Practice exam 1
What is the main purpose of key person insurance?
to compensate the business for the loss of its key employee
Under a joint life insurance policy, when does the insurer pay the death benefit?
when the first insured dies
ABC Life Insurance Co. sells term and whole life insurance policies through producers. If it sells a policy, it must give the customer the right to examine the policy for at least how long?
10 days
What is the purpose of disability income insurance?
to replace income lost during disability
Steve, age 72, owns an IRA. The required minimum distribution (RMD) for Steve this year was $6,000, but he only withdrew $4,000. Based only on this information, what penalty tax will Steve have to pay?
$1000
Pam is a 56-year-old vice president employed by Gulf, Inc. Under Gulf's employer-pay-all group life plan, Pam's coverage is $300,000. The value of what portion of that coverage is taxable to Pam?
$250,000
Policyholders who buy a health insurance policy issued in Nebraska are entitled to review the policy without obligation for at least how many days after it is delivered?
10
What is the minimum number of members necessary for an association to qualify for a group life insurance policy?
10
When a health insurer cancels a policy for failure to pay premiums, the cancelation provision requires the insurer to give the policyowner how many days' advance notice?
10
Harold is covered by a group health insurance policy in Nebraska that provides benefits for the treatment of alcoholism. If Harold enters an inpatient treatment center this year, how many days of care must his policy cover?
30
An insurer must notify its current customers of its privacy policies or practices at least once every how often?
12 months
A claimant on a health insurance policy must give written notice of the claim to the insurer within how many days following a loss?
20
Horace buys a Medicare supplement insurance policy but decides not to keep it. How many days does he have to return it for a full refund of the premium?
30 days
Eric fails to pay the annual premium on his major medical insurance policy. The grace period provision allows him to pay the premium within how many days after the due date?
31
What is a typical life insurance policy's grace period?
31
For purposes of group health insurance, a small employer is defined in Nebraska as any person or entity that employs no more than how many employees?
50
When owned by non-natural entities, the accumulating values in a nonqualified deferred annuity contract are taxed in which one of the following ways?
Accumulating values are taxable in the year earned.
Acme Insurers recently started an advertising campaign in Nebraska for its new life insurance policies. Which statement is TRUE?
Acme can compare its products to competitors only if such comparisons are fair and complete.
Which of the following statements about health insurance advertisements is NOT correct?
Advertisements must disclose that policyholders are protected by the Nebraska Life and Health Insurance Guaranty Association.
Which of the following statements about Section 457 plans is correct?
Contribution limits are the same as they are for 401(k) plans.
A long-term care insurance policy issued in Nebraska cannot exclude coverage or limit benefits for which of the following?
Alzheimer's disease
Brian and Paul are the same age. Each buys a disability income policy from the same insurer. However, Paul's disability income policy uses an any occupation definition of total disability while Brian's policy has an own occupation definition. Which of the following statements is correct?
An insured would prefer a policy like Brian's.
Eli, age 80, lives at home and can no longer dress, bathe, or eat by himself. What will happen if he submits a claim for benefits under his individual long-term care policy?
Benefits will be payable because he cannot perform three activities of daily living.
Which of the following may receive dividends on his life insurance policy?
David, who owns a participating whole life policy issued by ABC Mutual Insurance Company
Employee rights under an employer-sponsored retirement plan are protected under which of the following?
ERISA
Which statement about flexible spending accounts (FSAs) is NOT correct?
Employees can use the FSA funds to pay qualified medical costs as well as costs their employer's health plan covers.
For those enrolled in Medicare Part A or B, which statement is correct about Part D?
Enrollees in a Part C managed care plan can buy a prescription drug plan.
Fran applied for an individual health insurance policy on July 1 and was issued a binding receipt. If she injured her back on July 4 before the policy was issued, what will happen?
Fran's medical claims for her injury will be covered by the policy.
Which one of the following most correctly describes the tax treatment of withdrawals from a modified endowment contract (MEC)?
Full withdrawals and policy loans from a MEC are taxable; in addition to income tax, MEC withdrawals taken before the owner's age 59' are subject to a 10 percent penalty.
Which of the following statements regarding the coordination of benefits (COB) provision found in health insurance plans is correct?
If a child is covered under two group plans (one from each parent), the primary plan is the one covering the parent whose birthday falls first in a calendar year.
