Taxes, retirement and other insurance concepts PT1

An employee quit's 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

Group Life Insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is correct ?

100% participation of members is required in noncontributory plans.

Group Life insurance is a single Policy written to provide coverage to members of a group. Which of the following statements concerning group life is correct?

100% participation of members is required in noncontributory plans.

What type of life insurance is most commonly used for group protection

Annually renewable term

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

All of the following are characteristics of group life insurance EXCEPT ?

Premiums are determined by the age, sex and occupation of each individual certificate holder.

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.

What is the primary purpose of a 401K plan

Retirement

Which of the following statements concerning a simplified pension plan (SEP) is incorrect

SEP's are suitable for large companies

Who may contribute to a Keogh (hr-10) plan

Self employed plumber

An employee has group Life Insurance through an 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 is NOT true of life settlements ?

The seller must be terminally ill

All of the following are characteristics of a group life insurance plan EXCEPT ?

There is a requirement to prove insurability on the part of the participants.

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 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

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated ?

Those who have been insured under the plan for at least 5 years

What is the purpose of key person insurance ?

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

Social security was created to provide all of the following benefits EXCEPT?

Unemployment income

Which of the following statements regarding taxation of Modified Endowment Contacts is FALSE

Withdrawals are not taxable

All of the following are personal uses of life Insurance EXCEPT ?

buy-sell agreement

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

certain groups of employees only

For a retirement plan to be qualified, it must be designed for the benefit of

employees

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

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

to create an estate

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize ?

viatical settlement

What is the name of the insured who enters into a Viatical settlement?

viator

Under simple plans, participating employees may defer up to a specified amount each year and the employer then makes a matching contribution up to an amount equal to what percentage of the employee's annual wages ?

3%

What is the number of credits required for fully insured status for social security disability benefits ?

40

The president of a manufacturing company has offered one of the companies 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 with government approval standards. This annuity plan is

A non qualified annuity plan

Which of the following would NOT be taxable ?

A policy loan borrowed by the policyowner

Who is a third party owner?

A policyowner who is not the insured

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

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

Under the 401K bonus or thrift plan, the employer will contribute

An undetermined percentage for each dollar contributed by the employee.

A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owners death is

Buy-sell agreement

What does the term "liquidity" refer to in a life insurance policy?

Cash Values can be borrowed at any time

In a group life policy, a certificate of insurance is given to

Each insured person

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

Executive bonus

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.

When an employee terminates coverage under a group insurance policy, coverage continues in force

For 31 days.

If taken as a lump sum,life insurance proceeds to beneficiaries are passed

Free of federal income taxation.

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

Modified endowment contract

What is the official Name for the Social Security Program?

Old-Age, Survivors, and Disability Insurance

Traditional IRA contributions are

Tax deductable

Which of the following statements about a group life is correct ?

The cost of coverage is based on the ratio of men and women in the group.

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

The earnings in the plan accumulate tax deferred.

Which of the following is incorrect concerning a noncontributory group plan ?

The employees receive individual policies

All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT?

The employer can receive a current tax deduction for any contributions made to the plan

An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?

The insured may choose to convert to term or permanent individual coverage

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

The plan must provide an offset for social security benefits.

An Internal Revenue code provision that specifies providers for an individual retirement plan for public school teachers is an

403(b) Plan(TSA)

In order to qualify for conversion from group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years ?

5 years

The minimum number of credits required for partially insured status for social security disability benefits is

6 credits

To attain current insured status under social security, a worker must have earned at least how many credits during the last 13 quarters ?

6 credits

Which of the following is the required number of participants in a contributory group plan ?

75%

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.

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

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

SIMPLE Plans require all of the following EXCEPT

At least 1,000 employees.

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his

Attained age

In a direct rollover, how is the money transferred from one plan to the new one?

From trustee to trustee

Which of the following is an eligibility requirement for all social security disability income benefits?

Have attained fully insured status

An insured has a modified endowment contract. He wants to withdraw some obey in order to pay medical bills. Which of the following is TRUE?

He will have to pay a penalty if he is younger than 59 1/2

Which of the following is true of a qualified plan?

It has a tax benefit for both employer and employee.

Which of the following is Not true regarding a nonqualified retirement plan?

It needs IRS approval

An employee is joining a group insurance plan. In order to avoid having to prove insurability, what must the employee do?

Join during the open enrollment period

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

Keogh

All of the following statements are true regarding group insurance EXCEPT ?

Participants in the policy each receive a policy

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 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

Which type of retirement account allows contributions to continue beyond age 70 1/2 and does not force distributions to start at age 70 1/2 ?

Roth IRA

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

Simple employee pension plan

Which of the following applicants would not qualify for a Keogh plan

Someone who works 400 hours per year

Which of the following would be considered a non qualified retirement plan ?

Split-dollar plan

The premiums paid by the employer in a business life insurance policy are

Tax deductible by the employer

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

Taxation on accumulation

A 60 year old participant in a 401K 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

An employee quits his job on may 15 and doesn't convert his group life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describe what will happen?

The insurer will pay the death benefit from the group policy to the beneficiary

Which of the following best describes the "owner" as it pertains to life settlement contracts ?

The policyowner of the life insurance policy

Which of the following best describes the "owner" as it pertains to life settlement contracts?

The policyowner of the life insurance policy

All of the following are business uses of life insurance EXCEPT?

funding against general company financial loss

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

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

Which of the following types of insurance policies would perform the function of cash accumulation ?

whole life

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

workers compensation