CHP 10 -14

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1) Which of the following statements is (are) true with respect to annuities? I. Annuities are the opposite of life insurance. II. The fundamental purpose of annuities is to replace lost income in case of premature death. A) I only B) II only C) both I and II D) neither I nor II

41) Which of the following statements about the financing of OASDI and Medicare is (are) true? I. There is a maximum taxable wage base for OASDI. II. There is a maximum taxable wage base for Part A of Medicare. A) I only B) II only C) both I and II D) neither I nor II

Which statement is true with regard to problems and issues with tax-deferred retirement plans in the United States? A) Inadequate participation in employer-sponsored retirement plans can create economic insecurity for retired employees. B) Retirement benefits for women are higher than retirement benefits for men, reflecting the higher wages women are paid. C) Employees do not invest sufficient amounts in the common stock issued by the companies where they work. D) Pension benefits are too often indexed for inflation, burdening employers with high pension costs.

The Affordable Care Act requires employers with 100 or more employees to provide health insurance on the employees or pay a penalty if at least one employee receives a tax credit and coverage through the Health Insurance Marketplace. This requirement—providing insurance or paying a fine—is known as the A) single-payer solution. B) employer shared responsibility. C) essential benefit requirement. D) portability requirement.

The tax credit available through the Saver's Credit is equal to A) the annual IRA contribution limit. B) $2,000 regardless of income level and tax-filing status. C) a percentage of the contribution made to a traditional IRA, Roth IRA, 401-k, SIMPLE plan, or 403(b) plan. D) one-fourth of the Social Security taxes paid by the taxpayer.

16) A financial institution that provides for the accumulation or administration of the funds that will be used to pay pension benefits is called a A) trust fund. B) mutual fund. C) funding instrument. D) funding agency.

42) Some insurers offer a single-premium deferred annuity that does not begin paying benefits until an advanced age, such as 85. This product is called A) endowment insurance. B) equity-indexed annuity. C) life income with guaranteed payments annuity. D) longevity insurance.

The Affordable Care Act created program that enables small firms to offer health insurance to their employees. The program provides flexibility, choice, and the convenience of on-line account management. This program is called the A) Medical Advantage plan. B) Medicaid program. C) FAIR plan. D) SHOP Marketplace program.

20) Juanita paid a life insurer $45,000 in exchange for an immediate life annuity. Juanita will receive $500 per month from the insurer, and her life expectancy is 15 years (180 months). Assume that Juanita receives 12 monthly payments of $500 the first year. How much taxable income must she report? A) $3,000 B) $4,000 C) $4,500 D) $6,000

20) Which of the following statements about Medigap policies is (are) true? I. Insurers are required to have an open enrollment period of 6 months from the date an applicant first enrolls in Medicare Part B and is age 65 or older. II. Most policies are of limited value because they largely duplicate benefits already provided by Medicare. A) I only B) II only C) both I and II D) neither I nor II

23) Which of the following is a permissible IRA investment alternative? A) mutual funds B) fine art C) antiques D) life insurance

36) An immediate life annuity offers all of the following benefits EXCEPT A) Immediate annuity payments are entirely exempt from federal income tax. B) Simplicity for the purchaser as he or she does not have to manage investment funds. C) Security for the purchaser as stable lifetime income that cannot be outlived is provided. D) The principal is safe as the funds are guaranteed by the assets of the insurer.

24) Which of the following statements is (are) true regarding the Roth IRA? I. Roth IRA contributions are tax deductible. II. Roth IRA investment income accumulates income-tax free. A) I only B) II only C) both I and II D) neither I nor II

10) Which of the following statements about the Social Security cost-of-living adjustment is (are) true? I. The amount of the adjustment is limited to a maximum of 2.5 percent annually. II. Increases are based on changes in the consumer price index. A) I only B) II only C) both I and II D) neither I nor II

12) All of the following persons are eligible for survivor benefits under Social Security EXCEPT A) dependent parents age 62 or older. B) unmarried children between the ages of 18 and 22 who are attending college. C) a surviving spouse age 60 or older. D) a surviving spouse with eligible children younger than age 16.

24) Which of the following statements regarding group long-term disability income insurance plans is (are) true? I. These plans are usually limited to occupational disabilities. II. These plans typically use a more restrictive definition of disability after an initial period, such as two years. A) I only B) II only C) both I and II D) neither I nor II

39) Beth was injured at work and is eligible to receive workers compensation benefits. All of the following benefits are provided under workers compensation EXCEPT A) disability income. B) retirement benefits. C) rehabilitation. D) medical care.

