Ins. Missed Answers

Which of the following would NOT be a violation of state insurance regulations?

Producer C uses her license to write uncontrolled business only The purpose of a license is to primarily write non-controlled business

Types of 401 (k) plans

Pure salary reduction plan; bonus plan, thrift plan

Traditional IRAs

grows tax deferred contributions are TAX DEDUCTIBLE 10% from nonqualified early distributions distributions are TAXABLE Payouts must begin at 70 1/2

Term life insurance cannot be used in a 1035 Exchange since it

has no cash value

Commissioner

head of the state Department of Insurance

Part A

helps to pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care and hospice care.

Health Savings Accounts (HSAs): are linked to

high deductible insurance

10% penalty tax is imposed on distributions made before the age of 59 1/2. There are exceptional circumstances,

however, that are exempt from the penalty tax, including distributions made as a result of divorce decree.

Money borrowed against the cash value of a policy is not income taxable;

however, the insurance company charges interest on outstanding policy loans.

Estate Tax

if the insured owns the policy, it will be included for estate tax purposes. If the policy is given away (possibly to a trust) and the insured dies within 3 ears of the gift, the death benefit will be included in the estate

Policy proceeds

in life insurance, the death benefit

Accidental Death and Dismemberment: benefits are

income tax free

Group medical and dental expense benefits are received

income tax free by employee

Business Disability Insurance: Key Person Disability benefits are received

income tax free by the business

Buy-Sell Policy: benefits are

income tax free by the business

Disability Income Insurance: Disability income benefits are received

income tax free by the individual.

Death benefit generally are

income tax free to the beneficiary

Interest on the death benefit of a life insurance policy is taxable if it was paid in

installments rather than lump-sum

Annuities: The portion that is taxable is the

interest earned on the principal

Annuities: Tax Base

interest earned on the principal (taxable portion)

Accumulations are

interest taxable

Temporary Insurance Producer

issued under special circumstances expire after 180 days unless they pass license exam

Short term Disability group plans usually have a benefit period of

less than 2 years may have elimination period (except for disability resulting from accidents)

Allowable exchanges include

life insurance policy for another, endowment, or annuity endowment contract for another, or annuity annuity contract for another annuity

An individual who is covered by a high deductible health plan can

make a tax-deductible contribution to an HSA and use it to pay for out-of-pocket medical expenses

Policy endowment

maturity date

403 (b) limits employee contributions to a

maximum amount that changes annually, adjusted for inflation. Catch-up provisions apply

In medical expense insurance policies, unreimbursed medical expenses paid for the insured, spouse & dependents

may be claimed as deductions if the expenses exceed a certain percentage of the insured's adjusted gross income.

Cash value accumulations can be borrowed against by the policyowner, or

may be paid to the policyowner upon surrender of the policy

If money is not transferred properly from one qualified retirement plan to the next, the monies

may be subject to taxation

When a policyowner surrenders a policy for cash value, some of the cash value

may be taxable as income if the cash surrender value exceeds the amount of the premiums paid for the policy.

If either the insured or the spouse was born before 1/2/1952, they

may continue to deduct total medical expenses that exceed 7.5% of the AGI (adjusted gross income) [only applies if insured itemizes these deductions on tax return]

Transfer for value

meaning the life insurance policy is sold to another party prior to insured's death

Difference between IRA and SEP plan

much larger amount can be contributed each year to a SEP (an IRS established annual dollar limit or 25% of the employees compensation, whichever is less)

Section 1035 Exchanges of the Internal Revenue Code: exchanges of one cash value life policy for another cash value life policy, or annuity, the policies

must be on the same life. (must be the same person/life being insured)

Disability Income Insurance: Premium payments on personally owned disability income policies are

nondeductible by the individual.

Who is eligible for 403 (b) - TSA plan? Who contributes to the plan?

nonprofit; employer and employee

Insurance Agent Licensure Applicants from other states must apply for a

nonresident license in CT

Exchange of policies are

nontaxable

Premiums are

not deductible (personal expense)

Business Disability Insurance: Key Person Disability Income premiums are

not deductible to the business.

Buy-Sell Policy: premiums are

not deductible to the business.

Health Savings Accounts (HSAs): contributions made by an employer are

not included in the individual's taxable income.

