Taxation-Section 9

Laura has paid a total of $3,600 into her annuity. The cash value in her account is currently $4,200. If Laura rolls the entire value of her annuity into a different annuity under a Section 1035 exchange, she must pay income tax on?

$0.00 dollars The purpose of the 1035 exchange is to protect the insured's tax-deferred status.

How much is the one time death benefit from social security?

$255. A one-time payment of $255 can be made when you die if you have worked long enough. This payment can be made only to your spouse or minor children if they meet certain requirements.

In a seven year vesting schedule, what percentage of employer contributions is vested after seven years?

100%

This provision allows you to exchange an existing insurance or annuity contract for a newer contract without having to pay taxes on the accumulation in your old contract.

1035 exchange

Within how many days must an employer give a terminated employee notice to convert his life policy

15. In the event of an employee`s termination, the insurer or employer is required to give a notice to convert within 15 days of termination.

Upon the death of a primary breadwinner who is fully insured under Social Security, a dependent child is eligible to receive an income benefit until the age of

18 or 19, if unmarried and a student in elementary or secondary school. This is the wording used by social security for the survivor benefit for children Incorrect Answer19

The number of credits required for fully insured status is:

40 Fully insured status requires 40 credits or 10 years.

All the following statements about group life insurance policies are false. The participants are each issued a master contract. Each participant is in complete control of the policy. Participants are not issued certificates of insurance that show proof of insurance. execpt?

The employer is the master policy holder. Double negative - The sponsor of the group, normally the employer, is issued the master contract or master policy. The group sponsor has complete control over the policy.

The period of time following the youngest child`s 16th birthday until the surviving parent is eligible is called:

The blackout period

Which of the following statements about 401K plans is incorrect? 401Ks are defined contribution plans. Deferred contributions are made on a pre tax basis. 401Ks may also allow voluntary, after tax contributions by employees. correct Answer. 401Ks are known as a cash or deferred account or CODA.

401Ks are known as a cash or deferred account or CODA. CODA stands for "cash or deferred arrangement," not account.

What qualified retirement plan is a defined contribution plan with pre tax contributions that uses annuities and mutual funds only for investment options?

403B The main difference between a 401(k) and 403(b) plan is that unlike the 401(k) plan, investment options in the 403(b)plan are limited to annuities and mutual funds only.

A widow can begin to receive full social security retirement benefits at age:

65. At age 65 you can start to receive full retirement benefits and at age 60 is the age that a widow can begin to receive full social security for spousal income.

Which of the following are not regulatory requirements for dependents under group life plans?

A dependent may be covered up to age 18 under normal circumstances.

The following should be eligible to establish a Keogh retirement plan, A sole proprietor of an ice cream shop. A partnership. An independent insurance agent for their agency. Except:

A family owned corporation for the benefit of their employees. Corporations set up pension plans. Self-employed, sole proprietor, and partnerships set up Keoghs

Vesting is best described as:

An employee's right to ownership of the funds contributed by the employer.

The following statements is correct?

Annuities do not pass tax-exempt however life insurance does.

Which statement concerning a Roth IRA is not incorrect?

Contributions are not deductible. Roth IRAs contributions are not deductible is a true statement. Individuals can contribute to both a traditional and Roth IRA but only up to the maximum limit for one IRA. Contributions to Roth IRAs can be made after age 70 1/2, and distributions do not have to begin by 70 1/2 like in a traditional IRA.

Which of the following is not a major type of social security disability coverage?

Disabled Adult Benefits. There is not such thing as Adult Benefits. Disabled Adult Child Benefits are for children whose parent has died or has been receiving Social Security, retirement or disability. The child must be disabled before the age of 22.

The following are a requirement for eligibility in an employer plan? If plan is 100% vesting, then employees must have 2 years of service. Plan must not discriminate against rank and file employees. Employees must have completed 1 year of service with the employer. Except:

Employees must be 18 years of age or older. Employees must be 21 years of age or older and have completed 1 year of service with the employer.

Annuity benefits are a combination of principal and interest. What is the taxation status of the principal?