With respect to a $75,000 ten-year level term policy, all the following statements are correct EXCEPT:
If the insured dies after ten years, only the policy's cash value will be paid to the beneficiary.
Which of the following statements best describes an annuity's accumulation period?
It can be a very long period-up to many years-or it can be as short as one month.
Which of the following statements about a Medicare supplement policy is NOT correct?
It can indemnify against loss from illness on a different basis than loss from accident.
Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the Nebraska Life and Health Insurance Guaranty Association. Which of the following statements is true about this kind of assurance?
It is prohibited at all times.
Before delivering a health insurance policy to a client, the producer alters the insuring clause in a way that he believes will benefit the insurance company. Which of the following statements is true about this alteration?
It is prohibited by the entire contract provision.
How does a partial disability provision affect coverage under a disability income policy?
It pays benefits for a partial disability, even if the insured continues to earn wages.
Regarding life insurance premium receipts, which of the following correctly describes how a temporary insurance agreement works?
It provides death benefit coverage (usually less than the applied-for amount and typically through term life insurance) for a specified term after the date of application while the application goes through underwriting.
If a variable annuity's monthly payment amount is based on a 3 percent assumed interest rate (AIR), and the current NAV rate rises 4 percent, what impact will this have on the monthly annuity payment amount?
It will increase.
Joan owns a variable universal life insurance policy that now has a $100,000 cash value and is beyond its surrender charge period. This year, she plans to withdraw $25,000 from her policy's cash value to buy a new car. Which one of the following statements is most correct?
Joan's death benefit will be reduced by $25,000.
All the following statements regarding the tax treatment of disability income and medical expense insurance are correct, EXCEPT:
Major medical insurance policy premiums may be deductible but premiums for HMO and PPO plans are not deductible under any circumstances.
Mattie received proceeds from her viatical settlement agreement on May 1. Three weeks later, she decides that she no longer wishes to sell her policy. What are her options?
Mattie may cancel the contract because the cancelation period has not expired.
Which statement is correct about the coordination of benefits provision in group health insurance policies?
No insurer is required to reimburse benefits or coverages beyond those specified in the contract.
Which of the following statements about the purpose of Medicare supplement insurance is correct?
Medicare supplement insurance is designed to cover what Medicare doesn't cover.
Who will receive benefits under Medicare Part A hospital insurance?
Mona, who is receiving hospice care
Which of the following statements about deferred annuity surrender charges is NOT correct?
Most deferred annuities apply surrender charges for all years after the contract is issued.
Which of the following components of Medicare will pay for the costs of a surgeon and anesthetist?
Part B
Medicare supplement plans are provided by private insurance companies, but federal law ensures that people who meet the minimum requirements can qualify for coverage. What are those requirements?
People must be at least 65 years old, regardless of their health condition, and must apply for a Medicare supplement policy within six months of enrolling in Medicare Part B.
Medicare supplement Plan A provides the co-payment for hospitalization from day 61 through day 90. Which of the other Medicare supplement plans also provide this coverage?
Plans A through N
Which of the following correctly explains why a waiver of premium rider functions differently with a universal life insurance policy than with a traditional whole life policy?
Premium payments for a universal life policy are flexible, making it difficult to know how much premium to waive.
Deloris is planning to buy a deferred annuity. When can she select a settlement option?
She can choose the settlement option when the deferred contract annuitizes or when she buys the annuity.
Abby purchased a long-term care policy on June 15. Two weeks later, she lost her job and decided that she could no longer afford the policy. What are her options?
She can return the policy for a full refund of premium.
Which of the following statements regarding Social Security disability benefits is correct?
Social Security disability benefits are available to fully insured workers at any age.
Jon buys a $100,000 straight whole life policy. His twin brother, Ted, buys a $100,000 ten-pay whole life policy. All other factors being equal, which of the following statements is correct?
Ted will pay higher premiums than Jon.
For insurable interest to exist, which of the following is most correct?
The applicant must be expected to suffer a financial loss when the insured dies.
All the following statements about life insurance settlement options are correct EXCEPT:
The beneficiary's choice of settlement option always takes precedence over the policyowner's choice.
Which of the following statements regarding an insured executive bonus plan is correct?