Lump sum death are

not income taxable

Policy loans are

not income taxable

Death benefits are

not income taxable (except for interest)

Individual Long term care

not premiums not deductible (unless combined premiums and unreimbursed medical expenses exceed 10% of AGI or 7.5 for 65&up and subject tothe tax-qualified limitations) benefits not taxable

Exempt

not subject to an obligation ex. tax exemption

Tax exempt

not subject to taxation

Premiums are

not tax deductible

Policy dividends are

not taxable

Cash Value increases are

not taxable (as long as the policy is in force)

Dividends are

not taxable (return of unused premium; however, interest is taxable)

Benefits received by the employee that are attributable to his portion of the contribution are

not taxable as income

If the annuitant dies during the accumulation period, the insurer is

obligated to return all or a portion of the annuity cash value. This will be included in the deceased annuitant's estate.

Medical and Dental Expense: Any premium paid by the employee are

only deductible to the extent that the employee premium when added to all other unreimbused medical expenses exceed a certain percentage of the insured's adjust gross income, for individuals who itemize their deductions.

All withdrawals will be taxable until the

owner's cost basis is reached.

When the owner withdraws cash value from a universal life policy this is called

partial surrender both the cash value an death benefit are reduced

Commission

payment to the agent by the insurance company for placing insurance, usually a percentage of the policy premium

Annuities: Accumulation phase

period after an annuity has been purchased but before distributions begin

A person may be eligible for MEdicare Part A if they have End Stage Renal Disease (ESRD) which is

permanent kidney failure that requires dialysis or a transplant

HSAs

premiums deductible benefits 1. not taxable when used for medical expenses 2. taxable plus20% penalty under 65, no penalty over 65 for nonmedical use

HRAs

premiums deductible benefits not taxable

MSAs medical savings accounts

premiums deductible benefits not taxable when used for medical expenses; taxable when taken out at end of year

Group Long term care

premiums deductible for employer benefits not taxable

Group Medical

premiums deductible for employer benefits not taxable

Group Medicare Supplement

premiums deductible for employer benefits not taxable

Business Overhead Expense (BOE)

premiums deductible for employer benefits taxable

Group disability income

premiums deductible for employer benefits taxable

Long Term Care Insurance: The following rules apply to taxation of LTC policies:

premiums may be deductible; daily benefits from the policy are received income tax free, as long as they do not exceed the daily cost of long term care; benefits paid in excess of the cost of care received are taxed as ordinary income.

Buy-sell

premiums not deductible benefits not taxable

FSA

premiums not deductible benefits not taxable

Individual disability income

premiums not deductible benefits not taxable

Key Person

premiums not deductible benefits not taxable

Individual Medical

premiums not deductible (unless combined premiums and unreimbursed medical expenses exceed 10% of AGI or 7.5 for 65&up and subject tothe tax-qualified limitations) benefits not taxable

Individual Medicare Supplement

premiums not deductible (unless combined premiums and unreimbursed medical expenses exceed 10% of AGI or 7.5 for 65&up and subject tothe tax-qualified limitations) benefits not taxable

LIFO (Last In, First Out)

principle applied to asset management in life insurance products, under which it is assumed that the funds paid into the policy last will be paid out first

FIFO (First In, First Out)

principle under which it is assumed that the funds paid into the policy first will be paid out first

Endowment life policy

promise to pay the face amount if the insured survives until the end of a specific period (20; 30 years; until 65) will also pay if insured dies within specified period.

Licensing regulations set out the requirements, procedures, and fees relating to the

qualification, licensure, and appointment of insurance producers (agents)

403 (b) plans are

qualified plan available to employees of public school system & employees of certain nonprofit organizations under Section 501 (c)(3) of the IRA code

Profit-sharing plans are

qualified plans where a portion of the company's profit is contributed to the plan and shared with employees.

An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of

rebating when producers give or promise anything of value that is not specified in the policy they are guilty of rebating

Taxation of Individual Retirement Accounts (IRAs): If the beneficiary is a spouse, they can choose to

receive distributions by 12/31 of the year immediately following the owner's death or leave the money in the tax-deferred account until the calendar year in which the owner would have attained age 70 1/2 (distributions will be subject to income taxation)

Annuities: after all of the interest is received and taxed the principal will be

received with no additional tax consequences

Applicants who live and work in Ct would apply for what type of Insurance licensure

resident licenses

Dividends are the

return of unused premiums.

