Life 4 (10, 12 & 14)

An employer is paying $450 for $75,000 of group life insurance on it's employees, broken down as follows: The cost for the first $50,000 is $300, the cost for the next $25,000 is $150. Which of the following statements are true?

$150 will be included as compensation Explanation:The premium for the first $50,000 will not be included. The PREMIUM for any amount over $50,000 WILL be included.

Which of the following might not be covered by Social Security?

1 & 3 Explanation:is wrong because it should be hired before 1984. #3 is correct because each state and local government will decide for itself whether or not to participate.

Florida Law requires what percentage of participation in a non-contributory group life plan?

100% Explanation:There are no minimum participation requirements in a contributory plan.

Lightning Joe died leaving behind a wife, Thunderhead, age 35, and their 12 year son, Cumulonimbus. Thunderhead's blackout period will be for how long?

21 year Explanation:The blackout period begins when the youngest child reaches age 16, making Thunderhead 39. This continues until she is first eligible for Social Security benefits, age 60. Do not confuse the Survivor benefits with the Retirement benefits, which are ages 65 and 62. Survivor benefits are ages 65 and 60. Remember, the child receives a benefit until age 18.

Karen is 30 years old. She has a daughter age 10. If Karen's husband were to die, the blackout period would last how long?

24 years Explanation:The blackout period begins when the youngest child reaches the age of 16. In this example Karen would be 36. No more money would be paid to Karen from Social Security until she reaches, at the earliest, age 60 (24 years). Keep in mind, that the child's benefit would pay the child until age 18.

Sitting Bull was "currently insured" under Social Security when he died. His spouse will receive

255.00

Floyd, who has $2,000 of group life insurance, has just terminated his employment. Floyd has how many days in which to convert his group coverage to individual coverage?

31

Regarding eligibility requirements in a group life plan, for the plan to receive favorable tax treatment the government requires the plan to cover what percentage of the eligible employees?

70% Explanation:These are requirements set by the government to prevent the employer from discriminating in favor of the highly paid. Be careful here. This has nothing to do with the state's requirement or the insurance company requirements.

A Coverdell Savings Account is:

An after tax savings vehicle for education Explanation:These are education savings accounts funded with after tax dollars where the interest will not be taxed if the money is used for educational purposes. The monies must begin being distributed by the time the child reaches age 18. The contribution limits are capped at $2000. There are income limits that apply and a 10% penalty if certain conditions are not met.

Social Security benefits are based upon a worker's

Average Indexed Monthly Earnings (AIME) Explanation:The AIME takes into account inflation.

All of the following statements concerning Deferred Compensation plans are correct except:

Contributions may be tax deducted. Explanation:Deferred Compensation contributions are not tax deductible (non-qualified), therefore, the plans may be used to discriminate in favor of the highly paid employees.

The period of time following the death of a breadwinner during which the children are living at home is a/an:

Dependency period

A Multiple Employer Welfare Arrangement (MEWA) is all of the following except:

Fully Insured Explanation:MEWAs can NOT be fully insured. They MUST be self Insured.

Which of the following is/are true about GROUP LIFE?

Group life is not concerned with the selection of individual risks, but

Which of the following is not considered a group permanent plan?

Group single payment insurance Explanation:There is no such beast as Group single payment insurance. Although not very common, the others may be used. They provide cash value for the employees, the employer or both.

In the needs approach, all of the following sources of income should be taken into account except:

Income from term insurance

The human life value tried to measure what a life was worth in economic value to a family. Which of the following statements would be true of this approach?

Inflation was not taken into account.

What type of benefits does a Multiple Employer Welfare Association provide?

Insurance

Which of the following is not true concerning blanket insurance?

Insureds receive a policy

Which of the following statements is true concerning split-dollar insurance?

It is a method of purchasing insurance.

All of the following would be considered an employee benefit except:

Key Person Life Insurance

Types of groups approved for group insurance include:

Labor unions and trusteeships Fraternal Organizations Association Groups

For a group life plan to receive favorable tax treatment, the government imposes certain requirements to ensure that the rank-and-file employees are not discriminated against. Which of the following statements regarding eligibility requirements is not correct?