The executive is the insured and the policyowner
If a health insurance policy involves a death benefit, what will the insurer do if it receives proof the insured has died?
The insurer will pay the claim to the insured's beneficiary.
Brad, age 40, buys a ten-pay life insurance policy. What will happen when Brad turns 50?
The policy will continue providing full death benefit coverage, but no further premiums will be required.
When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed?
defamation
Which of the following statements regarding participating life insurance policies is correct?
They are eligible for policy dividends.
Which of the following best describes how annuities owned by corporations are taxed?
They are taxed differently than personally owned annuities are taxed.
Which one of the following statements about variable life insurance is correct?
Variable life insurance policyowners can transfer funds between subaccounts and the insurer's general account.
Alex sold an insurance policy before his license lapsed and earned a commission on the sale. Is he entitled to a commission if the policy is renewed?
Yes, because he was licensed when the policy was sold.
To qualify as life insurance for tax purposes, a policy must maintain a certain level of pure insurance protection. In practice, this means a UL policy's death benefit must include which of the following?
a corridor of insurance protection that depends on the insured's age
Under a health insurance policy's intoxicants and narcotics provision, a health insurer may exclude insurer liability if which of the following occurs?
a loss results from intoxication or the use of non-prescribed narcotics
Which of the following does NOT fall within the definition of a life insurance advertisement?
a memo from an insurer's president to employees
Under a Section 1035 exchange, a nonqualified deferred annuity can be exchanged tax-free for which of the following products:
a nonqualified annuity only
When completing an application for life insurance, Andrew states that he is 39 years old, though he is actually 45. When the insurer discovers this, what will it probably do?
adjust the benefits
The basic purpose for two-tiered fixed annuities is to encourage contract owners to:
annuitize their contract at retirement
Disability products that are marketed to blue-collar workers and manual laborers typically contain which definition of total disability?
any occupation
A health insurer, at its expense, may conduct a physical examination of the insured how often?
as often as reasonably necessary to investigate a claim
If the owner of a lapsed whole life insurance policy that was issued on a standard basis does not choose a nonforfeiture option, which of the following will the insurer do?
automatically apply the extended term option
Regardless of unique differences, every state's workers' compensation program offers all of the following, EXCEPT:
benefits that are payable even if an injured worker sues for additional compensation
A guaranteed insurability rider lets a disability income insurance policyowner:
buy additional amounts of coverage on specified dates, without having to provide evidence of insurability
Henry's accident and health insurance policy states that he has the right to continue the policy until age 65 by paying premiums on time. The company can decline renewal for specific items, such as retirement, but not bad health. Which type of renewability provision does his policy have?
conditionally renewable
Michael's supplementary major medical policy has a $750 deductible that is payable after the basic medical plan pays its benefits but before the major medical plan pays any benefits. This describes what type of deductible?
corridor deductible
With what type of health insurance policies are guaranteed insurability riders typically associated?
disability income and long-term care insurance policies only
The formal term used to describe the funds used in providing life insurance policy dividends is:
divisible surplus
The Director of Insurance cannot suspend or revoke a producer's license for which of the following reasons?
failing to meet projected sales goals
Which of the following is NOT an unfair claims settlement practice if committed by an insurance company in Nebraska?
failing to promptly settle a claim for which liability is uncertain
What are common benefit limits in long-term care insurance policies?
flat daily amounts
Roberto was traveling through Italy when he realized that he forgot to pay his monthly life insurance premium. Which provision in the policy will keep the policy in force until he pays the premium one week later?
grace period
ERISA protects enrollees in an employer-sponsored health care plan in each of these ways EXCEPT:
guaranteeing immediate processing of claims
To qualify for a resident insurance producer's license, a person must do all of the following EXCEPT:
have a college degree
An insurance company can exclude coverage for a specific medical condition by including which type of rider in a health insurance policy?
impairment
In an insurance transaction, what does the applicant give to the insurer as consideration in exchange for the insurer's promise to cover the risk?
initial premium
An employer establishes flexible spending accounts for its employees. Which expenses will the accounts NOT cover?
insurance policy premiums
How is a person who is covered by a medical expense insurance plan commonly described?
insured or subscriber
The concept of adverse selection refers to:
likelihood of consumers who are in poor health to seek insurance
Indexed annuities allow contract owners to participate in some of the growth in the stock market while avoiding possible losses of principal by which one of the following processes?
