Chapters 9-10 Annuities and Retirement
The main purpose pf an annuity is to.....
Create a stream of income
How do benefit payments fluctuate over time in a variable life annuity?
Reflects changes on the market value of assets in a seperate account
Who would most likely purchase an immediate annuity?
Retiree having a lump sum to invest
Taking a sum of money and decreasing it in size is called
Capital liquidation
When a sum of money undergoes capital liquidation, that sum will
Decrease in size
Which annuity allows contributions to an IRA?
Deferred
Tori has an annuity that pays her a $500 per month income benefit for life or for ten years, whichever is longer. What kind of annuity is this?
Fixed life annuity with period certain
A large corporation pension plan purchased an accumulation annuity contract where all of the participating employees received certificates of participation. What is this contract called?
Group deferred annuity
What is another name for a Keogh plan?
HR 10 plan
A single-life annuity only has ONE......
Annuitant
During the liquidation phase of an annuity contract, to whom are the income benefits normally payable to?
Annuitant
The surrender charge on many deferred annuity contracts are waived when the....
Annuitant dies or become disabled
What determines how much an annuitant is paid for a variable annuity?
The market value variations of the securities backing it
Rick recently died and left behind a individual IRA account in his name. His widow was forwarded the balance of IRA. The widow qualifies for...
The martial deduction
Which statement concerning a deferred annuity contract is correct?
The owner can be the beneficiary, annuitant, or neither
The time limit an individual has to "rollover" funds from an IRA or qualified plan is.....
60 Days
ERISA requires that a Summary Plan Description must be provided to a new plan member within how many days following the new member's eligibility date?
90 days
The IRS has a "minimum coverage" rule regarding qualified retirement plans. This rule states that each qualified plan is required to....
Benefit a broad cross-section of employees
What is the tax treatment of benefit payments for a non-qualified annuity?
Benefit payments are always taxable
When an annuity contract has been fully surrendered, how will the surrender charges affect the final contract settlement?
Fiscal contract settlement will be reduced
A single premium deferred annuity sometimes contains a bailout feature. Which statement regarding this feature is correct?
If the interest rate falls below a specified level, the surrender charge is waived
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
Income tax and penalty tax
A 55 year old recently received a $30,000 distribution from a previous employer's 401k plan, minus $6,000 for income tax withholding. Which federal taxes apply if none of the funds were rolled over?
Income taxes plus a 10% penalty tax on $30,000
A business may purchase an annuity for all of the following EXCEPT
Informally funding a non-qualified deferred compensation plan
What is another term used for a "pure" life annuity?
Life income
The owner of a single premium deferred annuity is entitled to do all of these EXCEPT
Make additional payments into the annuity
The contractual rights which allow the owner of a deferred annuity to surrender the cash value several years before the annuity date are called......
Nonforfeiture options
Sarah, age 88, is a life annuitant who has lived beyond her life expectancy. The funds for additional benefit payments will be derived primarily from funds that were
Not distributed to life annuitants who die before life expectancy
Who typically makes the purchase payments in an individual annuity?
Owner
A Keogh plan is a(n)....
Qualified retirement plan for the self employeed
How are Roth IRA distributions normally treated for tax purposes?
Received income tax-free
When does the owner's contractual rights begin under an individual annuity contract?
Time of purchase
When determining the accumulation value of a deferred annuity, the total is calculated by taking the premiums paid + interest earned - ......
expenses and withdrawals
An individual working part-time has a gross income of $5,000 for the year. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
$5,000
Which of the co-annuitants listed below would receive the largest monthly benefit payments in a joint and 100% survivor annuity?
Age 71 to 73
What is NOT a valid contract exchange?
An annuity exchanged for a life insurance policy
When a large sun of money is used to structure monthly payments, which product is typically used?
An immediate annuity
An annuity's accumulation period may
Continue after the purchase payments stop
A description of a qualified plan's insurance contract may be found in which ERISA reporting form?
Annual return/report (Form 5500)
What happens to the purchasing power of benefit payments from a fixed life annuity when the cost of living goes up?
Decreases
A life annuity with period certain is characterized as.....
Guaranteeing benefit payments for a stated number of years
When compared to a fixed annuity, a variable annuity has what distinguishing feature?
Investment risk is assumed by the purchaser
A trustee-to trustee transfer of rollover funds is a qualified plan allows a participant to avoid.....
Mandatory income tax withholding in the amount transferred
John brought a deferred annuity on Mary. John amends the contract years later to name Tom as the recipient of the proceeds if Mary dies. Who is the annuitant for this contract?
Mary
Sylvia purchased an annuity for $100,000 from the proceeds of an inheritance. No further payments are permitted and the income stream begins in 15 years. This contract is a(n)
Single premium deferred annuity
Contributions made by an employee to a qualified retirement plan are required to be....
Subject to a vesting schedule
Which of these is a true statement regarding survivor benefits under a qualified retirement plan?
Survivor benefits can only be waived with the written consent of a married employee's spouse
The interest credited to the cash values of personally-owned non-qualified annuities is considered
Tax-deferred
Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The participation employee
The owner's cost basis for a non-qualified deferred annuity is typically the same as the
Total premiums paid
What is the effect of the market value adjustment in a market value annuity?
Transfers some of the investment risk to the policyowner
When does interest income for a flexible premium deferred annuity get reported for federal income taxes?
Upon receiving distributions from the contract
Under which circumstances is the interest rate guaranteed within a market value adjusted anuity?
When the contract has been held for the period specified in the policy