Life insurance amount has to be the same for everyone

Which of the following statements concerning social security benefits is true?

Michael retired at age 65. He has a 15 year old totally disabled daughter and a wife, age 45. The child will receive income for life. The wife also will receive a monthly benefit, even though she is under age 62.

All of the following statements concerning group credit life are true except:

Premiums are paid entirely by the creditor.

Which of the following pertaining to Group Credit Life Insurance is correct?

Premiums are paid wholly by the insured.

The minimum number of employees who may constitute a group for insurance purposes is specified under which

State Laws Life insurance company underwriting rules

Concerning Buy/Sell Plans in a corporation, with 3 equal stockholders, how many policies would be needed?

Stock Redemption - 3 policies

Which of the following is not true concerning the FICA tax?

The FICA tax has no limits as to the retirement portion

Which of the following is true concerning key person life insurance?

The cash values are listed as an asset on the company's balance sheet.

Which of the following best describes the normal conversion benefit available to terminated employees under a group life insurance policy?

The employee may convert to an individual whole life policy within 31 days without submitting evidence of insurability.

Which of the following statements concerning deferred compensation and salary continuation plans are correct?

The employer funds the salary continuation plan, the employee funds the deferred compensation plan.

Which of the following statements concerning Multiple Employer Trusts (METs) are true?

The employer must join the trust METs are designed for employers who have a small number of employees. If the MET is funding the trust with insurance contracts rather than self-funding, then the trust is the contract holder and each employee is receiving a certificate.

All the needs that arise when a breadwinner dies arise when the breadwinner becomes disabled except:

The final expense fund

A buy-sell agreement was established for a $300,000 partnership with 3 equal partners. Assuming a cross-purchase agreement, which of the following statements is true?

The partners purchases 6 policies for $50,000.

Which of the following concerning deferred compensation plans is not correct?

They are qualified plans Explanation:Deferred Compensation plans are non-qualified. They receive no favorable tax treatment from the IRS. They are indeed used by businesses to discriminate in favor of the elite.

All the following statements concerning deferred compensation plans are correct except:

They receive favorable tax treatment from the IRS. Explanation:If someone were in a high tax bracket and receiving a bonus, taxes could eat the bonus. The bonus would be deferred, applying the bonus to a cash value policy on the life of anyone the company chooses. If the person died before retirement the proceeds of the policy would be paid to the person's beneficiary. If the person lived to retirement, the cash would be used to supplement retirement. Can discriminate with a deferred comp. plan.

In a three-person partnership, a buy/sell Cross-Purchase plan requires each partner to purchase how many life insurance policies?

Two

For whom is the entity plan best suited?

a partnership with many partners

Life insurance can be used in businesses for all the following ways except:

as a profit sharing plan Explanation:A profit sharing plan is a qualified tax deductible retirement plan. Can't use life insurance.

A plan, usually funded by life insurance, to purchase a deceased partner's share of a business is known as a:

buy / sell agreement

All of the following are covered under the social security system except:

certain railroad workers

Under SOCIAL SECURITY, a covered worker's PIA is:

equal to the full retirement benefit

Lanny, covered under his company's group life plan, was terminated June He died June 15. His life insurance policy will pay:

full benefit

A MEWA is not:

fully insured Explanation:It is a type of Multiple Employer Trust for union employees who have a common bond. They are fulyl SELF-INSURED and tax exempt.

Which is not considered a group permanent plan?

group credit life

In a typical split-dollar policy the employer and the employee split the cost of the insurance. On an annual basis, the employer's outlay is equal to the:

increase in cash value

In order to qualify for favorable tax treatment, group life policies:

must have at least 85% of the participants be non-key employees.

All of the following are eligible for Social Security except

railroad workers

All the following are examples of non-qualified plans except:

simple plans

Which is not the primary purpose of Key Person insurance?

tax deductible premiums

With a Key Employee insurance policy, who is normally the beneficiary?

the business

Which of the following describes the favored tax treatment to the business of Key Employee life insurance

Death proceeds are received by the business tax free.

The following types of GROUP LIFE plans are available EXCEPT

Group deferred life plans

The following types of GROUP LIFE plans are available EXCEPT:

Group deferred life plans