined disability as "the inability to perform the duties of your own occupation" for the first two years. After two years, disability is defined as "inability to perform the duties of any occupation for which you are reasonably suited by education, experience, and training." The policy would replace three-fourths of lost income after a six-month elimination period, with benefits payable until age 65. Recently, Paula was severely injured in an automobile accident in which her hands were crushed and had to be amputated. Which of the following statements is true regarding the benefits that Paula will receive under her disability income policy?

Paula qualifies for benefits for at least two years

four major healthcare problems in the US

rising healthcare spending, lots don't have health insurance, lots of waste and inefficiency, and harmful insurer practices