Exchanges cannot happen from a less-tax-advantaged contract to a more-tax-advantaged contract

same to same

Who is eligible for Simplified Employee Pension (SEP) plan? Who contributes to the plan?

self-employed/small employer; employer

Who is eligible for HR-10 Keogh plan? Who contributes to the plan?

self-employed; employer matches employee's contributions

Tax Reform Act of 1984

single premium life insurance remained as one of the few financial products offering significant tax advantages

Who is eligible for SIMPLE plan? Who contributes to the plan?

small employers (no more than 100 employees) ; employer matches employee's contribution

Business Overhead Expense (BOE):

sold to small business owners to reimburse themf or the overhead expenses after a disbaility

Taxation of Individual Retirement Accounts (IRAs): Distribution

subject to income taxation in the year the withdrawal is made

Taxable

subject to taxation

The interest earned on a dividend account left to accumulate

subject to taxation as ordinary income each year interest is earned, whether or not the interest is paid out to the policyowner.

Surrenders are

surrender value - past premium = amount taxable

Business Overhead Expense (BOE): premiums

tax deductible to the business as a business expense

Whether it be a life insurance policy or an MEC, the policy is

tax free

Health Savings Accounts (HSAs): a HSA holder who uses the money for nonhealth expenditure pays

tax on it plus 20% penalty

Rollover

tax-free distribution of cash from one retirement plan to another.

Direct Transfer (or Transfer)

tax-free transfer of funds from one retirement program to a traditional IRA or transfer of interest in a traditional IRA from one trustee directly to another

403 (b) is also called

tax-sheltered annuity (TSA)

Cash value exceeding premiums paid are

taxable at surrender

Dividend interest are

taxable in the year earned

Personally-owned Health insurance

taxation of insurance benefits is often determined by whether or not premiums were taxed

Corporate-owned annuities: Interest income is

taxed annually unless the corporation owns a group annuity for its employees and each employee receives a certificate of participation

CashValue Gains

taxed at surrender

Health Savings Accounts (HSAs): an HSA holder 65 and up, can withdraw for nonhealth purposes will be

taxed but NOT penalized 20%

Any individual or business entity may apply where for insurance licensure

the Commissioner at the Department of Insurance

ROTH IRAS are tax free when

the account has been open for 5 years.

Annuities: Principal amount

the amount that was paid into the annuity, which is excluded from taxes.

When money is withdrawn from the annuity during the accumulation phase,

the amounts are taxed on a Last In, First Out basis

If the annuity has been paid up, and the annuitant dies during the annuity period

the annuity benefits are taxable and will be included in the estate.

The agent licensure application must be signed by

the applicant if the application is for an individual, a licensed officer if for a corporation a licensed partner if for a partnership a Licensed principal if the application if for any other applicant

An exception to life insurance proceeds being free of federal income taxation is if

the benefit payment results from a transfer for value (when policy is sold to another party prior to insured's death)

If the contract holder dies before the annuitization date,

the contract's interest becomes taxable. If the beneficiary is a spouse, however, the tax can continue to be deferred.

Partially contributory

the cost is paid partially by the employee and employer. The portion paid by the employee is received income tax free and the portion paid by the employer is included in the employee's gross income and is taxed as ordinary income.

Fully contributory

the employee pays the entire cost, so the income benefits are received income tax free by the employee

Some Profit Sharing plans do not provide a definite formula for figuring the profits to be share so

the employer contributions must be systematic and substantial.

Noncontributory plans

the employer pays the entire cost, so the income benefits are included in the employee's gross income and taxed as ordinary income

Defined benefit plans

the employer specific an amount of benefits promise to the employee

Defined-benefit plans

the employer specifies an amount of benefits promised to an employee

In 403 (b) plans contributions can be made by

the employers or employee through reduction and are excluded from the employee's current income.

Annuities: A portion of each annuity payment is taxable and

the other portion is not.

Employees who elect to participate in a SIMPLE plan, may defer up to a specified amount each year and the employer

then matches the contribution, dollar for dollar, up to an amount equal to 3% of employee's annual compensation.

Upon death, the face amount is paid,

there is no more cash.

3 of the 24 continuing education hours must be completed in courses related specifically

to state regulations or ethics

Cease and desist

to stop or discontinue

If the insured or the spouse is 65 years or older,, they may continue to deduct

total medical and dental expenses that exceed 7.5% of their AGI

Simplified Employee Pensions (SEPs)

type of qualified plan suited for small employers or the self-employed.

Buy-Sell Policy:

typically written to cover partners or corporate officers of a closely held business.

Health Savings Accounts (HSAs): when opening account the person must be

under the age of medicare eligibility

most people who itemized their deductions can claim deductions for

unreimbursed medical expenses (those that are not covered by health insurance) that exceed 10% of their adjusted gross income (AGI)

Business Overhead Expense (BOE): benefits are

usually limited to covered expenses incurred or the maximum monthly benefit stated in the policy, and are taxable to the business

Settlement Options

when the beneficiary receives payments consisting of both principal and interest, the interest portion of the payments received is taxable as income.