1) Problems with the current health care system in the United States include which of the following? I. Rising health care expenditures II. Considerable waste and inefficiency in the health care system A) I only B) II only C) both I and II D) neither I nor II

1) Which of the following statements about group insurance is true? A) Individual contracts are issued to each person covered under a group insurance plan. B) The cost of group insurance is usually higher on a per-person basis than the cost of individual insurance. C) The actual experience of a large group is a factor in determining the premium that is charged. D) Individual evidence of insurability is usually required.

3) Life annuity payments are made up of all of the following EXCEPT A) return of premiums. B) interest earnings. C) unliquidated principal of annuitants who live too long. D) unliquidated principal of annuitants who die early.

11) The effect of an annual out-of-pocket limit in an individual medical expense policy is to A) limit the lifetime benefits payable under the policy. B) put a cap on annual benefits the insurer will pay. C) prevent the insured from receiving duplicate benefits if medical expenses are also covered under workers compensation insurance. D) cover 100 percent of eligible medical expenses after an insured has incurred a specified amount of out-of-pocket expenses.

49) Which of the following is a characteristic of a health maintenance organization (HMO)? A) unlimited choice of health-care providers B) no premiums until care is provided C) narrow, limited, medical services provided D) great emphasis on cost containment

10) Which of the following statements about group universal life insurance is true? A) The interest rate credited to a policy varies over time, but is subject to a minimum guarantee. B) The employee selects where the cash value of the policy is invested. C) The coverage is not convertible to individual insurance if the employee leaves the group. D) The employer usually funds most of the cost of group universal life insurance.

11) Which of the following statements about Blue Cross Plans is (are) true? I. They typically provide service benefits rather than cash benefits to members. II. They usually provide very limited benefits for hospital charges. A) I only B) II only C) both I and II D) neither I nor II

12) Insurers offering variable annuities charge a number of expenses. One category of expenses is to pay the fund manager and to pay brokerage fees. This expense is the A) investment management charge. B) administrative charge. C) surrender charge. D) front-end load.

12) Which of the following statements about the protection provided by the Pension Benefit Guaranty Corporation is (are) true? I. Only defined benefit plans are insured. II. Only benefits that are not yet vested are guaranteed. A) I only B) II only C) both I and II D) neither I nor II

15) Which of the following statements is (are) true with respect to an equity-indexed annuity? I. The maximum percentage gain is usually capped. II. There is no downside protection against loss of principal if the annuity is held to term. A) I only B) II only C) both I and II D) neither I nor II

16) A deductible under which expenses are accumulated on an annual basis, and once a specified total is reached, the deductible is satisfied for the year is called a A) calendar-year deductible. B) prospective deductible. C) straight deductible. D) waiting period.

17) All of the following statements about long-term care insurance are true EXCEPT A) Premiums can be reduced by electing shorter elimination periods. B) A common benefits trigger is the inability to perform a certain number of activities of daily living. C) Protection against inflation is usually made available as an optional benefit. D) Policies currently sold are guaranteed renewable.

18) Which of the following statements about HMO managed care plans is (are) true? I. There is an emphasis on controlling costs. II. They usually have high deductibles. A) I only B) II only C) both I and II D) neither I nor II

18) Which of the following statements about the medical insurance (Part B) portion of Medicare is (are) true? I. Participation in Part B of Medicare is voluntary. II. It is provided at no cost to anyone who is fully insured under Medicare. A) I only B) II only C) both I and II D) neither I nor II

19) Which of the following statements about Section 401(k) plans is true? A) Elective salary deferrals to these plans are free of federal income taxation until the funds are actually withdrawn. B) These plans are exempt from rules that prevent discrimination in favor of highly compensated employees. C) There is no limit on the actual percentage of salary that can be deferred by highly compensated employees under a qualified plan. D) If an employee takes the funds made available to him or her in cash, the money received is not taxable.

2) Which of the following statements about the characteristics of social insurance programs is true? A) Benefits are loosely related to a worker's earnings. B) Benefits are paid primarily on the basis of individual equity. C) Participation in social insurance programs is voluntary. D) Social insurance programs must be fully funded at all times to pay required benefits.