linking the interest to be credited to the contract to the growth of an equity (stock) index, while, at the same time, providing for a guaranteed minimum rate of return for the length of the contract
Because they are aleatory contracts, insurance policies:
often award disproportionately large benefits due to chance events
Amanda applied for a long-term care policy on August 1, at which time she received a document disclosing the policy's benefits, exclusions, renewal provisions, and continuation provisions. Which document did Amanda receive?
outline of coverage
If the insured dies during a life insurance policy's grace period without having paid the premium, what will be the insurance company's response?
pay the death benefit after deducting the unpaid premium
Alana let her life insurance policy lapse two years ago and now wants to reinstate the policy. Which action is she NOT required to take to reinstate the policy?
pay the next year's premium in advance
Funds in a Section 529 college savings plan can be used to pay for tuition at all of the following, EXCEPT:
private high schools
Any sale of a Medicare supplement policy that results in the insured having more than one such policy is
prohibited in all cases.
James and Edwina have a 26-year-old daughter who is mentally handicapped and incapable of self-sustaining employment. To continue their daughter's health insurance coverage after she reaches the limiting age stated in their group policy, what must James and Edwina do?
provide proof of their daughter's incapacity to the insurer within 31 days after she reaches the limiting age
If Jack takes a new job that is less hazardous than the job he had when he obtained health coverage, what may the insurer do?
reduce the premium
Under Sanjay's individual health insurance policy, the insurer may cancel the policy only on the policy's anniversary date and can also increase the premium. Which type of renewability provision does Sanjay's policy have?
renewable at insurer's option
Emily postpones buying a life insurance policy, believing that her family will use its savings to pay her final expenses if she dies prematurely. Which method is she using to deal with risk?
retention
Which of the following is not a required provision in group life insurance policies issued in Nebraska?
right to examine
An annuity owner has many options for receiving annuity income payments. What is another term for these payout options?
settlement options
Section 457 plans are reserved for employees of:
state and local government units
Which type of insurance company pays dividends to its stockholders?
stock company
A worker who is considered currently insured is entitled to which of the following Social Security benefits?
survivors benefits only
Which of the following provides an additional death benefit for death due to any cause, whether accident or illness?
term rider
As part of the field underwriting process for health insurance, producers must provide the following types of information to applicants EXCEPT:
the applicant's MIB report
If it cannot be determined which of two people died first in an accident, how does the "common disaster clause" resolve the question in cases where the two people are the insured and primary beneficiary of a life insurance policy?
the beneficiary is assumed to have died first allowing the proceeds to be paid to the contingent beneficiary.
Unfair discrimination in health insurance transactions can occur when an insurer differentiates charges or benefits among persons of which group?
the same class and risk
After a viatical settlement agreement is signed, which party owns the life insurance policy?
the viatical settlement provider
A Section 259 prepaid tuition plan may cover:
tuition and mandatory fees only
If an employer/employee group offers group life insurance on a contributory basis, what percentage of the group must enroll?
At least 75 percent of the group must enroll in the plan.
Which of the following would not be considered a living benefit of a life insurance policy?
conservation of his estate
All the following statements about term life insurance are correct EXCEPT:
A small cash value gradually accumulates while the policy is in force.
Which type of long-term care is provided outside a person's home for groups of adults who are physically or mentally disabled, on less than a 24-hour basis?
adult day care
Who normally owns life insurance used to meet business insurance needs?
the business
What does the employer own under a group insurance plan?
the master policy
When does an insurance policy take effect?
when the first premium is paid
This year, Agent Todd earned 20 percent of his total commissions from life and health insurance written for his relatives and friends. Which statement is correct?
Agent Todd has engaged in controlled business.
With respect to group life insurance participation requirements, which of the following statements is correct?
If the plan is contributory, at least 75 percent of eligible employees must enroll in the plan.