In 401 (k) plans the company may also match employee contributions

whether it is on a dollar-for-dollar basis or according to a percentage.

Any distributions are taxable in an MEC plan includin

withdrawals and policy loans

Adjusted gross income

gross income (all income from whatever sources) minus adjustments to income

Adjusted Gross Income

gross income (all income from whatever sources) minus adjustments to income.

Health Savings Accounts (HSAs): A person may obtain coverage under a qualified health insurance plan with established minimum deductibles

$1,350 for singles and $2,700 for families in 2018

An employee insured under a group health plan has bee paying $25 monthly premium for his group health coverage. The employer has been contributing $75, for the total monthly cost of $100. If the employee leaves the company, what would his maximum monthly premium for COBRA coverage?

$102. The employer is permitted to collect a premium from the terminated employee at a rate of no more that 102% of the individual's group premium rate (in this scenario, 102% of $100 total premium is $102). The 2% charge is the cover the employer's administrative costs.

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act

$2,500

Applicants for Insurance Licensure must pay a fee of

$50 for each license issued plus nonrefundable fee for administering examinations (currently 15$ for insurance producers)

An insured is covered under 2 group health plans - under his own and his spouse's. He had suffered a loss of $2,000. After the insured paid the total of $500 in deductibles and coinsurance, the primary insurer covered $1,500 of medical expenses. What amount , if any, would be paid by the secondary insurer?

$500. Once the primary insurer has paid the full available benefit, the secondary insurer will cover what the first company will not pay, such as deductibles and coinsurance. The insured will, then be reimbursed for out-of-pocket expenses.

If an employee contributes 40% of premium and receives a benefit of $1000,

$600 (60% employer contribution) will be taxed while the other $400 will be tax free.

The Pregnancy Discrimination Act specifically prohibits prengnancy discrimination by employers with the minimmum amount of how many employees?

15. Employers with 15 or more employees are prohibited from pregnancy discrimination.

Long Term Disability group plans usually pay benefits for

2 years or longer.

Life insurance being included in the taxable estate include

- Incidents of ownership -face amount of policy will be included in taxable estate, even though actual proceeds were paid to beneficiary - Estate as beneficiary - Transfer of ownership - within 3 years prior to death, the face amount of policy will be included in the taxable estate.

Taxation of Individual Retirement Accounts (IRAs): Certain conditions under which the 10% penalty will NOT apply:

- Participant is 59 1/2 - Participant is totally disabled; - The money is used to make the down payment on a home (not to exceed $10000 and usually for first time homebuyers); -Withdrawals are for post-secondary education expenses -Withdrawals are for catastrophic medical expenses or upon death

Policy loans, with interest, can be repaid in any of the following ways:

-By the owner while the policy is in force; - At policy surrender or maturity, subtracted from the cash value; or - At the insured's death, subtracted from the death benefit

All of the following are consideration exceptions to the 10% penalty administered to those who withdraw before 59 1/2 years old:

-Death of participant -The participant's disability; -A divorce decree requiring a distribution to a spouse as part of the settlement; -As a series of equal payments (at least annually) over the participant's life expantacy -A loan from the plan; or -As part of a qualified rollover.

If the general requirements for qualified plans are met, the following tax advantages apply:

-Employer contributions are tax deductible to the employer, and are not taxed as income to the employee; -The earnings in the plan accumulate tax; deferred; -Lump-sum distribution to employees are eligible for favorable tax treatment.

Under a 401 (k) plan participants may choose to do one of the following:

-Receive taxable cash compensation; or -Have the money contributed to the 401(k), in cash or deferred arrangement plans (CODA)

Taxation of Individual Retirement Accounts (IRAs): Contribution taxation rules:

-tax deductible contributions for the year of the contribution (based on person's income) -Contributions must be made in CASH in order to be tax deductible (CASH=any form of money) -Excess contributions are taxed at 6% per year as long as the excess amounts remain in the IRA; -Tax deferred earnings (the money that accumulates in the account) are not taxed until withdrawn

How many hours of CT Continuing Education must a nonresident producer complete every two years?

0 Nonresident producers may satisfy this requirement by complying with the CE requirements of their home state.

Health Savings Accounts (HSAs): To be eligible for an HSA account, an individual must

1.be covered by a high deductible health plan (HDHP) 2. not be covered by other health insurance 3. not be eligible for Medicare 4. can't be claimed as a dependent on someone else's tax return.