4) Which of the following statements about retirement ages in defined benefit pension plans is (are) true? I. The normal retirement age in most plans is 65. II. In a defined-benefit plan, the early retirement age is the earliest age an employee can retire with full, unreduced benefits. A) I only B) II only C) both I and II D) neither I nor II

41) Under one type of retirement plan for small businesses, the employer contributes to an IRA established for each eligible employee. Under this type of plan, the contribution limits are significantly higher than they are for traditional IRAs and Roth IRAs. This type of plan, which requires little paperwork, is called a A) simplified employee pension (SEP) plan. B) defined benefit plan. C) Keogh plan. D) 403(b) plan.

43) Which of the following would help to reduce the long-range OASDI actuarial deficit ? A) increasing the payroll tax rate B) increasing benefits C) reducing the taxable wage base D) increasing the cost of living adjustment

44) The Affordable Care Act requires all new medical expense plans to provide a comprehensive set of coverages and services. This comprehensive set of coverages and services that must be provided are called A) essential health benefits. B) dread disease benefits. C) long-term care benefits. D) respite care benefits.

44) Which of the following statements about tax-deferred retirement plans in the U.S. is true? I. Women, on average, receive lower employment-based retirement income than men. II. One way to hedge against inflation is to invest lump-sum pension distributions in fixed-income investments. A) I only B) II only C) both I and II D) neither I nor II

44) Which of the following statements about the Medicare prescription drug benefit is (are) true? I. Beneficiaries select a prescription drug plan and pay monthly premiums, with the premium reduced or waived for low-income beneficiaries. II. The benefit provides first-dollar coverage of prescription drugs up to a maximum of $10,000 per year, but no coverage after $10,000. A) I only B) II only C) both I and II D) neither I nor II

45) Which of the following statements is (are) true about longevity insurance? I. If the annuitant dies during the deferral period, the purchase price of the annuity is forfeited. II. Longevity insurance is an example of an immediate annuity. A) I only B) II only C) both I and II D) neither I nor II

5) One provision of the Affordable Care Act is designed to benefit young adults up to age 26. This provision allows these young adults to A) remain covered under their parents' health insurance policies. B) receive a tax credit for their health insurance premium if they are unemployed. C) receive low-interest government loans to finance their health insurance. D) receive coverage under Medicare if they are not covered by a private health insurance plan.

5) Which of the following statements concerning defined-benefit pension plans is (are) true? I. The contribution rate by the employer varies from year to year. II. The retirement benefit is not known in advance. A) I only B) II only C) both I and II D) neither I nor II

50) Which of the following statements about the financial status of Medicare Part A is (are) true? I. Part A has serious financial problems. II. Reforms instituted by Congress have reduced total Part A expenditures in recent years. A) I only B) II only C) both I and II D) neither I nor II

53) Which of the following statements regarding recent developments in employer-sponsored health plans is (are) true? I. Preferred provider organizations (PPOs) continue to dominate group health insurance markets. II. The number of employers offering medical benefits to workers who retire early has increased. A) I only B) II only C) both I and II D) neither I nor II

6) As of this year, Brad, age 50, has 40 credits under the Social Security program. These credits were all earned in the last 10 years. What is Brad's insured status under the program? A) He is currently and fully insured. B) He is currently insured, but not fully insured. C) He is fully insured, but not currently insured. D) He is neither currently insured nor fully insured.

6) Which of the following statements is (are) true with respect to a joint-and-survivor annuity? I. Some joint-and-survivor annuities reduce the income payment after the first annuitant dies. II. No payments are made after the first annuitant dies. A) I only B) II only C) both I and II D) neither I nor II

6) Which of the following statements regarding health care expenditures in the United States is (are) true? I. As a nation, the U.S. spends significantly more per-person on health care than most other industrialized nations. II. Health care expenditures in the U.S. are high because everyone is covered by a health insurance plan. A) I only B) II only C) both I and II D) neither I nor II

7) All of the following are potential disadvantages to employees covered by a money-purchase pension plan EXCEPT A) The contribution rate by the employer is uncertain. B) The retirement benefit can only be estimated in advance of retirement. C) The benefit formula may produce an inadequate benefit if an employee enters the plan at an older age. D) The investment losses are borne by the employees.

8) All of the following persons are eligible for a benefit under the retirement portion of the Social Security program EXCEPT A) a divorced spouse, age 55, who was married to the retired worker for 6 years. B) a retired worker's 63 year-old spouse who is no longer caring for children. C) a retired worker's 52 year-old spouse who is caring for a 12 year-old daughter of the retired worker. D) a retired worker's unmarried 20 year-old son who has been severely disabled because of an automobile accident while he was in elementary school.

