C5 Test -Group Life, Qualified Plans, Business Uses and Taxation

A Profit-Sharing Plan and Money Purchase Plan are:

Examples of Defined Contribution Plans

Dividends are never?

Guaranteed

IRAs are available:

To some individuals who are participating in a qualified pension plan.

In which of the following plans is the owner immediately vested?

IRA

Whose Estate bears the burden of Estate Tax?

Policyowner

Individually owned non-qualified annuities are generally taxed as follows:

Premiums are not deductible; interest credited to the cash value is taxed deferred.

Stephanie contributes more than the maximum amount to her Roth IRA. What will most likely happen?

She will pay a tax penalty

Which of the following is true regarding the taxation of accelerated benefits?

Benefits are not taxed

A plan under which the surviving partners of a partnership agree to buy the interest of a deceased partner is known as which of the following?

Buy & Sell Agreement

All of the following are true about the group life insurance conversion option EXCEPT

no benefits are paid if a terminated employee dies before converting

An insured purchases a $1,000,000 life insurance policy paid up at age 65. At age 65 the cash value of the policy is $180,000. In the past the insured borrowed $35,000 from the cash value. When the insured dies, what amount is taxable in the insured's estate?

$1,000,000

In most states, when a group life insurance plan is written on a contributory basis, the group plan must insure at least ______ of all eligible group members.

75%

Which of the following Qualified Plans relies upon a formula for determining the retirement payout?

Defined Benefit

Which of the following scenarios will incur a 10% tax penalty on distributions?

Distributions are made on a policy before age 59½.

Which of the following is true of a qualified plan?

It has a tax benefit for both employer and employee.

Roth IRA's permit all of the following EXCEPT?

Minimum required distributions by the age of 70 1/2

A Stock Bonus Plan is which of the following?

Profit Sharing Plan

All of the following are true about Non-Contributory Group Insurance EXCEPT:

The amount of coverage is selected by the participant

Which of the following statements is true regarding dividends that are accumulating at interest on a participating life policy?

The dividends are received tax free; however, the interest earned on the dividends is taxed as ordinary income.

Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?

The employer is the owner and the beneficiary

Which of the following describes the tax advantage of a qualified retirement plan?

Which of the following describes the tax advantage of a qualified retirement plan?

Split Dollar Life Insurance is which of the following?

A method of purchasing life insurance.

The purpose of the Exclusion Ratio is to:

Allocate principal and interest, so to properly determine taxable and non-taxable amounts that are paid to annuitants.

Cindy divorces Charlie at age 35 and collects distributions on their retirement plan as a result. What penalties will she have to pay?

None

Personal life insurance premiums and death benefit proceeds are generally taxed as follows:

Premiums are not tax deductible, death benefits are income tax free.

The annual increase of cash value within a life policy generally is:

Tax deferred as long as the policy is not terminated

Key person life insurance permits all of the following Except?

Beneficiary is elected by the key employee

A 457 Plan permits a deferral of compensation of up to 33 1/3% of wages or up to maximum of which amount?

$16,500

A school teacher has contributed $80,000 into a Tax Sheltered Annuity. At the time she surrendered the contract, the account value was $180,000 and her tax bracket was 30%. The resultant tax amounts to?

$54,000

A college student earns $1,500 part time while attending school. He/she may contribute which of the following amounts into an IRA for the current tax year?

Any amount up to $1,500

Which of the following is NOT true of Section 1035 Policy Exchanges?

Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days.

Business uses of life insurance which does NOT designate the employer as beneficiary is which of the following?

Group life

All of the following are reasons a beneficiary may be subject to tax from a life insurance settlement EXCEPT:

No insurable interest was in effect at the time of policy settlement

A premature distribution from an individually owned non-qualified annuity is:

Subject to a 10% penalty

Laura has group life insurance through her employer. After five years she decides to leave the company and work independently. What must Laura do in order to obtain an individual policy?

The group policy is convertible to an individual policy without proof of insurability

Withdrawals from a universal life insurance policy are treated as which of the following?

FIFO (first in first out) rules apply

All of the following are true of the federal tax advantages of a qualified plan EXCEPT:

At distribution, all amounts received by the employee are free of taxes.

Under present OASDI (old age survivor and disability insurance) program, PIA represents?

Average earnings over the number of years worked

Which of the following is an example of an agent's fiduciary responsibilities?

An Agent promptly forwarding premiums to the insurance company