Any licensed person whose activities affect interstate commerce and who knowingly makes false material statement related to the business of insurance may be imprisoned for up to

10 years or fined or both

Distributions (payments made to the policyowner) before 59 1/2 are subject to

10% penalty

Taxation of Individual Retirement Accounts (IRAs): In the case of early distribution (prior to age 59 1/2) a

10% penalty will apply

Medical Expense Coverage for Sole Proprietors (business owner) and Partners may deduct

100% of the cost of a medical expense plan provided to them and their familiars because they are considered self-employed individuals and not employees. The deduction may not exceed he taxpayer's earned income for the year.

In an ROTH IRA plan, an individual can contribute up to _____% of earn income up to an IRS-specified maximum, while with traditional IRAs,

100; the dollar amounts change every year.

A producer that allows the license to lapse may reinstate as longer as its less than

12 months after the due date of the renewal fee without being required to pass an exam

Every small employer carrier must actively offer to small employers at least how many health benefit plans?

2. As a condition of transacting business in this state with small employers, every small employer carrier is require to active offer to small employers at least 2 health benefit plans. One plan offered by each small employer carrier must be a basic health benefit plan, and one plan must be a standard health benefit plan.

If the distribution of Rollover (money_ is paid directly to the participant, _____ % of the distribution must be withheld by the payor.

20

Following an injury, a policyowner covered under Medicare Parts A&B was treated by her physician on an outpatient basis. How much of her doctor's bill will she be required to pay out-of-pocket?

20% of covered charges above the deductible. After the deductible, Part B will pay 80% of covered expenses, subject to Medicare's standards for reasonable charges.

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?

3 days. Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.

A minimum of 24 hours of continuing education credits every

3 years

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?

5 days, Consumers must be advised that they have a right to request additional info concerning investigative consumer reports, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.

401 (k) allows participants age

50 or over to make additional catch-up contributions (up to a limit) at the end of the calendar year.

Loans on a 401(k) plan are permitted in certain circumstances for up to

50% of the participant's vested accumulated benefit or annual IRS- established dollar amount.

What is the maximum number of employees that a small employer can have?

50. The term "small employer" applies to any person or entity that employs at least 2, but not more than 50 employees on business days during the preceding calendar year.

Distribtution prior to age ____ and impose a 10% penalty, unless they fall under an exception to the 10% penalty.

59 1/2

Rollovers must be completed within_____ days from the time the money is taken out of the first plan.

60

To be eligible for Part A Medicare, an individual may be required to be age ___ or over and entitled to monthly SS benefits based on the spouse's work record and the spouse is at least _____.

65;62

All life insurance policies and changes are subject to

7- pay test

ROTH IRA plan contributions can continue beyond age __ and contributions do not have to begin at age ____

70 1/2; 70 1/2

How many eligible employees must be included in a contributory plans?

75%. At least 75% of eligible employees can be included in a contributory plan. Both the employees and the employer contribute to premium payments.

Applicants may submit renewals for insurance licensure beginning

90 days prior to license expiration

Part D

Prescription Drugs is for prescription drug coverage.

The employer will contribute a certain amount or percentage for each dollar contributed by the employee; however employee contributions are not always required in what type of plan(s)?

Bonus or Thrift

In an IRA, A married couple could contribute a specified amount that is double the individual amount even if only one person had earned income.

Each spouse is require to maintain a separate account not exceeding the individual limit.

Partial Surrenders are

FIRST IN FIRST OUT (FIFO) taxation [FIFO applies to life insurance only] [LIFO applies to annuities]

An applicant is denied insurance because of the information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company?

Fair Credit Reporting Act The Fair Credit Reporting Act governs what information can be collected and how information can be used.

Benefits paid to disabled employees that are attributable to the employer's contribution are subject to

Federal Insurance Contributions Act (FICA) withholding for Social Security purposes. Will be considered taxable income to employee

Kevin and Nancy are married; Kevin is the primary breadwinner and has a health insurance policy that covers both him and his wife. Nancy has an illness that requires significant medical attention. Kevin and Nancy decide to legally separate, which means that Nancy will no longer be eligible for health insurance coverage under Kevin. Which of the following options would be best for Nancy at this point?

COBRA. Dependents of employees are eligible to receive group health insurance under the employee's plan. If the employee and the dependent become legally separated, divorced, or if the employee dies, the dependent will be eligible for COBRA benefits for up to 36 months. This is best for her, since she has endured a long term illness. Otherwise, being approved for individual health insurance would be difficult.

Which of the following provisions must be included on the first page of a Medicare supplement policy, which states the insurer's right to change premium amounts?