8) Brad funded a life annuity through installment payments. At age 60, he decided to elect an annuity settlement option and to begin to receive payments. Which of the following life income options will provide Brad with the highest monthly income? A) life annuity (no refund) B) life income with payments guaranteed for 5 years C) life income with payments guaranteed for 10 years D) installment refund annuity

9) Under a unit-benefit formula, benefits are a function of both A) earnings and years of service. B) age and earnings. C) age and gender. D) years of service and position within a firm.

James is concerned that if he purchases a fixed immediate annuity his funds will be tied-up and not accessible if an emergency arises. His insurance agent said that a rider could be attached to his annuity to address this concern. The rider is a(n) A) partial cash withdrawal rider. B) return of premium rider. C) guaranteed purchase option rider. D) waiver-of-premium rider.

32) All of the following are circumstances under which withdrawals from a traditional IRA may be made prior to age 59.5 without incurring a substantial penalty EXCEPT A) The withdrawal is in substantially equal installments paid over the individual's life expectancy. B) The withdrawal is used to pay living expenses after unemployment insurance benefits cease. C) The distribution is to the beneficiary of a deceased IRA owner. D) The withdrawal is because of income needed due to the individual's disability.

40) Which of the following statements about eligibility requirements for qualified Health Savings Accounts (HSAs) is (are) true? I. Only individuals who are eligible for Medicare benefits can establish a qualified HSA. II. Applicants must be covered by a high deductible health plan and not be covered by any other comprehensive health plan to establish a qualified HSA. A) I only B) II only C) both I and II D) neither I nor II

41) All of the following statements about the tax treatment of Health Savings Accounts (HSAs) are true EXCEPT A) Contributions to a qualified HSA are tax deductible. B) Distributions from a qualified HSA used to fund medical expenses are taxable income. C) Investment income in a qualified HSA accumulates income tax free. D) Distributions from a qualified HSA prior to age 65 for nonmedical purposes are subject to a 10 percent penalty tax.

41) Nancy's employer provides an interesting employee benefit plan. Each employee is given 250 employee benefit credits to spend. A wide array of benefits is available, and the employee uses benefit credits to select the benefits that he or she wants. This type of employee benefit plan is called a(n) A) defined benefit plan. B) cafeteria plan. C) employee selection plan. D) contributory plan.

42) Which of the following statements about taxation of Social Security retirement benefits under federal law is (are) true? I. Social Security retirement benefits are never considered taxable income. II. Up to 85 percent of Social Security retirement benefits may be considered taxable income, depending on the amount of other income received by the beneficiary. A) I only B) II only C) both I and II D) neither I nor II

43) Which of the following is a characteristic of longevity insurance? A) payment of the face value of the policy at age 100 B) forfeiture of the purchase price if the annuitant dies during the deferral period C) cash value can be borrowed or recouped through a nonforfeiture option D) high-cost annuity compared to other life annuities

43) Which of the following statements about health savings accounts (HSAs) is true? A) There are no limits to annual contributions that an individual may make to his or her HSA. B) Once an individual has reached age 65 or is covered by Medicare, no additional contributions to the HSA may be made. C) The health insurance plan covering the HSA account beneficiary is not permitted to use a deductible. D) HSAs offer no tax benefits for the account beneficiary.

43) Which of the following statements regarding minimum vesting standards for qualified defined benefit plans is (are) true? I. The vesting standards apply to both employer and employee retirement contributions. II. Employers may vest benefits more quickly than the minimum standards . A) I only B) II only C) both I and II D) neither I nor II

44) Which of the following statements is (are) true with regard to group life insurance? I. Most group life insurance is whole life coverage. II. Most group life insurance plans allow a modest amount of life insurance on the employee's spouse and dependent children. A) I only B) II only C) both I and II D) neither I nor II

45) All of the following statements about the Medicare Prescription Drug Plan are true EXCEPT A) Medicare prescription drug coverage is available to all Medicare beneficiaries. B) Medicare prescription drug coverage is funded exclusively through the Part A payroll tax. C) The Medicare prescription drug program provides financial help for beneficiaries with limited income and financial resources. D) In addition to the initial deductible, there is a coverage gap where the beneficiary must pay the entire cost of prescription drugs.

