Life Insurance Chapter 9

Under a group life policy, an insured is provided as a tax free benefit up to what coverage amount?

$50k

Which of the following statements is TRUE regarding group life insurance? A. The underwriting practices are more liberal than individual insurance. B. The employer receives the certificate of coverage. C. Employer-paid premiums are not deductible to the employer. D. Ordinary whole life is the most common group life insurance product offered.

A

Which of the following would be best suited to provide retirement funds to a firm with 500 employees? A. Qualified pension plan B. Roth IRA C. Section 457 plan D. Whole life insurance

A

All of the following are situations whereby the owner of a qualified plan would be able to receive a penalty free or qualified distribution of funds prior to age 59 1/2 EXCEPT: A. The death of the owner B. The disability of the owner C. Using the money for start-up capital for a new multilevel marketing company D. Buying a home for the first time

C

All of the following plans are qualified, EXCEPT a: A. 401(k) Plan B. Simplified Employee Pension Plan C. Deferred Compensation Plan D. Section 457 Deferred Compensation Plan

C

Which of the following is best suited for providing retirement benefits for a firm with 800 employees? A. A 403(b) plan B. A traditional IRA C. A 457 deferred compensation plan D. Pension plan

D

Which type of contract may be used to fund an Individual Retirement Account?

Flexible Premium Annuity

How do the earnings of a 529 savings plan grow?

Tax exempt

Permitted withdrawals from a Roth IRA are:

Tax free

A tax sheltered annuity provides reduced tax liability by means of a salary reduction. All of the following are eligible to participate in a 403(b) tax sheltered annuity, EXCEPT: A. Private school teacher B. Minister C. Employee of a town D. Employee of a non profit agency

C

Which of the following best describes a type of pension plan where contributions to it are not tax-deductible? A. Defined Contribution Plan B. Tax-Qualified Plan C. Non-qualified Plan D. Defined Benefit Plan

C

Which of the following investment vehicles does not take into consideration one's income? A. Individual retirement account B. 403(b) plan C. Variable annuity D. Roth IRA

C

Mack is a full-time college student and a part-time pizza delivery man. He earns no more than $1,500 per year. What is the maximum contribution Mack could make into his IRA retirement plan? A. $4,000 B. $4,500 C. College students may not open IRA accounts D. $1,500

D

What does an employee not have to prove or provide when she wishes to convert her group term plan to an individual plan?

Insurability

Pre-retirement pension plan distributions may occur prior to age 59.5. What penalty amount may be assessed for an early distribution?

10%

No cash is assumed to be distributed when money is withdrawn from a traditional IRA if the funds are reinvested within:

60 days

In a contributory group life insurance plan, what portion of eligible employees must participate before a policy is issued?

75%

A keogh plan is referred to as a:

HR-10

All of the following are qualified plans, EXCEPT: A. 403(b) plan B. 501c Trust C. 401(k) plan D. Section 457 deferred compensation

B

The conversion period in a group life policy is:

31 days

An employee moves money from one qualified plan to another. In order to avoid tax penalties, within what period must the money be moved and what is the process called?

A rollover, 60 days

A keogh plan is designed for which of the following parties? A. High salaried directors of a corporation B. A self employed person and employees C. Partners with a business interest D. An employee of a nonprofit organization

B

Group insurance may be sold to each of the following entities except: A. Employer groups B. Unions C. Self-employed individuals D. Trade associations

C

Social Security provides all the following types of benefits EXCEPT: A. Disability B. Death C. Workers' Compensation D. Retirement

C

Which of the following are true tax advantages of a qualified plan: A. Employer contributions are deductible to the employer as a business expense. B. Plans grow on a tax-deferred basis. C. Benefits are not taxed until withdrawn. D. All the above are true advantages.

D

Which of the following is not a qualified plan? A. 457 Plan B. 401(k) Plan C. 403(b) Plan D. Endowment

D

Which of the following is true regarding group life insurance? A. Benefits are paid to a beneficiary are taxable B. An employee with a previous physical impairment is eligible for group life coverage C. Group life insurance is not portable D. Group life policies include a savings feature which permits policy loans

B

Social Security provides several types of benefits to those who are eligible. One of these benefits is retirement income. If an eligible recipient is fully insured, which of the following statements is true? A. A lump sum benefit of $255 will be paid to an eligible dependent child when the eligible worker dies B. The primary insurance amount will be paid to an eligible recipient at retirement C. A recipient may receive monthly income benefits at age 65 and continue to work D. Income benefits may begin during the blackout period if the eligible spouse is over age 60

C

Which of the following types of pension plans do not permit a tax deduction of contributions to the plan? A. Defined benefit plan B. Qualified plan C. Defined contribution plan D. Non qualified plan

D

Which pairing is NOT CORRECT? A. 403(b) -- Non-profit employee B. 401(k) -- For-profit employee C. 457 Deferred Compensation -- municipal worker D. IRA -- Self-employed only

D, An IRA can be established by anyone who has earned income

Who is most likely to participate in a 401(k) plan?

