Taxes, Retirement, and Other Insurance Concepts
C
A "qualified" annuity or retirement plan A) accepts after-tax contributions B) is non-cancellable C) is approved by the IRS D) has a penalty for early withdrawal
D
A 60-yr 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 age 59.5 B) There is a 10% early withdrawal penalty. C) The amount distributed is subject to ordinary income tax. D) The amount of distribution is reduced by the amount of a 20% withholding tax.
A
A key person insurance policy can pay for which of the following? A) Costs of training a replacement B) Loss of personal income C) Workers compensation D) Hospital bills of the key employee
B
A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a A) stock redemption plan. B) buy-sell agreement. C) key person policy. D) split-dollar plan.
B
A partnership buy-sell agreement in which each partner purchases insurance on the life of the other person is called a A) stock redemption plan B) cross-purchase plan C) key person plan D) split-dollar plan
B
All of the following are business uses of life insurance EXCEPT A) funding business continuation agreements. B) funding against general company financial loss. C) compensation executives. D) funding against financial loss caused by the death of a key employee.
D
All of the following are characteristics of group life insurance except A) Amount of coverage is determined according to nondiscriminatory rules. B) Individuals covered under the policy receive a certificate of insurance. C) Certificate holders may convert coverage to an individual policy without evidence of insurability. D) Premiums are determined by the age, sex, and occupation of each individual certificate holder.
B
All of the following are examples of third-party ownership of a life insurance policy except: A) When an insured purchased a new home, the insured made an absolute assignment of a life insurance policy to the mortgage company. B) An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan. C) An insured couple purchases a life insurance policy insuring the life of their grandson. D) A company purchases a life insurance policy on their manager, who is an important part of the operation.
B
All of the following are general requirements of a qualified plan except A) The plan must be permanent, written, and legally binding. B) The plan must provide an offset for social security benefits. C) The plan must be communicated to all employees. D) The plan must be for the exclusive benefits of the employees and their beneficiaries.
D
All of the following are true to key person insurance except A) There is no limitation on the number of key employee plans in force at any one time. B) The employer is the owner, payor, and beneficiary of the policy. C) The key employee is the insured. D) The plan is funded by permanent insurance only.
C
All of the following statements concerning the use of life insurance as an Executive Bonus are correct except: A) The employer pays a bonus to a selected employee to fund the policy. B) It is considered a non-qualified employee benefit. C) The policy is owned by the company. D) Any type of insurance policy may be used.
A
All of the following would be different between qualified and non-qualified retirement plans except: A) taxation on accumulation B) taxation of withdrawals C) taxation of contributions D) IRS approval requirements
D
An employee quits her job where she has a balance of $10k in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds into a new account. If she decides to rollover her plan into a Traditional IRA, how much will she receive from the plan administrator, and how long does she have to complete the tax-free rollover? A) $10k, 30 days B) $8k, 30 days C) $10k, 60 days D) $8k, 60 days
C
An individual has been contributing to a retirement account after taxes are taken out of his paycheck. His financial advisor told him that he will be allowed to make contributions after age 70.5. The account owner does not have to pay taxes on the growth of his account. What type of retirement account is it? A) Simplified employee pension plan B) Traditional IRA C) Roth IRA D) 403(b) plan
D
For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are A) deducted based on the income level. B) Never tax deductible. C) Partially tax deductible depending on the income level. D) Tax deductible.
B
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? A) Premiums are determined by age, occupation, and individual underwriting. B) 100% participation of members if required in noncontributory plans. C) Each member covered receives a policy. D) Coverage cannot be converted when an individual leaves the group.
B
How are contributions to a tax-sheltered annuity treated with regards to taxation? A) They are taxed as income for the employee but are tax-free upon withdrawal. B) They are not included as income for the employee but are taxable upon distribution. C) They are never taxed. D) They are taxed as income for the employee.
C
If a company has a Simplified Employee Pension plan, what type of plan is it? A) The same as an IRA with the same contribution limits. B) An undefined contribution plan for large businesses. C) A qualified plan for a small business. D) The same as a 401(k) plan.
A
If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is A) fully insured B) partially insured C) correctly insured D) permanently insured
D
In a direct rollover, how is the money transferred from one plan to the new one? A) from trustee to the participant B) from the participant to the new plan C) from the original plan to the original custodian D) from trustee to trustee
D
In the executive bonus plan, who is the owner of the policy, and who pays the premium? A) Company is the owner, but the executive pays the premium. B) Board of directors is the owner, and the board of directors pays the premium. C) Company is the owner, and the company pays the premium. D) Executive is the owner, and the executive pays the premium.
D
Life insurance death proceeds are A) taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income. B) taxed as a capital gain. C) taxed as ordinary income. D) generally not taxed as income.
B
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 percent of the employee's annual wages? A) 10 B) 3 C) 5 D) 7
B
Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings? A) 75% of employee's contributions are taxed. B) They are tax deferred until withdrawn. C) Taxes must be paid in full. D) Employer's matching contribution can be 50% of employee's salary.
B
What is the primary purpose of a 401(k) plan? A) Life insurance distribution B) Retirement C) Education funds D) To receive dividends over a certain period
D
What percentage of a company's employees must take part in a noncontributory group life plan? A) 0% B) 25% C) 75% D) 100%
D
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 a(n) A) key person policy B) fraternal association C) aleatory contract D) executive bonus
A
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? A) Third-party ownership B) An irrevocable beneficiary C) A buy-sell agreement D) Family term rider
B
Which of the following is an eligibility requirement for all Social Security Disability Income benefits? A) is at least age 50 B) has attained fully insured status C) has been disabled for at least 1 year D) has permanent kidney failure
B
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? A) Premiums are taxable to the employee. B) Premiums are not tax deductible as a business expense. C) Premiums are tax deductible by the key employee. D) Premiums are tax deductible as a business expense.
C
Which of the following is not an example of a business use of life insurance? A) executive bonuses B) key person C) workers compensation D) buy-sell funding
A
Which of the following is not true regarding a nonqualified retirement plan? A) It needs IRS approval. B) Contributions are not currently tax deductible. C) It can discriminate in benefits and selecting participants. D) Earnings grow tax deferred.
B
Which of the following statements about group life is correct? A) The policy can be converted to an individual term insurance policy. B) The cost of coverage is based on the ratio of men and women in the group. C) The premiums are higher than in an individual policy because there is no medical exam. D) The group sponsor receives a certificate of insurance.
A
Which type of retirement account allows contributions to continue beyond age 70.5 and does not force distributions to start at age 70.5? A) Roth IRA B) Flexible IRA C) Standard IRA D) Traditional IRA
C
Who can make a fully deductible contribution to a traditional IRA? A) Someone making contributions to an educational IRA B) A person whose contributions are funded by a return on investment C) An individual not covered by an employer-sponsored plan who has earned income D) Anybody: all IRA contributions are fully deductible regardless of income level
C
Who is a third-party owner? A) An employee in a group policy B) An irrevocable beneficiary C) A policyowner who is not the insured D) An insurer who issues a policy for two people
C
Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy? A) The key person is the owner and beneficiary. B) The key person is the owner, and the employer is the beneficiary. C) The employer is the owner and beneficiary. D) The employer is the owner, and the key person is the beneficiary.
