Taxes, Retirement, and Other Insurance Concepts

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?

$10,000, no tax consequences

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

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

In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?

From trustee to trustee

Life insurance death proceeds are

Generally not taxed as income

Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose

HR-10 (Keogh Plan)

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

Interest only

Are Simplified Employee Pension plans (SEP) suitable for large companies?

No, they are designed to be provided by a small employer for the benefit of the employees

Death benefits payable to a beneficiary under a life insurance policy are generally

Not subject to income taxation by the Federal Government

What is the official name for the Social Security program?

Old Age Survivors Disability Insurance

Traditional IRA contributions are tax deductible based on which of the following?

Owner's income

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.

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

What is the primary purpose of a 401(k) plan?

Retirement

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

Which of the following is the best reason to purchase life insurance rate than annuities?

To create an estate

What is the purpose of key person insurance?

To lessen the risk of financial loss because of the death of a key employee

What is the name of the insured who enters into a vatical settlement

Viator

An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. What (if any) part of the accelerated benefit is taxed?

a portion of the benefit up to a limit is tax free; the rest is taxable income.

What is a legal document dictates who can buy a deceased partner's share of a business and for what amount?

buy-sell agreement

Who are Hr-10 (Keogh Plan) for?

self-employed and their employees

Who would be the "owner" of a life settlement contract?

the policy owner of the life insurance policy

What is the required number/percentage of participants in a contributory group plan?

75%

Who is a third-party owner?

A policyowner who is not the insured

What does a vatical statement do?

Allows an insured with a life-threatening condition to sell the existing policy in order to receive benefits when they are most needed. Viators typically receive a percentage of the policy's face value from the person who purchases the policy.

What type of Life insurance may be used to fund a buy-sell agreement?

Any form of life insurance may be used

Employer contributions made to a qualified plan

Are subject to vesting requirements

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