Employee of a for profit company

When an employee terminates employment he may choose to take his group life insurance coverage with him according to the conversion privilege. Generally, the insurer allowing the conversion will require the employee to convert to what type of life insurance?

Individual whole life

Group and individual underwriting vary greatly. Which statement below is NOT TRUE with regard to group insurance and/or its underwriting practices? A. Group underwriting is more liberal than individual underwriting. B. Medical exam requirements are required for group participation. C. The Master Contract goes to the employer who owns the policy. D. Group rates are generally less expensive than individual rates.

B

To avoid any penalties or adverse tax consequences, rollovers of qualified plans must be effected within how many months of withdrawal

2 months

Who may participate in a 403(b)/Tax-Sheltered Annuity plan? A. A public teacher B. A minister C. A nurse D. All the above

D

Each of the following statements is TRUE regarding group term life insurance, EXCEPT: A. Group life coverage must be incidental of the formation of the group B. Group life underwriting encourages adverse selection C. A certificate holder possesses the right to name a beneficiary D. A conversion privilege is provided in most group life plans

B

Which statement below is NOT TRUE with regard to group conversion? A. Dependent children covered under the group plan may also convert to an individual plan. B. All group plans must offer the conversion right. C. Conversion consists of a 30-day period following termination. D. Proof of insurability is not usually required.

C, Conversion consists of a 31-day period

Which of the following may be used to fund an individual retirement account? A. Whole life policy B. Life paid-up at 65 policy C. Universal life policy D. Flexible premium annuity

D

Which of the following qualified plans is specifically used to set aside funds for a college or post secondary education?

529 Plan

An employee's length of service and an average of his yearly income are two important factors when calculating the retirement benefit of a:

Defined Benefit plan

Which of the following plans allows the owner to continue making contributions beyond age 70 1/2 and does not require that the owner begin to make minimum distributions prior to age 70 1/2? A. Roth IRA B. SEP C. A Traditional IRA D. SIMPLE Plan

A

A qualified plan owner, age 45, decides to withdraw, not transfer monies from his retirement plan. What penalties, if any will be assessed?

10% IRS penalty, Applicable state and federal withholding taxes

A group life insurance plan provides term life insurance protection. If an employer pays the entire premium, what percentage of the eligible employees must be covered by the plan?

100%, If a group life plan is noncontributory, all eligible employees must be covered

The following statements are true of an Individual Retirement Account (IRA), EXCEPT: A. It is a retirement plan for those who have earned income. B. Most IRAs are used to fund retirement. C. Growth is tax-deferred until withdrawn. D. Only the growth of the account is taxable when withdrawn.

D

Each of the following are characteristics of a Roth IRA, EXCEPT: A. Distributions may be deferred beyond age 70.5 B. Contributions to this account are tax deductible C. Contributions may continue after age 70.5 D. Qualified distributions are not income taxable

B

Which statement below is NOT TRUE with regard to a Roth IRA? A. The owner may contribute beyond age 70 1/2. B. There is no minimum distribution requirement at age 70 1/2. C. Distributions are tax-free if withdrawn after age 59 1/2. D. Distributions are tax-free if withdrawn after age 59 1/2 and the account has been open for 5 or more years.

C, owner must be 59 1/2 and the account must have been open for at least 5 years.

Who would be most likely to purchase a Keogh qualified retirement plan?

A self employed person or sole proprietor

Social Security provides several benefits based on a worker's primary insurance amount. Each of the following is a Social Security benefit, EXCEPT: A. Disability benefits B. Unemployment benefits C. Retirement income D. Dependent benefits

B

A qualified plan describes any pension or profit-sharing plan that provides favorable tax treatment. All of the following are requirements of a qualified plan, EXCEPT: A. It must be in writing. B. It must be communicated to all employees. C. It must provide Social Security retirement income benefits. D. It must be provided for the exclusive benefit of employees and their beneficiaries.

C

A tax sheltered annuity is characterized by a salary reduction and tax deferral. Which of the following would be eligible to participate in this type of retirement vehicle? A. A 58 year old male who is totally disabled B. An administrative assistant to a company officer C. A minister D. An employee of the federal government

C

Which of the following qualified plans is more inclined to utilize a fixed or variable deferred annuity as its primary investment vehicle? A. A defined contribution plan B. Group term life insurance plan C. Section 457 plan D. Buy-sell agreement

C

Qualified plans are those that are approved by the IRS. In order to receive qualified status, the plan must meet all of the following conditions: A. They must be in writing. B. They must not be discriminatory. C. They must comply with the exclusion ratio formula D. ALL

D

A direct rollover made from one qualified plan to another without the owner receiving any cash is:

Not subject to the 20% withholding tax