45) Which of the following is a common investment mistake that many retirement plan participants make? A) not investing heavily enough in common stock issued by the employer B) investing too heavily in common stock when close to retirement C) participating in an employer-sponsored retirement plan to obtain matching employer contributions D) participating in an employer-sponsored retirement plan and contributing the maximum amount allowed

47) Under one type of Medicare Advantage Plan, members of the plan can see any doctor or health services provider that accepts Medicare patients. If members receive care outside the network of member physicians and care facilities, they must pay higher out-of-pocket costs. This type of Medicare Advantage Plan is a A) Medicare HMO. B) Medicare PPO. C) Medicare Special Needs Plan. D) Medicare Private Fee-for-Service Plan.

47) Which of the following statements about Roth 401(k) plans is true? I. Contributions to a Roth 401(k) plan are made with before-tax dollars. II. Qualified distributions from a Roth 401(k) are received income-tax free. A) I only B) II only C) both I and II D) neither I nor II

5) Cassie, age 62, paid a life insurer $100,000 in exchange for a life annuity. If Cassie dies before receiving 120 monthly payments from the insurer, the remaining payments will be made to a beneficiary. If Cassie dies after receiving 120 payments, no additional payments are made by the insurer. Cassie has purchased a(n) A) life annuity, no refund. B) life annuity with guaranteed payments. C) installment refund annuity. D) cash refund annuity.

5) Which of the following statements about the eligibility requirements for group insurance is true? A) Most plans cover both full-time and part-time employees. B) An employee must be actively at work on the day the employee's group insurance becomes effective. C) An employee who signs-up for insurance during an eligibility period must furnish evidence of insurability. D) One purpose of a probationary period is to determine whether the employee is healthy enough to be covered under the group health insurance plan.

50) Which of the following is a provision of the Affordable Care Act? A) strengthening the use of pre-existing conditions exclusions B) no cost-sharing for certain preventative services C) introduction of annual and lifetime limits to control costs D) elimination of flexible spending accounts

51) All of the following changes would reduce the long-range deficit for the Social Security program EXCEPT A) increase the OASDI taxable wage base. B) delay scheduled increases in the full retirement age. C) make all OASDI benefits fully taxable. D) use general revenues of the federal government to help pay benefits.

54) Under many cafeteria plans, employees make premium contributions with pre-tax dollars. Then they use money from the salary reduction to purchase group health insurance or dental insurance. This type of cafeteria plan is called a A) health reimbursement arrangement plan. B) premium conversion plan. C) full-choice plan. D) flexible spending account plan.

55) Under the Medicare Prescription Drug Program, a coverage gap (also called a "donut hole") exists after the beneficiary and drug plan pay a certain amount for covered drugs. The coverage gap refers to A) the large, up-front deductible that must be satisfied if the patient has a prescription for a covered brand-name drug. B) the temporary gap in coverage that begins when the beneficiary and drug plan pay a certain amount for covered drugs during the year and ends when the catastrophic limit is reached and coverage resumes. C) the temporary gap in coverage that begins after beneficiaries reach the lifetime limit on catastrophic drug expenses and ends when a new deductible is met and coverage resumes. D) the temporary gap in coverage that begins when prescription benefits terminate for beneficiaries who attain age 68 and resumes when beneficiaries attain age 72.

56) Which of the following statements regarding the Emergency Unemployment Compensation (UEC) program is true? A) EUC benefits are limited to individuals who have exhausted regular state benefits and have annual incomes below the federal poverty level. B) EUC benefits are funded entirely by the federal government. C) EUC benefits are limited to employees who have lost their job because of a labor dispute. D) EUC benefits are available on a case-by-case based and awarded at the discretion of the Secretary of Labor.

7) Individual major medical insurance is characterized by which of the following? A) narrow range of benefits B) no lifetime benefit limits C) no exclusions D) first-dollar coverage

9) Under the Affordable Care Act, if a health insurer does not meet the minimum loss ratio requirement, the insurer must A) pay a fine to the federal government. B) issue rebates to the people the insurer covered. C) not sell any health insurance for a period of one year. D) reduce the premium on the policies it sells the following year.

A serious current concern with the Social Security program is the depletion of the Disability Income Trust Fund. Each of the following contributed to the depletion of the fund EXCEPT A) aging of the workforce and baby boomers B) changing to a less stringent definition of disability C) the increased number of women in the workforce D) growth in the size of the labor force over time

Agnes and Mary Clare, two elderly sisters, own an annuity covering both of their lives. The annuity pays benefits to them until the first sister dies, then the annuity terminates. Agnes and Mary Clare own a(n) A) flexible premium annuity. B) joint life annuity. C) longevity annuity. D) joint-and-survivor annuity.