Continuation provision The renewal provision, also known as continuation provision, must be included. This provision explains the right of the insurer to alter premium amounts.

Original Medicare refers to

Part A and B (Hospital and Medical Insurance only)

An insurance company assures its new policyholders that their premium costs will not increase for a period of at least 5 years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act?

Fraud According to Title 18, Sections 1033 and 1034 of US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud. This includes statements made on an applications for insurance, renewal of policy, claims for payment or benefits, premiums paid, and financial condition of an insurer

ROTH IRA

Grows TAX FREE (after 5 years) contributions are NOT tax deductible (made with after-tax dollars) Qualified distribution cannot occur until account open for 5 years and owner is 59 1/2 Distributions are NOT TAXABLE Payouts DO NOT have to begin at 70 1/2

Part A Health

Hospital Insurance financed through a portion of the payroll tax (FICA)

Issue age policy premiums increase in response to which of the following factors?

Increased benefits. The premiums of issue age policies can only increase in response to an increase in benefits.

Plan participants are allowed to contribute up to a specified dollar amount each year, or 100% of their salary if less than the maximum contributory amount in WHAT KIND OF PLAN

Individual Retirement Account

Those with what type of plans who 50 or older are entitled to additional catch-up contributions

Individual Retirement Account

All of the following are differences between individual and group health insurance EXCEPT

Individual insurance does not require medical exams while group insurance does require medical exams. In individual coverage, policies are issued based upon individual underwriting. In group plans, everyone is covered for the same coverage and there is no individual underwriting selection.

IRS

Internal REvenue Service: a US Gov't agency responsible for the collecting of taxes, and enforcement of the Internal REvenue Code

Concerning Medicare Part B which statement is INCORRECT?

It is fully funded by Social Security taxes (FICA) Part B is funded by monthly premiums and from the general revenues of the federal gov't.

If an employer provides health insurance for its employees, which of the following is true regarding pregnancy coverage?

It must be covered to the same extent as any other medical condition. The Pregnancy Discrimination Action states that pregnancy, childbirth and any related medical conditions must be covered to the same extent as any other medical condition under the policy.

Distributions of a MEC plan are taxed on a

Last in, First Out, known as "interest-first" rule

A person may be eligible for Part A Medicare if they have Amyotrophic Lateral Sclerosis aka called ____.

Lou Gehrig's Disease. This person automatically qualifies as soon as the month disability benefits begin.

Part B

Medical Insurance financed from monthly premiums paid by insureds and from the general revenues of the federal government

Part C

Medicare Advantage allows peopel to receive all of their health care services through available provider organizations

Which of the following is NOT covered under Plan A in Medigap insurance?

Medicare Part A deductible Medicare Supplement PLan A provides the core, or basic, benefits established by law. All of the above are part of the basic benefits, except for the Medicare Part A deductible, which is a benefit offered through nine other plans.

If a policy fails the 7-pay test, they are classified as

Modified Endowment Contract (MEC) and loses the standard tax benefits of a life insurance contract

In order to be eligible for group health insurance all of these are conditions an employee must meet EXCEPT:

Must have dependents. Employer group health insurance generally requires that to be eligible for coverage an employee must be a full time employee, working in a covered classification, and must be actively at work.

Employee contributions are

NOT DEDUCTIBLE

Corporate-owned annuities: Growth in the annuity is

NOT tax deferred

A 55 year old employee has worked part-time for his new employer for 3 months now, but has not been offered health insurance. What factor has limited the employee's eligibility?

Number of hours worked per week In order to be eligible for group health insurance through an employer, an employee

What type of care is Respite care?

Relief for a major care giver Respite Care is designed to provide relief to the family care giver, and can include a service such as someone coming to the home while the care giver takes a nap or goes out for a while. Adult day care centers also provide this type of relief for the caregiver.

Taxation is deferred on both contributions and earnings until funds are withdrawn from which type of plan

SIMPLE PLAN

SIMPLE Plan stands for

Savings Incentive Match Plan for Employees

A person may be eligible for Medicare Part A if they are younger than 65, but has been entitled to

Social Security disability benefits for 24 months - disabled

(True or False) To establish a SIMPLE plan, the employer must NOT have a qualified plan already in place.

TRUE

A citizen or legal resident of the US must be age 65 or over and qualified for Social Security or RR retirement benefits to be eligible for Medicare Part A. (TRUE or FALSE)

TRUE

Which of the following would be a qualifying event as it relates to COBRA?

Termination of employment due to downsizing. Events include termination of employment for reasons other than for misconduct; dependents' qualiying events include the death of the employee divorce or legal separation.

