Taxes, Retirement, and Other Insurance
Employer contributions made to a qualified plan...
Are subject to vesting requirements
All of the following are business uses of life insurance except...
Funding against general company financial loss
Life insurance death proceeds are...
Generally not taxed as income
In life insurance policies, cash value increases...
Grow tax deferred
Which of the following statements about group life is correct?
The cost of coverage is based on the ratio of men and women in the group.
All of the following statements are true regarding tax-qualified annuities except...
Employer contributions are not tax deductible
Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?
The employer is the owner and beneficiary
All the following benefits are available under Social Security except...
Welfare benefits
If you decide to rollover your plan to a Traditional IRA, how much will you receive from the plan administrator and how long do you have to complete the tax-free rollover?
60 days and the money is paid directly to you then 20% will be held by the payor.
A key person insurance policy can pay for which of the following?
Costs of training a replacement
Death benefits payable to a beneficiary under a life insurance policy are generally...
Not subject to income taxation by the Federal Government
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?
They are tax deferred until withdrawn.
In a direct rollover, how is the money transferred from one plan to the new one?
From Trustee to Trustee
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is incorrect?
The insured may choose to convert to term or permanent individual coverage
All of the following are true of key person insurance except...
The plan is funded by permanent insurance only
If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is...
Fully Insured
Which of the below statements is FALSE concerning a Modified Endowment Contract (MEC)?
The policyholder can receive distributions at any time without being penalized
An internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a...
403(b) Plan (TSA)
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?
A portion of the benefit up to a limit is tax free; the rest is taxable income.
Which of the following is an IRS qualified retirement program for the self-employed?
Keogh
Which of the following is INCORRECT regarding whole life insurance?
Policy loans are tax deductible
In group life policies, a certificate of insurance is given to...
Each Insured Person
When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
Interest Only
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.
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
Social Security was created to protect against all of the following except...
Bad investment choices
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 an
Executive bonus
An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true?
He will have to pay a penalty if he is younger than 59 1/2
Which of the following is not true regarding a nonqualified retirement plan?
It needs IRS approval
Which of the following is NOT true regarding policy loans?
Money borrowed from the cash value is taxable.
Which of the following statements concerning a Simplified Employee Pension plan (SEP) is incorrect?
SEPs are suitable for large companies
Who may contribute to an HR-10?
Self-employed plumber
Which of the following applicants would not qualify for a Keogh plan?
Someone who works 400 hours per year.
All of the following are characteristics of a group life insurance plan except...
There is a requirement to prove insurability on the part of the participants.
Which of the following is incorrect regarding whole life insurance?
Policy loans are tax deductible
If an employee wants to enter the group outside the open enrollment period, to reduce adverse selection, the insurer may...
Require evidence of insurability
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
The amount of the distribution is reduced by the amount of a 20% withholding tax.
A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a...
Cross-purchase plan
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
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
For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are...
tax deductible
An insured decides to surrender his $100,000 Whole Life Policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?
$3,000
Which of the following terms is used to name the nontaxed return of unused premiums?
Dividend
Which of the following is true regarding taxation of dividends in participating policies?
Dividends are not taxable
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
An employee is joining a group insurance plan. In order to avoid having to prove insurability, what must the employee do?
Join during the open enrollment period
Which of the following statements is TRUE concerning whole life insurance?
Lump-sum death benefits are not taxable
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.
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
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy. He dies on June 1st. Which statement is true
The insurer will pay the full death benefit from the group policy to the beneficiary.
All of the following would be eligible to establish a Keogh retirement plan EXCEPT...
The president and employee of a family corporation