To encourage low- to moderate-income workers to save for retirement, a tax credit called the Saver's Credit is available. Which statement about tax credits and tax deductions is true? A) Tax deductions are more favorable than tax credit for most taxpayers. B) Tax credits reduce taxes owed on a dollar-for-dollar basis. C) Tax credits reduce taxable income. D) Tax deductions reduce taxes owed on a dollar-for-dollar basis.

Under the Medicare Prescription Drug Program, a coverage gap (also called a "donut hole") exists after the beneficiary and drug plan pay a certain amount for covered drugs. The coverage gap refers to A) the large, up-front deductible that must be satisfied if the patient has a prescription for a covered brand-name drug. B) the temporary gap in coverage that begins when the beneficiary and drug plan pay a certain amount for covered drugs during the year and ends when the catastrophic limit is reached and coverage resumes. C) the temporary gap in coverage that begins after beneficiaries reach the lifetime limit on catastrophic drug expenses and ends when a new deductible is met and coverage resumes. D) the temporary gap in coverage that begins when prescription benefits terminate for beneficiaries who attain age 68 and resumes when beneficiaries attain age 72.

1) Which of the following statements about the tax implications of qualified pension plans is true? A) Investment income on plan assets is taxable in the year the investment income was earned. B) Employer contributions are deductible up to certain limits as an ordinary business expense. C) Employer contributions are considered taxable income to employees but are taxed at capital gains rates. D) Distributions from qualified pension plans are received tax-free by the retiree.

11) Which of the following statements about the minimum vesting standards for a qualified defined benefit plan is (are) true? I. Under cliff vesting, an employee must be at least 50 percent vested after 5 years of service. II. Under graded vesting, an employee must be at least 20 percent vested after 3 years of service and 100 percent vested after 7 years. A) I only B) II only C) both I and II D) neither I nor II

12) All the following are common exclusions in a major medical insurance policy EXCEPT A) routine dental care. B) surgeons' fees. C) expenses covered by workers compensation laws. D) cost of eyeglasses.

12) What is the purpose of stop-loss insurance that is used with self-insured group medical expense plans? A) to require employees to buy insurance for losses in excess of some specified amount B) to have a commercial insurer pay claims that exceed a specified limit C) to obtain administrative services from a commercial insurer D) to exempt self-insured plans from state insurance laws that require mandated benefits

13) All of the following are reasons why employers self-insure medical expense plans EXCEPT A) to reduce certain costs, such as premium taxes and commissions. B) to provide mandated state benefits. C) to retain funds until needed to pay claims. D) to eliminate the need to comply with separate state laws.

13) Kristen has an individual medical expense policy with a $1,000 calendar-year deductible, a $5,000 out-of-pocket limit, and a 20 percent coinsurance requirement. Kristen was hospitalized for a surgical procedure in March, her first health care treatment received during the year. The total bill was $20,000. Considering the deductible and coinsurance, how much of this amount must Kristen pay? A) $4,400 B) $4,800 C) $5,000 D) $5,100

14) A key feature of group medical expense plans is the employee being required to pay a percentage of covered expenses in excess of the deductible. This feature is A) other insurance. B) coinsurance. C) pro-rated insurance. D) reinsurance.

14) Which of the following statements about variable annuities is true? A) The periodic payments received by the annuitant are fixed. B) Variable annuities typically provide a guaranteed death benefit payable to a beneficiary if the annuitant dies prior to retirement. C) Insurers offering variable annuities are not permitted to charge administrative fees. D) Although the value of annuity units fluctuates, accumulation units have a fixed value.

15) Which of the following statements about long-term care insurance is (are) true? I. Long-term care insurance is inexpensive, especially if purchased at older ages. II. Purchasers have a choice of daily benefits and benefit periods. A) I only B) II only C) both I and II D) neither I nor II

15) Which of the following statements about recent developments in group medical coverage is (are) true? I. After increasing for many years, the premiums for group medical expense coverage have finally started to decline. II. A growing number of employers are offering plans with higher deductibles for employees. A) I only B) II only C) both I and II D) neither I nor II

16) Which of the following statements about hospice benefits under the hospital insurance (Part A) portion of Medicare is (are) true? I. Hospice benefits are payable only while the beneficiary is hospitalized. II. Hospice benefits are provided to persons who are terminally ill. A) I only B) II only C) both I and II D) neither I nor II

16) With an equity-indexed annuity, what name is given to the method of crediting excess interest to the annuity? A) the capitation method B) the indexing method C) the distribution method D) the earnings method

