Taxes, Retirement, and other insurance concepts.

An insured decides to surrender his $100,000 whole life policy. The premiums paid into the policy adds up to $15,000. At policy surrender the cash value was $18,000. What part of the surrender value would be income taxable?

$3,000. The difference between the premiums paid and the cash value would be taxable.

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.

Death Benefits payable to a beneficiary under a life insurance policy are generally?

Not subject to income taxation by the federal government.

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?

Third party ownership or owned by someone other than the insured.

Which of the following statements is TRUE concerning whole life insurance?

Lump-Sum death benefits are not taxable.

An insured has a modified endowment policy 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 ½.

In life insurance policies, cash value increases?

Grow Tax Deferred.generally only taxed if the policy is surrendered (totally or partially) and the cash values exceeds the premiums paid.

All of the following are true of key person insurance except?

The plan is funded by permanent insurance only. Can be funded by any type of life insurance.

All of the following statements concerning an employer sponsored nonqualified plans are true EXCEPT?

the employer can receive a current tax deduction for any contributions made to the plan.

What types of life insurance is most commonly used for group plans?

Annually renewable term.

An employer has sponsored a qualified retirement plan for its employees where the employee's retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?

Profit sharing plan.

All of the following statements are true regarding tax- qualified annuities EXCEPT?

Employer contributions are not tax deductible. Tax qualified annuities must be approved by the IRS, and allow for tax deductible employer contributions. All withdrawals are taxed and earnings grow tax deferred.

Which of the following is an eligibility requirement for all social security disability income benefits?

Have attained fully insured status. 40 quarters 10 years.

Which of the following allows the insurer to relieve a minor insured from payments if the minor's parents have died or become disabled?

Payor benefit.

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.

Which of the following is the required number of participants in a contributory group plan?

75%

Life insurance death proceeds are?

Generally not taxed as income.

Under SIMPLE plans, participating employees may defer up to a specific amount each year, and the employee then makes a matching contribution up to an amount equal to what percent of the employees annual wages?

3 %.

To attain currently insured status under social security a worker must have earned at least how many credits during the last 13 quarter period.

6 credits.

Which of the following is NOT true regarding a nonqualified retirement plan?

It needs IRS approval.

Which of the following is INCORRECT concerning a noncontributory group plan?

The employees receive individual policies.

All of the following would be eligible to establish a Keogh retirement plan Except?

The president and employee of a family corporation. Are for self employed individuals and their employees.

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.

What percentage of a company's employees must take part in a noncontributory group life plan?

100%

An IRA purchased by a small employer to cover employees is known as a ?

Simplified Employee Pension (SEP) is an employer sponsored IRA, contributions to the plan are not included in the employee's taxable income for the year, to the extent that they do not exceed the maximums allowed. Distributions from a SEP are taxable as ordinary income when received at retirement

SIMPLE plans require all of the following EXCEPT?

At least 1,000 employees. SIMPLE plans are for small businesses that employee no more 100 people receiving at least $5,000 in compensation from the employer during the previous year.

Who may contribute to an HR-10 plan?

Self employed plumber

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. Taxable as ordinary income in the year of the distribution. However, if the distribution is rolled over to a traditional IRA, taxes are deferred until the required minimum IRA distributions begin(which is generally no later than age 70 ½ ) Since this client actually took a distribution (instead of of making a trustee-to- trustee rollover) the distribution is subject to 20% withholding tax.