Life Insurance: Retirement and Other Insurance Concepts
Employer contributions made to a qualified plan
Are subject to vesting requirements
What does "liquidity" refer to in a life insurance policy?
Cash values can be borrowed at any time
A key person insurance policy can pay for which of the following?
Costs of training a replacement
Which of the following is an eligibility requirement for all Social Security Disability Income benefits?
Have attained fully insured status
When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
Interest only
What is the main purpose of the Seven pay Test?
It determines if the insurance policy is an MEC.
All of the following employees may use a 403(b) plan for their retirement EXCEPT
The CEO of a private corporation
Which of the following best describes the tax advantage of a qualified retirement plan?
The earnings in a qualified plan accumulate tax deferred.
Which of the following is INCORRECT concerning a noncontributory group plan?
The employees receive individual policies
Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?
The employer is the owner and beneficiary
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
The policy is owned by the company
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
Withdrawals are not taxable.
The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower echelon employees. this plan would be funded with before tax corporate dollars, and it does not meet government approval standards. This annuity plan is
a non qualified annuity plan
The premiums paid by the employer in a business life insurance policy are
tax deductible by the employer
What percentage of a company's employees must take part in a noncontributory group life plan?
100%
What is the number of credits required for fully insured status for Social Security disability benefits?
40
In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?
5
To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters
6 credits
Who is a third-party owner?
A policy owners who is not the insured
All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT
At distribution, all amounts received by the employee are free of taxes.
SIMPLE Plans require all of the following EXCEPT
At least 1,000 employees.
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his
Attained age
Which of the following statements concerning buy-sell agreements is true?
Buy-sell agreements are normally funded with a life insurance policy
The taxation of Modified Endowment Contracts
Distributions before age 59 1/2 incur a 10% penalty on policy gains/Policy loans are taxable distributions/Accumulations are tax deferred.
Which of the following terms is used to name the nontaxed return of unused premiums?
Dividend
For retirement plan to be qualified, it must be designed for the benefit of
Employees
All of the following statements are true regarding tax-qualified annuities EXCEPT
Employer contributions are not tax deductible
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)
Executive bonus
In the Executive Bonus Plan, who is the owner of the policy, and who pays the premium?
Executive is the owner, and the executive pays the premium
When an employee terminates coverage under a group insurance policy, coverage continues in force
For 31 days
In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?
From trustee to trustee
If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is
Fully insured
An IRA purchased by a small employer to cover employees is known as a
Simplified Employee Pension Plan
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Survivor protection
All of the following statements concerning an employer sponsored non qualified retirement plan are true except
The employer can receive a current tax deduction for any contributions made to the plan
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?
The employer is the owner and beneficiary
An employee is insured under her employer's group life plan. If she terminated her group coverage, which of the following statements is INCORRECT?
The insured may choose to convert to term or permanent individual coverage.
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?
Those who have been insured under the plan for at least 5 years
Which of the following is the required number of participants in a contributory group plan?
75%
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer-sponsored plan who has earned income
All of the following are examples of third-party ownership of a life insurance policy EXCEPT
An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan
What type of life insurance is most commonly used for group plans?
Annually renewable term
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
Any form of life insurance
All of the following are business uses of life insurance EXCEPT
Funding against company's general financial loss
Which of the following is TRUE of a qualified plan?
It has a tax benefit for both employer and employee
If a retirement plan or annuity is "qualified," this means
It is approved by the IRS
If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?
It is only taxable if the cash value exceeds the amount paid for premiums
Which of the following is NOT true regarding a nonqualified retirement plan?
It needs IRS approval
Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?
Life expectancy
Which of the following statements is TRUE concerning whole life insurance?
Lump sum death benefits are not taxable
In a single employer group plan, what is the name of the policy issued to the employer?
Master contract
How are contributions to a tax-sheltered annuity treated with regards to taxation?
They are not included as income for the employee, but are taxable upon distribution
Which of the following is the best reason to purchase life insurance rather than annuities?
To create an estate
Social Security was created to provide all of the following benefits EXCEPT
Unemployment income
A tax sheltered annuity is a special tax favorted retirement plan available to
certain groups of employees only
If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is
fully insured
In life insurance policies, cash value increases
grow tax deferred
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a
settlement option
If a life insurance policy develops cash value faster than a 7 pay whole life contract, it becomes a/an
Modified endowment contract
In which of the following instances would the premium be tax deductible?
Premiums paid by an employer on a $30,000 group term life insurance plan for employees
Which type of retirement account does not require the owner to start taking distributions at age 72?
Roth IRA
Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?
SEPs are suitable for large companies
An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy?
She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?
The insurer will pay the full death benefit from the group policy to the beneficiary.
Which of the following best defines the "owner" as it pertains to life settlement contracts?
The policy owner of the life insurance policy
Which of the following best define the "owner" as it pertains to life settlement contracts?
The policyowner of the life insurance policy
All of the following would be eligible to establish a Keogh retirement plan EXCEPT
The president and employee of a family corporation.
