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