Taxes, Retirement, and Other Insurance Concepts
Which is not a business use of life insurance?
Funding against general company financial loss
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
The minimum number of credits required for partially insured status for Social Security disability benefits is?
6 credits
What is a third-party owner?
A policyowner who is not the insured
What type of life insurance is most commonly used for group plans?
Annually renewable term
What is true regarding taxation of dividends in participating policies?
Dividends are not taxable
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....
Executive bonus
When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
Interest only
If an insured surrenders his life insurance policy, which is true regarding the cash value of the policy?
It is only taxable if the cash value exceeds the amount paid for premiums
Which is not true regarding group insurance?
Participant in the policy each receive a policy
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized - what is this called?
Profit sharing plan
Who may contribute to an HR-10 Plan?
Self employed plumber
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
What is incorrect concerning a noncontributory group plan?
The employees receive individual policies
What is not true concerning an employer sponsored non qualified retirement plan?
The employer can receive a current tax deduction for any contributions made to the plan
What is the main purpose of the 7-Pay test?
To determine if the insurance policy is an MEC
If a company has a Simplified Employee Pension plan, what type of plan is that?
A qualified plan for a small business
Social security was not created to protect against?
Bad investment choices
When an employee terminates coverage under a group insurance policy, coverage continues in force.....
For 31 days
Which type of retirement account allows contributions to continue beyond age 70 1/2 and does not force distributions to start at age 70 1/2?
Roth IRA
What is incorrect concerning a Simplified Employee Pension Plan?
SEPs are suitable for large companies
Which of the following is the same with regards to both qualified and nonqualified retirement plans?
Taxation on accumulation
If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is?
Fully insured
What is not true of the federal tax advantages of a qualified plan?
At distribution, all amounts received by the employee are tax free
An employee is joining a group plan. In order to avoid having to prove insurability, what must the employee do?
Join during the open enrollment period
What is incorrect regarding whole life insurance?
Policy loans are deductible
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?
Premiums are not tax deductible as a business expense
Who would not qualify for the Keogh Plan?
Someone who work 400 hours per year
The premiums paid by the employer in a business life insurance policy are....
Tax deductible by the employer
What is not correct concerning the use of life insurance as an Executive Bonus?
The policy is owned by the company
What is not true concerning a MEC ?
The policyholder can receive distributions at any time without being penalized