Chapter 4. Retirement and Other Insurance Concepts

The minimum number of credits required for partially insured status for Social Security disability benefits is

6 credit

If a retirement plan or annuity is "qualified", this means

It is approved by the IRS

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.

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

The earnings in a qualified plan accumulate tax deferred.

All of the following are general requirements of a qualified plan EXCEPT

The plan must provide an offset for social security benefits.

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?

Third-party ownership

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n)

403(b) Plan (TSA)

Employer contributions made to a qualified plan

Are subject to vesting requirements

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.

The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is

A non qualified annuity plan

If a company has a Simplified Employee Pension plan, what type of plan is it?

A qualified plan for a small business

Which of the following is NOT true regarding a non qualified retirement plan?

It needs IRS approval

Who is a third-party owner?

A policyowner who is not the insured

All of the following employees may use a 403b plan on their retirement EXCEPT

CEO of private corporation

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

To create an estate

Who may contribute to a Keogh (HR-10) plan?

self-employed plumber

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

Which of the following is NOT true of life settlements?

The seller must be terminally ill

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

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

the employer is the owner and beneficiary

SIMPLE Plans require all of the following EXCEPT

At least 1,000 employees.

In life insurance policies, cash value increases

Grow tax deferred.

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 life insurance policy develops cash value faster than a 7 pay whole life contract, it is?

Modified Endowment Contract

Which of the following is NOT true regarding policy loans?

Money borrowed from the cash value is taxable.

An employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy?

She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan.

Which of the following applicants would NOT qualify for a Keogh Plan

Someone who works 400 hours per year

What is the purpose of key person insurance?

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

Which type of retirement account does not require the owner to start taking distributions at age 72?

Roth IRA

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

A tax-sheltered annuity is a special tax-favored retirement plan available to

Certain groups of employees only.

Which of the following is an IRS qualified retirement program for the self employed?

Keogh (HR 10)

All of the following benefits are available under social security EXCEPT

welfare benefits

Which of the following is NOT an example of a business use of life insurance?

workers compensation

Which of the following is true regarding taxation of dividends in participating policies?

Dividends are not taxable.

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

Owner's income

What is the primary purpose of a 401k plan?

retirement.

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 tax free.

Which of the following is true of qualified plan?

It has a tax benefit for both employer and employee.

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

What percentage of a company's employees must take part in a noncontributory group life plan?

100%

Who can make a fully deductible contribution to a traditional IRA?

An individual not covered by an employer-sponsored plan who has earned income

Which of the following statements concerning buy-sell agreements is true?

Buy-sell agreements are normally funded with a life insurance policy

An IRA purchased by a small employer to cover employees is known as a

Simplified Employee Pension Plan

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?

6

All of the following would be different between qualified and non qualified retirement plans EXCEPT

Taxation on accumulation

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 are true of key person insurance EXCEPT

The plan is funded by permanent insurance only.

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 statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT

SEPs are suitable for large companies