17) Which of the following expenses is covered under the medical insurance (Part B) portion of the Medicare program? A) a long-term stay in rest home B) the fee charged by a surgeon for an operation C) the cost of semis-private room during a hospital stay D) routine prescription drugs outside of the hospital

17) Which of the following is (are) characteristics of HMO managed care plans? I. Unlimited choice of physicians and hospitals II. Emphasis on controlling the cost of covered services A) I only B) II only C) both I and II D) neither I nor II

17) Which of the following statements about pension funding agencies and funding instruments is true? A) Under a trust-fund plan, individual annuities are purchased each year for employees participating in the plan. B) A separate investment account is a group pension account with a life insurance company. C) If the funding instrument is a commercial bank, the plan is called an insured plan. D) Under a guaranteed investment contract, the insurer guarantees the principal of a lump sum deposit but does not guarantee the interest rate.

18) Which of the following statements about disability and disability income insurance is (are) true? I. Most disability income policies replace 100 percent of gross earnings. II. The probability of being disabled before age 65 is much higher than commonly believed. A) I only B) II only C) both I and II D) neither I nor II

18) Which of the following statements regarding the taxation of individual annuities is (are) true? I. The exclusion ratio is the percentage of the annuity income that is taxable. II. After the net cost of the annuity has been paid to the annuitant, the total annuity payment is taxable. A) I only B) II only C) both I and II D) neither I nor II

19) Which of the following statements about the role of physicians with respect to Medicare claims is (are) true? I. Physicians who do not accept an assignment of Medicare claims can charge as much as 200 percent of the Medicare-approved fee. II. Physicians who accept assignment agree to accept the Medicare-approved amount as payment in full. A) I only B) II only C) both I and II D) neither I nor II

2) Beta Corporation has 1,000 employees eligible to participate in the firm's pension plan, and 100 of these employees are considered highly compensated. All of the highly compensated employees are covered by the plan. What is the minimum number of the 900 non-highly compensated employees who must be covered by the plan in order for the plan to satisfy the ratio percentage test? A) 500 B) 630 C) 667 D) 900

20) An HMO that contracts with two or more independent group practices to provide medical services to covered members is called a(n) A) group model HMO. B) network model HMO. C) staff model HMO. D) individual practice association HMO.

20) Which of the following statements about withdrawals from Section 401(k) plans is (are) true? I. The penalty tax does not apply to hardship withdrawals. II. Withdrawals may be made without penalty at age 59.5 or older. A) I only B) II only C) both I and II D) neither I nor II

21) Which of the following statements about Keogh plans is correct? A) They can be used by owners of incorporated businesses only. B) Investment income accumulates on a tax-deferred basis. C) The maximum annual contribution for any one participant is limited to $2,000. D) Plan distributions must start prior to age 59.5.

21) Which of the following statements about individual disability income policies that use a two-part definition of total disability is (are) true? I. During the initial period of disability, the insured must be unable to perform the duties of any gainful occupation. II. After the initial period of disability, the insured must be unable to perform the duties of any occupation for which he or she is reasonably fitted by education, training, and experience. A) I only B) II only C) both I and II D) neither I nor II

22) Which of the following statements is (are) true regarding the taxation of distributions from individual annuities? I. Individual annuity distributions are never taxable. II. Once the annuitant has recovered the premiums he or she paid for the annuity, the entire annuity distribution is taxable. A) I only B) II only C) both I and II D) neither I nor II

23) Which of the following statements is (are) true with respect to SIMPLE retirement plans? I. Only large employers can start a SIMPLE plan, provided the employer does not maintain another qualified plan. II. SIMPLE plans are exempt from most nondiscrimination and administrative rules that apply to qualified plans. A) I only B) II only C) both I and II D) neither I nor II

24) Kevin has an individual major medical policy that his insurer agrees to keep in force until age 65. However, the company has the right to increase the premium each year for the underwriting class in which Kevin has been placed. Which renewal provision is found in Kevin's policy? A) noncancellable B) guaranteed renewable C) conditionally renewable D) nonrenewable.

26) Daryl, age 42, quit his job. His employer offered a defined contribution pension plan, and the balance in the account was $30,000 when Daryl quit. He can avoid immediate taxation of these funds by A) taking a lump-sum distribution. B) using an IRA rollover account. C) receiving the money through four equal installments. D) using the funds to purchase common stock issued by the former employer.

