Taxes, Retirement, and Other Insurance Concepts

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Which is not a business use of life insurance?

Funding against general company financial loss

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

The minimum number of credits required for partially insured status for Social Security disability benefits is?

6 credits

What is a third-party owner?

A policyowner who is not the insured

What type of life insurance is most commonly used for group plans?

Annually renewable term

What is true regarding taxation of dividends in participating policies?

Dividends are not taxable

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

When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?

Interest only

If an insured surrenders his life insurance policy, which is true regarding the cash value of the policy?

It is only taxable if the cash value exceeds the amount paid for premiums

Which is not true regarding group insurance?

Participant in the policy each receive a policy

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

Who may contribute to an HR-10 Plan?

Self employed plumber

An employee has group life insurance through her 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

What is incorrect concerning a noncontributory group plan?

The employees receive individual policies

What is not true concerning an employer sponsored non qualified retirement plan?

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

What is the main purpose of the 7-Pay test?

To determine if the insurance policy is an MEC

If a company has a Simplified Employee Pension plan, what type of plan is that?

A qualified plan for a small business

Social security was not created to protect against?

Bad investment choices

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

For 31 days

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

What is incorrect concerning a Simplified Employee Pension Plan?

SEPs are suitable for large companies

Which of the following is the same with regards to both qualified and nonqualified retirement plans?

Taxation on accumulation

If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is?

Fully insured

What is not true of the federal tax advantages of a qualified plan?

At distribution, all amounts received by the employee are tax free

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

Join during the open enrollment period

What is incorrect regarding whole life insurance?

Policy loans are deductible

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

Who would not qualify for the Keogh Plan?

Someone who work 400 hours per year

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

Tax deductible by the employer

What is not correct concerning the use of life insurance as an Executive Bonus?

The policy is owned by the company

What is not true concerning a MEC ?

The policyholder can receive distributions at any time without being penalized


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