An insurer can nonrenew an individual health insurance policy for all of the following reasons EXCEPT:
deterioration of the insured's health
Insurers use usual, customary, and reasonable (UCR) fees to:
determine the appropriate amount payable for a given service
Which is NOT a method that managed care systems use to control costs?
financial incentives to providers for limiting care
Brady purchased an individual life insurance policy on February 1. He typically will not be able to enter into a viatical settlement contract within how many years after purchasing the policy?
five
Sue, an annuity owner, names her 15-year-old son and 10-year-old daughter as joint annuitants of her contract. Upon whose life (or lives) are income payments determined?
the joint life expectancy of Sue's son and daughter
The amount of benefits that a disabled person can expect to receive from Social Security is based on which of the following?
primary insurance amount at the time the disability occurred
Adam is a Medicare beneficiary who is also eligible for his state's Medicaid program. In terms of his primary and secondary coverage, Medicaid will be considered Adam's:
secondary insurer, with Medicare as his primary insurer
Which of the following states that the applicant must provide both a signed application and payment of the first premium for the policy to become effective?
the consideration clause
What is the maximum length of time that a Medicare supplement policy can exclude individuals from coverage based on pre-existing medical conditions?
6 months
Peter is 80 years old, a widower, and living with his employed son who has been fully supporting Peter. In the event of his son's death, what level of Social Security benefit could Peter receive?
82.5 percent of the son's PIA
For estate tax purposes, what is the value of any life insurance policy a person owns at his or her death?
It is generally includible in the valuation of his or her estate.
An insurer may classify a life insurance applicant as a "substandard risk" for all of the following reasons, EXCEPT:
low-paying job
If a group health insurance plan is experience-rated, which of the following factors will the insurer NOT examine when issuing the policy?
the community or region in which the group operates
With respect to annuity taxation, what purpose does the exclusion ratio serve?
to determine the portion of each annuity payment that is excluded from tax
Which one of the following is the primary goal of the insurer's premium rate calculation process?
to make sure the company collects enough money from each group of insureds to pay all of the benefits promised under the contract
In addition to ordinary income taxation, what else is a distribution from a modified endowment contract (MEC) before age 59' subject to?
10 percent premature distribution tax penalty
All the following statements about the taxation of accidental death and dismemberment (AD&D) policy benefits are correct EXCEPT:
Any interest earnings paid are not taxed.
Which statement about life policy riders that cover additional insureds is NOT correct?
Each additional insured is issued his or her own separate policy.
All of the following statements regarding the use of deferred annuities in retirement planning are correct, EXCEPT:
Earnings grow on a tax-free basis only when a deferred annuity is used to fund a qualified retirement plan.
Which organization offers health insurance to Nebraska residents who are denied health insurance and unable to obtain coverage from private companies due to pre-existing medical conditions?
Nebraska Comprehensive Health Insurance Pool
Which of the following is an exception to the rule that a health insurer may deny a claim arising from the use of narcotics under a health insurance policy's intoxicants and narcotics provision?
The loss was sustained because the insured was under the influence of a narcotic administered on the advice of a physician.
All the following statements about endowment contracts are correct EXCEPT:
They receive preferential income tax treatment.
If an annuity requires only that each premium deposit be above a certain minimum, this is most likely which type of annuity?
flexible premium deferred annuity
An insurance company with a home office in Wisconsin that does business in Illinois is a domestic company in Wisconsin. What kind of company is it in Illinois?
foreign
Which of the following options must be offered to all long-term care policyowners?
inflation protection
Fred's wife was the primary beneficiary of his $750,000 life insurance policy. She received payments of approximately $900 a month during her life, and at her death, their son received a lump-sum payment equal to $750,000. Which of the following death benefit settlement options does this best describe?
interest-only option
Which of the following life insurance riders provides financial support for medical care, nursing home care, and assisted living care for extended periods?
long-term care rider
Abby lives in Oklahoma, where she is licensed as an insurance producer. She wants to apply for a nonresident license in Nebraska. Which of the following conditions must she satisfy?
She must show her Oklahoma license to be in good standing.
Mr. Smith, a shoe store owner, is insured under a business overhead expense policy that pays a maximum monthly benefit of $2,500. If Mr. Smith becomes disabled and has actual monthly expenses of $3,000, which of the following is correct?
The policy will pay $2,500 as a monthly benefit.