A husband and wife are insured under group health insurance plans at their own places of employment, and as dependents under their spouse's coverage. If one of them incurs hospital expenses, how will those expenses likely be paid?

The benefits will be coordinated. Benefits will be coordinated when individuals are covered under two or more health plans.

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?

The customer's associate, friends, and neighbors provide the report's data. Both consumer reports and investigative consumer reports provide additional info from an outside source about a customer's character and reputation, and both types of reports are used under the Fair Credit Report Act. The main difference is that the info for the investigative consumer report is obtained through an investigation and interviews with associates, friends, neighbors of the consumer.

All of the following are reasons a small employer would not have the option to renew its health plan EXCEPT

The policy doesnt provide the coverage the employer wants. The small employer loses its option to renew or nonrenew a policy if it fails to pay premiums, if the number of eligible employees drops, if there is fraud regarding an insured individual, if there is noncompliance with the plan provisions, or if the small employer has left the business that it was engaged in when the policy went into effect.

What is the purpose of Medicare Carve-out or Supplements?

They pay deductibles or copayments that are not paid by Medicare. Medicare carve-out and supplements act as excess insurance paying those covered expense not paid by Medicare because of deductibles or copayment requirements.

IRS Internal Revenue Service

US gov't agency responsible for collecting taxes, and enforcement of the IRC (Internal Revenue Code)

Which of the following describes the taxation of an annuity when money is withdrawn during the accumulation phase?

Withdrawn amounts are taxed on a last in, first out basis. All withdrawals will be taxable until the owner's cost basis is reached. After all of the interest is received and taxed, the principal will be received with no additional tax consequences.

Nonresident producers who move to this state must file for

a change of address form to the Department of Insurance in 30 days after change of legal residence.

Injunction

a court issued order to stop committing an act or violation

Statute

a formal written law enacted by legislaturel insurance statutes can be found in the state insurance code.

If there is a new increase in the death benefit,

a new 7 pay test is required.

Property and Casualty or Personal Lines producers must complete

a one-time 30hours course on Federal flood requirements

Tax deductible

a qualified expense that may reduce the amount of income subject to taxation

Home state

a state in which an insurer is organized and has its main place of business

What do ROTH IRA & Traditional IRAs have in common

able to contribute up to 100% of income up to an IRS-specified limit excess contributions are subject to a 6% tax penalty

Annuities: Tax are deferred during the

accumulation period

In traditional IRAs, withdrawals may begin at

age 59 1/2 but no later than 70 1/2

If a 58 year old withdraws $6000 from his annuity,

all of it is taxable and a penalty of $600 or 10%

401 (k) qualified retirement plans

allows employees to take a reduction in their current salaries by deferring amounts to a retirement plan.

Individual Retirement Account

allows individuals to make tax deductible contributions until the age of 70 1/2.

Vested

amount of individual ownership of a plan

Health Savings Accounts (HSAs): for taxpayers 55 y-o and older,

an additional contribution amount is allowed up to 1000$

An insurance producer may not act as

an agent of an insurance company unless the producer becomes appointed by the insurer.

In a SEP (Simplified Employee Pension), an employee establishes and maintains

an individual retirement account to which the employer contributes. These contributions are not included in employee gross income.

Inducement

an offer that attempts to influence the other party

One-sum cash surrenders

annuity cash surrender results in immediate taxation of the interest earned

Annuities: the portion that is nontaxable is the

anticipated return of principal paid in

Annuities: Cost Base

anticipated return of principal paid in (nontaxable portion)

Upon surrender or inheritance (endowment) of a life insurance policy,

any cash value in excess of cost basis (premium payments) is taxable as ordinary income.

Who is eligible for 401 (k) plan? Who contributes to the plan?

any employer; employer matches employee's contribution

Commissioner will notify producer of the license expiration date

at least 30 days before.

SIMPLE (Savings Incentive Match Plan for Employees) plan is

available to small businesses that employ no more than 100 employees who receive at least $5,000 in compensation from the employer during the previous year.

Medicaid provides all of the following benefits EXCEPT a. Family planning services. b. Income assistance for work-related injury.

b

Exclusion Ratio

calculation method used to determine the annuity amount to be excluded from taxes

Certified insurance consultant

can examine insurance and annuity contracts and make recommendations for a fee. consultant contract must be in writing and must have a copy by the person when she signs it. contract must indicate the fees consultant is charging

Seven pay test

can only pay extra premiums up to 7 times or else the contract turns into a modified endowment

Credit hours may not be

carried over to the next 2 year compliance period

Annuities cannot be exchanged into

cash value life policies

The policyowner may borrow against the policy's

cash value.

