CH 4
What is the number of credits required for fully insured status for social security disability benefits
40
All of the following statements are true regarding group insurance EXCEPT
Participants in the policy each receive a policy
An individual has been diagnosed with Alzheimer's disease, He is insured under a life insurance policy with the accelerated death benefits rider. Which of the following is true regarding taxation of the acceleration benefits?
A portion of the benefit up to a limit is tax free; the rest is taxable income
If a company has a Simplified Employee Pension plan, what type of plan is it?
A qualified plan for a small business
If a company has a simplified employee pension plan, what type of plan is it ?
A qualified plan for a small business
All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT
Being age 65
All of the following are requirements of eligibility for social security disability income benefits EXCEPT
Being age 65.
A life insurance policy used to fund an agreement that contractually established the intent of someone to purchase a business upon the insured business owners death is a
Buy sell agreement
A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a
Cross purchase plan
Which of the following terms is used to name the nontaxed return of unused premiums ?
Dividends
Which of the following is true regarding taxation of dividends in participating policies ?
Dividends are not taxable
For a retirement plan to be qualified, it must be designed for the benefit of
Employees.
All of the following statements are true regarding tax qualified annuities EXCEPT
Employer contributions are not tax deductible
If taken as a lump sum, life insurance proceeds to beneficiaries are passed
Free of federal income taxation.
If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is
Fully insured
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)
If a retirement plan or annuity is "qualified", this means
It is approved by the IRS
Which of the following is an IRS qualified retirement program for the self-employed ?
Keogh Plan
Which of the following statements is true concerning whole life insurance ?
Lump-sum death benefits are not taxable
In a single employer group plan, what is the name of the policy issued to the employer?
Master contract
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an
Modified Endowment Contract
If a life insurance develops cash value faster than a seven-pay whole life contract, it becomes a/an
Modified endowment contract
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an
Modified endowment contract
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 is correct concerning the taxation of premiums in a key-person life insurance policy?
Premiums are not tax deductible as a business expense.
In which of the following instances would the premium be tax deductible ?
Premiums paid by an employer on a $30,000 group term life insurance plan for employees
An IRA purchased by a small employer to cover employees is known as a
Simplified Employee Pension Plan (SEP)
Which of the following applicants would NOT qualify for a Keogh plan ?
Someone who works 400 hours per year
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Survivor protection
The advantages of qualified plans to employers is
Tax deductible Contributions
All of the following would be different between qualified and non qualified retirement plans EXCEPT
Taxation on accumulation
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
A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then
The benefit is received tax free
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
The policy is owned by the company
How are contributions to a tax-sheltered annuity treated with regards to taxation?
They are not included as income for the employee, but are taxable upon distribution
Which of the following employees insured under a group life plan will be allowed to convert to individual insurance of the same coverage once the plan is terminated
Those who have insured under the plan for at least 5 years
Social Security was created to provide all of the following benefits EXCEPT
Unemployment income
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
Withdrawals are not taxable
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
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?
they are tax deferred until withdrawn
Which of the following is not an example of a business use of life insurance ?
workers compensation
When a beneficiary receives payment consisting of both principals and interest portions, which parts are taxable as income ?
Interest only
What is the main purpose of the seven- pay test ?
It determines if the insurance policy is an MEC.
Which of the following is the required number of participants in a contributory group plan?
75%
All of the following statements are true regarding tax-qualified annuities EXCEPT
employer contributions are not tax deductible
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 consequence
To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?
6 credits
All of the following are business uses of life insurance EXCEPT
funding against general company financial loss
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer- sponsored plan who has earned income
An internal revenue code provision that specifically provides for an individual retirement plan for public school teachers is a
403(b) plan (TSA)
All of the following are true of a key person insurance EXCEPT
The plan is funded by permanent insurance only
In a life settlement contract, whom does the life settlement broker represent?
owner
All of the following are general requirements of a qualified plan EXCEPT
The plan must provide an offset for social security benefits
Who can make a fully deductible contribution to a traditional IRA?
An individual not covered by an employer-sponsored plan who has earned income
All of the following are examples of third party ownership of a life insurance policy except
An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.
Employer contributions made to a qualified plan
Are subject to vesting requirements
SIMPLE Plans require all of the following EXCEPT
At least 1,000 employees
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 statements about group life is correct ?
The cost of coverage is based on the ratio of men and women in the group
Which of the following best describes the tax advantage of a qualified retirement plan?
The earnings in a qualified plan accumulate tax deferred
Which of the following best describes the tax advantage of a qualified retirement plan?
The earnings in a qualified plan accumulated tax deferred
Which of the following is INCORRECT concerning a non contributory group plan ?
The employee receives individual policies
Which of the following is INCORRECT concerning a noncontributory group plan?
The employees receive individual policies
Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?
life expectancy