Taxes, Retirement, and Other Insurance Concepts

To attain currently 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 statements concerning buy-sell agreements is true?

Buy-sell agreements are normally funded with a life insurance policy.

Which of the following is NOT true regarding a non qualified retirement plan?

It needs IRS approval.

All of the following statements are true regarding group insurance EXCEPT

Participants in the policy Each receive a policy.

An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?

$3,000

All of the following are examples of third-party ownership of a life insurance policy EXCEPT

An insured borrows money form the bank and makes a collateral assignment of a part of the death benefit to secure the loan.

In life insurance policies, cash value increases

Grow tax deferred.

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

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

Traditional IRA contributions are tax deductible based on which of the following?

Owner's income

All of the following would be different between qualified and non qualified retirement plans EXCEPT

Taxation on accumulation

An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?

A portion of the benefit up to a limit is tax free; the rest is taxable income.

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?

The amount of the distribution is reduced by the amount of a 20% withholding tax.

Which of the following describes the tax advantage of a qualified retirement plan?

The earnings in the plan accumulate tax deferred.

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.

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.

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 characteristics of a group life insurance plan EXCEPT

There is a requirement to prove insurability on the part of the participants.

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?

Withdrawals are not taxable.

Which of the following terms is used to name the nontaxed return of unused premiums?

dividend

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

Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?

SEPs are suitable for large companies.

Which of the following applicants would NOT qualify for a Keogh Plan?

Someone who works 400 hours per year

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

Survivorship protection.

Employer contributions made to a qualified plan

Are subject to vesting requirements.

In a life settlement contract, whom does the life settlement broker represent?

The owner

Which of the following best defines the "owner" as it pertains to life settlement contracts?

The policyowner of the life insurance policy

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT

As Distribution, all amounts received by the employee are tax free.

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

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 type of retirement account does not require the owner to start taking distributions at age 72?

Roth IRA