Benefits of qualified plans are taxable to the plan participant when they are received during retirement, at a time when the retired person is likely to be in a much lower tax bracket. (TRUE or FALSE)

cierto

Dividends are tax exempt. (true or falso)

cierto

Life Insurance Policy: death benefits are tax free if taken as a lump-sum distribution to a named beneficiary. (True or False)

cierto

Consultants cannot receive

commissions or compensation from any insurer or producer in connection with the sale or writing of any insurance contracts involved with his consulting business. consultants who violate these provisions can be penalized between $250 & $2500

EAch year individuals are allowed to save up to certain limits regardless of their plan's deductible

current contribution limits are $3,450 for singles and $6900 for families

nonresident producers must:

currently licensed as a resident in their home state submitted proper request for licensure and has paid all fees submitted to the Commissioner the application for licensure that the person submitted to his home state or a completed uniform application person's home state awards nonresident producer licenses to residents of this state on the same basis (the states have reciprocity)

Life insurance proceeds paid to a named beneficiary

generally free of federal income taxation if taken as a lump sum

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? a. no taxes are due since the plan participant is over 59 1/2 b. there is a 10% penalty for early withdrawal c. the amount distributed is subject to ordinary income tax. d. the amount of the distribution is reduced by the amount of a 20% withholding tax

d

Concerning group Medical and Dental Insurance, which of the following statements is INCORRECT? a. Benefits received by the employee are free from federal income tax. b. premiums paid by the employer are deductible as a business expense c. employee paid premiums may be deducted if certain conditions are met. d. employee benefits are tax deductible the year in which they were received

d

Taxable estate

death benefit or face amount of a life insurance policy may be subject to federal estate tax.

Settlement Options

death benefit spread evenly over income period (averaged). Interest payment in excess of death benefit portion are taxable.

401 (k) plans permit for early withdrawal for specified hardship reasons such as

death or disability.

Medical and Dental Expense: For group medical and dental expense insurance any premium paid by the employer is

deductible as a business expense

Disability Income (STD,LTD): Premiums paid by the employer for disability income insurance for its employees are

deductible as a business expense and are not considered taxable income to employee

Accidental Death and Dismemberment: premiums are

deductible to the employer as an ordinary business expense.

MECs have tax _____ accumulations.

deferred

Health Savings Accounts (HSAs):

designed to help individuals save for qualified health expenses that they, spouse or dependents incur.

When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered

discrimination permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination

If the owner of the IRA dies before distributions, the entire interest must be

distributed in full on or before Dec 31 of the 5th anniversary of the owner's death, unless they named a beneficiary.

Taxation of Individual Retirement Accounts (IRAs): If a beneficiary of a deceased IRA policyowner is assigned, the benefits may be

distributed over the life of the beneficiary no later than 12/31 following the policyowner's death

Direct Rollover

distribution is made directly from one IRA plan to the new IRA plan. 20% withholding is avoided

Original Medicare ____ require a referral to see a specialist, as long as the specialist is enrolled in Medicare.

does not

Original Medicare _____ require the patient to choose a primary physician

does not

Original Medicare ______ cover prescription drugs

does not

For payments after licensure lapse due date, a penalty in the amount of

double the unpaid renewal fee required

a minimum of 6 of 24 continuing education hours must be completed for

each line of authority

Surrender

early termination of a policy by the policyowner

In addition to order income tax, premature distributions under an annuity contract may be subject to a 10% penalty for

early withdrawals prior to age 59 1/2

A producer license will expire

every 2 years on the last day of the producers birth month

The law permits deductions for unreimbursed expenses in

excess of 10% of the adjusted gross income (AGI).

Contributions into a 401 plan are ____ from the individual empoyee's gross income up to a specified dollar amount.

excluded

Life Insurance Policy Premiums are tax deductible. (True or False)

falso; not

Life insurance policy: principal is taxable. (True or Falso)

falso; tax free

Defined contribution plans

focus on contributions rather than on the benefits they will pay out

Defined-contribution plans

focus on contributions rather than on the benefits they will pay out

Coercion

forceful act or threat aimed to influence a person to act against his or her will

Roth IRA

form of an individual retirement account funded with after-tax contributions.

Original Medicare covers health care ...

from any doctor, health care provider, hospital or facility that accepts Medicare.

Disability Income (STD,LTD): Benefits received by an employee that are attributable to employer contributions are

fully taxable to the employee as income