Life 4 215 license
Which of the following statements concerning social security disability benefits is true?
There is a 5 month waiting period to apply for benefits.
Which of the following might not be covered by Social Security?
#2 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.
The lump sum death benefit payable under social security is:
$255.00 Explanation: $255.00...payable to a surving spouse or eligible children.
If an employer pays the group life insurance premium, the employee does not have to list the premium as income if the amount is between
0 - $50,000 Explanation: The premium for the first $50,000 will not be included. The PREMIUM for any amount over $50,000 WILL be included.
What is the minimum number of employees required in Florida for group insurance?
1
Shaka Kahn, who has $20,000 of group life insurance, has just terminated his employment. The maximum amount that Mr. Kahn will be able to convert is:
20,000
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 Explanation: "Currently insured" only qualifies for the $255.00 death benefit. This means he does not have enought quarters. He needs 40 quarters to "fully insured".
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.
Which of the following statements regarding Coverdell Education Savings Accounts are true?
Contributions must be made before the beneficiary turns 18 Explanation: Maximum contributions to these accounts are $2000 and must be made before the beneficiary turns 18. Any funds remaining after the beneficiary turns 30 will be taxed or they may be rolled over to fund another beneficiary. Contibutions are not deductible.
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 period of time following the death of a breadwinner during which the children are living at home is a/an:
Dependency period Explanation: The greatest need for income is when a breadwinner dies and there are children living at home. This is the dependency period. The blackout period refers to the period from when a breadwinner dies and the youngest child reaches age 16. Income would stop at this time and not begin again until at the earliest age 60.
What is the maximum age that the earnings test for social security retirement benefits could be applied?
FRA
At what time can a person continue working without fear of having their social security check reduced?
FRA Explanation: FRA is the Full Retirement Age. This is age 65 for those born before 1938...for those born after 1959, it is age 70..so, it is different for most folks. This is the time one will receive full retirement benefits. All S.S. benefits are based on this FRA...If someone retires before their FRA and earns above a specified amount of income they will have their S.S. retirement check reduced..a penalty for working... Holy Smokes...
Qualification for Social Security disability benefits requires a waiting period of how long?
Five months
Lanny, covered under his company's group life plan, was terminated June 1. He died June 15. His life insurance policy will pay:
Full benefit
A Multiple Employer Welfare Arrangement (MEWA) is all of the following except:
Fully Insured
The following types of GROUP LIFE plans are available EXCEPT:
Group deferred life plans
Which of the following is/are true about GROUP LIFE?
Group life is not concerned with the selection of individual risks, but rather the selection of risks by classification. 2. The group life policy must be incidental to the group's purpose.
Which of the following is not considered a group permanent plan?
Group single payment insurance
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. Explanation: This approach has been replaced by the needs approach. There are too many factors left untouched with this system. Inflation, pay raises, and other sources of income were not calculated in this approach.
What type of benefits does a Multiple Employer Welfare Association provide?
Insurance
Which of the following statements is true concerning split-dollar insurance?
It is a method of purchasing insurance. Explanation: Split dollar is a method of purchasing insurance. It is used by the businees owner, who has the ability to pay for insurance in order to help the employee purchase insurance if the emplyee has the need, but not the ability to pay.
All of the following would be considered an employee benefit except:
Key Person Life Insurance Explanation: A Key-Person policy would protect the business in the event of the death of a "key" employee. Split-Dollar, Deferred Compensation, and Salary Continuation plans are designed for the benefit of employees. They are non-qualified plans, which means the business can discriminate in favor of any employee of his/her choosing.
Types of groups approved for group insurance include:
Labor unions and trusteeships Fraternal Organizations Association Groups
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. Explanation: DEATH BENEFITS: The child only receives a benefit until he/she is 18 (19 if in high school). They did away with college funding. RETIREMENT BENEFITS: The wife will receive a benefit, even though she is under age 62, because the child was disabled before age 22. The child will receive a benefit indefinately. DISABILITY BENEFITS: His disability benefit will be less because he had taken early retirement. TAXATION: S.S. benefits may be taxed up to 85%.
All of the following statements concerning group credit life are true except:
Premiums are paid entirely by the creditor. Explanation: The insurance is paid by the debtor. The creditor may insist that coverage be required but they can not force the debtor to obtain coverage from their institution.
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 law(s) or rule(s)?
State Laws III. Life insurance company underwriting rules Insurance companies have underwriting guidelines of their own. States may or may not have minimum numbers required to qualify as a group.
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. Explanation: The FICA tax (7.65%) can be broken down into two parts. Old age, Survivor, Disability (OASDI) and Medicare. Of the 7.65%, 6.20 is applied to the OASDI portion and the remaining 1.45 of the tax funds medicare. The 6.20 is apllied on incomes up to a certain level ($118,500 in yr.2015). After that level is reached, no more 6.20 is taken out. However, the portion of the tax representing medicare (1.45) is unlimited. No matter how much income one earns in a given year this does not stop. In January it all starts over again.
With a Key Employee insurance policy, who is normally the beneficiary?
The business
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. Explanation: The policy is acually a liability. But, the cash value is a tangible amount that adds to the balance sheet. The premiums are not tax dedcutible. As for split dollar, there is no such beast as a split dollar policy, split dollar is a METHOD of buying insurance, not a particular policy.
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.
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?
The life insurance must be the same amount for all. Explanation: The insurance does not have to be the same dollar amount. However, the amount of insurance provided to all employees must bear a uniform relationship to their level of compensation or position. In other words, a manager would receive more insurance than a supervisor. The cost for any amount of insurance above $50,000 would be included in the employee's salary for tax purposes.
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. Explanation: The partnership itself is not a "party" to the agreement. The partners purchase the policies with the amount being equal to the purchase price. "(n-1)n" where "n" equals the number of partners. Ex. (3-1)x 3 = 6
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?
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 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.
Which of the following statements concerning Multiple Employer Trusts (METs) are true?
They may be self-funded or funded with contracts from insurance companies. 3. 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 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.
For whom is the entity plan best suited?
a partnership with many partners Explanation: The word "entity" tells you the question is referring to a partnership. The business purchases "one" policy on each of the partners. Had it been a corporation, the "stock-redemption" would have been used. Corporations-stock-redemption....Partnerships-Entity
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 Explanation: Railroad workers covered under the railroad retirement system are not covered under social security. They have their own.
Under SOCIAL SECURITY, a covered worker's PIA is:
equal to the full retirement 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.
All of the following statements regarding annuities are correct EXCEPT
generally, annuity contracts issued today require fixed, level funding payments
Which is not considered a group permanent plan?
group credit life Explanation: Group credit life uses decreasing term.
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 Explanation: The employer's part of the premium 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 Explanation: State and local government employees may "opt" out, but most do not.
All the following are examples of non-qualified plans except:
simple plans Explanation: Non-qualified plans receive no favorable treatment from the IRS. They are not tax deductible. Therefore, the business can discriminate and pick-and-choose which employees they want to reward.
Which is not the primary purpose of Key Person insurance?
tax deductible premiums Explanation: Premiums are not deductible.
In a three-person partnership, a buy/sell Cross-Purchase plan requires each partner to purchase how many life insurance policies?
two policies Explanation: Each partner would purchase two policies each. Mr. A would buy a policy on Mr. B and Mr. C. Mr. B would buy a policy on Mr. A and Mr. C. Mr C would buy a policy on Mr A and Mr. B. Each buying two policies for a total of six. (N-1)n where n is the total number of owners. Ex (3-1)3= 6