If annuity was purchased with pre-tax dollars then both the interest and principal are taxable. If the annuity was purchased with after tax dollars then the interest is taxable and the principal is not. Both are correct statements

All monthly retirement benefits can be paid to the following family members: Former spouse of the worker if age 62 or older. Disabled children. Spouse of the worker aged 62 or older. Except:

Married children under age 19 if still in school. Unmarried is the key.

The following would qualify for a Keogh plan: Partnership. Self employed using a defined contribution plan. Self employed using a defined benefit plan. Except:

Owners of an incorporated business. Keogh plans may be set up by self-employed persons, partnerships, and owners of unincorporated businesses as either a defined benefit or defined contribution plan.

In a group policy the employer is responsible for all of the following. Any administration that is not provided by the insurer. Enrollment and recordkeeping. Applying for and the selection of benefits to be provided. except:

Paying the premium and notifying the insurer of employees who are higher risk than others

the following are a major difference between social and private insurance? Social participation is both automatic and mandatory for all eligible citizens. The government is a monopoly regarding insurance. Social insurance doesn`t try to be equally fair to everyone. Except:

Private insurance benefits are mandated by law. The benefits provided under social insurance are required by law.

All correct statement pertaining to TSAs would be: Teachers participating in a TSA do not pay current taxes on their contributions. Participants in a TSA are taxed on benefits when received. TSAs are not available to any worker. Except:

TSAs are available to employees of certain nonprofit organizations and schools, such as a nursing student.

The following are IRS requirements for qualified retirement plans. The plan must be permanent. The plan must be approved by the IRS. The plan must be written and communicated to employees. except:

The plan must have a vesting requirement just for the officers and stockholders.

Which of the following would generate a taxable situation?

The policyowner surrenders the policy and receives $15,000 in cash value in which they paid $12,000 in premiums.

the following statements concerning currently insured are correct ? It allows children to collect a benefit up to age 18 if unmarried or up to 19 if unmarried and still in school. It applies to survivor benefits The lump sum death benefit of $255 will be paid if there are minor children or a spouse. Except:

The spouse with no minor children will be entitled to the widow/widower (spousal income) at age 60.

The following correct statements concerning the conversion privilege of group term life insurance ? Upon conversion the employee/member pays premiums based on their attained age. Conversion can be exercised regardless of insurability. An insured employee/member has 31 days to convert from the date of termination from the group plan. Except:

There is no coverage during the conversion period if the employee/insured has decided not to exercise their right to convert. Should death occur during the conversion period the group policy must still pay a death benefit regardless of whether or not the employee/member was going to convert.

Which of the following is incorrect concerning quarters?

To be fully insured you must earn at least 1 credit being at age 21 for each year, so at 24 you would only need 4 credits to be fully insured.

All the following characteristics of group life policies are correct. To be eligible as a group at least 2 people must be organized as a group. Organization of the group must be for a purpose other than purchasing life insurance. Individuals do not have to show evidence of insurability. except:

Underwriting is based on the groups age and average health condition.

When would life insurance proceeds be subject to federal or state income taxes?

When the policy is transferred for money.

All of the following statement about profit sharing plans correct. Designed to encourage productivity and to reward employees with part of the company`s profits. Contributions accumulate tax free until withdrawn. One of the most popular types of qualified defined contribution plans. Except:

Yearly earnings are fully taxable in the year received.

the following would be able to deduct the premiums from a life policy from taxes ? A company purchasing group term life for employees. When a policy is owned by a charitable organization. .A company paying premiums for employees as a bonus or incentive.

You Selected This AnswerWhen the premiums are paid from a company bonus.

Which of the following statements regarding annuity taxation is FALSE?

a withdrawal from a deferred annuity under the contract's free withdrawal provision exempts the distribution from the pre-59 penalty tax.

A defined contribution plan is a qualified retirement plan in which:

contributions are defined, but the ultimate benefit to be paid is not.

the following are valid reasons that could support the recommendation to purchase a deferred annuity: purchase can be made with either a single premium or periodic premiums guaranteed income stream if annuitized. Taxdefferred accumilation. Except:

stepped-up basis to the beneficiary at the owner's death. Unlike life insurance proceeds annuities do not pass tax-exempt at death. Stepped up basis would mean that all the tax-deferred growth would be considered principal and therefore not taxable. The beneficiary has the same tax consequences the annuitant would have when receiving income from an annuity.