ABC Insurance Company wants to become licensed in Nebraska to sell insurance products. Which of the following must it receive in order to transact insurance?
certificate of authority
Which of the following provisions, found in all major medical insurance policies, states that the insured must pay a certain percentage of the covered costs after the deductible is satisfied?
co-insurance provision
Which type of long-term care marketing method fails to disclose that the purpose of the contact is the solicitation of insurance?
cold lead advertising
To determine how much life insurance a person needs, an agent will examine the individual's current income, assets and liabilities, goals, current expenses, and risk profile. What is this approach to determining the right amount of life insurance called?
the needs approach
Under group insurance coverage, one policy covers a number of people. Who owns these group polices?
the organization that represents the group and which sponsors the coverage
Which of the following provisions details how claims are paid?
the payment of claims provision
Before selling an annuity, a producer must make reasonable efforts to obtain information about all of the following EXCEPT:
the prospect's marital status
In general, non-contributory plans must cover what percentage of those who are eligible to participate?
100 percent
Which of the following best illustrates risk transfer?
Anita buys health insurance to protect herself in case of serious illness.
Bob bought a $100,000 ten-year level term insurance policy on March 1, 2008. What would happen if he died on March 15, 2018?
No death benefit would be payable.
With respect to the penalty tax assessed to pre-age 59' annuity withdrawals, the penalty tax is NOT assessed for withdrawals due to all the following reasons EXCEPT:
The owner can establish financial hardship.
Which of the following statements correctly describes the tax treatment of individual medical and long-term care insurance premiums paid by self-employed individuals?
They can be taken as an 'above the line' deduction to directly reduce taxable income.
Jeremy has had an individual health insurance policy for many years because of his family's history of cancer. The tendency of someone like Jeremy to buy and maintain insurance is known as:
adverse selection
Bill believes he has a cause of action against his health insurer for its refusal to pay benefits on a claim. He filed written proof of loss on April 1. Not having received a response by May 1, he decides to take legal action. What will his attorney probably do?
advise him to wait
When she applied for an individual health insurance policy, Betty neglected to disclose that her parents had undergone open-heart surgery many years ago. Her insurer discovers this misstatement four years after the effective date of coverage. What can it do?
nothing
Maya was laid off from her job on October 1. Which action must Maya take to continue her group health insurance coverage?
pay the premium within 10 days after receiving notice of the right to continue the policy
Kendra is covered by a group long-term disability plan. She is injured on the job and receives benefits under that plan. Which source of income will NOT affect her benefits?
personal savings
How long must insurers keep copies of illustrations used in selling life insurance policies?
three years after the policy expires
Which of the following statements about Roth IRAs is correct?
Contributions to a Roth IRA are not deductible.
Robin falls while snow skiing and breaks a leg. She decides to never again attempt this activity. What method is she using to manage this risk of falling?
risk avoidance
Which of the following statements regarding adjustable life insurance policy cash value withdrawals is correct?
Adjustable life insurance cash values are accessible either through a traditional policy loan or through a partial surrender.
When an insurer employs field agents, who is responsible for delivering a new policy to a policyholder?
agent
When Terry applied for his life insurance policy four years ago, he omitted any information in the application related to treatment he had received several years earlier for a serious chronic illness. Which of the following actions can the insurance company take when it learns of the omission?
nothing
Which of the following features of major medical policies protects the insured by limiting the out-of-pocket dollar amount the insured must pay?
stop-loss provision
With respect to individual disability income insurance, which of the following underwriting factors most reflects the risk the applicant's job represents to the insurer?
the applicant's occupational class
If a person buys a new life insurance policy to replace an existing one, the producer must give the applicant the Notice Regarding Replacement form no later than when?
when the application is taken
Which is not an element of all legal contracts?
counteroffer
Jennifer purchases an individual health insurance policy on June 1. One week later, she loses her job and decides she can no longer afford the policy. What are her options?
return the policy for a full refund of premiums
Justine leaves her position with her employer on March 1. She wants to convert her employer's group life insurance coverage to an individual policy. In order to convert her group coverage, she must apply for an individual policy no later than what date?
March 31
Which of the following statements correctly describes the tax treatment business overhead expense (BOE) insurance?
Premiums are tax-deductible and benefit payments are taxable.
All of the following are standard exclusions found in most life insurance policies, EXCEPT:
military service
If a Health Savings Account (HSA) account holder takes money out of the fund but does not use it to cover medical costs, the withdrawal:
will be subject to ordinary income taxes and a possible 20 percent penalty tax
Sandra has a Section 125 cafeteria plan. To pay for her benefits, the employer will:
withhold part of her pre-tax salary