26) Early distributions from qualified retirement plans are assessed a 10 percent penalty tax. However, there are some exceptions to this rule. All of the following distributions would be exempt from the penalty tax EXCEPT A) distributions made after age 59.5. B) distributions made when an employee of any age changes employers. C) distributions made after the death or permanent disability of the employee. D) distributions that are part of a series of substantially equal payments over the worker's life expectancy.

26) Some employers offer employees a choice of health care plans which are designed to make employees more sensitive to health care costs, to provide an incentive to avoid unneeded care, and to seek low-cost health care providers. Such plans are called A) employee assistance plans. B) consumer-directed health plans. C) cafeteria plans. D) preferred provider organization (PPO) plans.

27) Because of the Affordable Care Act, beginning in 2014, all new medical expense plans that offer individual and group coverage must accept all individuals and employers in the state who apply for coverage. These insurers are required to continue to renew the coverage at the option of the individual or plan sponsor. Thus, under the Affordable Care Act, the renewal provision is A) conditionally renewable. B) guaranteed issue. C) nonrenewable. D) renewable at the insurer's option.

27) Which of the following statements is (are) true with regard to Roth IRAs? I. The portion of a Roth IRA distribution that is attributable to investment income is taxable. II. There is a maximum income level above which Roth IRA contributions are not allowed. A) I only B) II only C) both I and II D) neither I nor II

28) Greta purchased a long-term care policy. Greta's eligibility for benefits under the policy may be triggered by A) how long premiums have been paid. B) inability to perform activities of daily living. C) continuous hospitalization for at least 60 days. D) eligibility for Medicare benefits.

28) Under one type of HMO, the physicians are employees of the HMO and are paid a salary and sometimes an incentive bonus to hold down costs. This type of HMO is called a(n) A) individual practice association (IPA). B) staff model. C) group model. D) network model.

29) Which of the following persons can establish a traditional IRA? I. Persons whose only income received is from investments. II. Employed persons under age 70.5 who are not active participants in an employer-sponsored retirement plan. A) I only B) II only C) both I and II D) neither I nor II

29) Which of the following statements about benefits provided by workers compensation programs is true? A) Occupational disability and nonoccupational disability are covered. B) Death benefits and benefits to eligible survivors are payable if a worker is killed on the job. C) Medical benefits are usually subject to deductibles, coinsurance, and numerous exclusions. D) Retirement benefits are payable to retired workers through workers compensation.

3) What are the minimum age and service requirements that can be imposed on employees eligible to participate in a retirement plan? A) age 18 and 6 months of service B) age 21 and 1 year of service C) age 21 and 3 years of service D) age 25 and 4 years of service

30) Ellen purchased a health insurance policy. Under the provisions of the Affordable Care Act, which of the following renewal provisions must the insurer use in the policy? A) cancellable B) guaranteed issue C) renewable at the insurer's option D) conditionally renewable

31) The Affordable Care Act includes a provision designed to help small employers make health insurance coverage available to their employees. This provision allows small employers to directly reduce their federal income tax by a percentage of the employer's contribution to funding health care for employees. This subsidy, in the form of reduction of income taxes, is called a A) marginal tax rate. B) tax credit. C) tax bracket. D) tax deduction.

16) Which of the following statements is (are) true concerning benefit payments under long-term care insurance? I. Reimbursement policies pay for actual charges up to a specified daily limit. II. Per diem policies pay a specified daily benefit regardless of the charges incurred. A) I only B) II only C) both I and II D) neither I nor II

19) Juanita paid a life insurer $45,000 in exchange for an immediate life annuity. Juanita will receive $500 per month from the insurer, and her life expectancy is 15 years (180 months). What is the exclusion ratio in this case? A) 33.33 percent B) 40.00 percent C) 50.00 percent D) 66.67 percent

2) All of the following are historical reasons for the increase in health care expenditures in the U.S. EXCEPT A) cost insulation because of third-party payers. B) employment-based health insurance. C) universal health insurance coverage. D) technological advances in health care.

21) Which of the following statements about preferred provider organization (PPO) health plans is (are) true? I. A PPO plan contracts with health care providers to provide medical services to members at reduced fees. II. Plan members are given a financial incentive to use PPO providers rather than other providers. A) I only B) II only C) both I and II D) neither I nor II

21) Which of the following statements about the financing of the Social Security program is (are) true? I. Although the self-employed pay an OASDI tax rate that is twice the employee rate, they are allowed certain deductions that reduce the effective tax rate. II. The earnings base on which OASDI taxes are paid increases annually based on changes in average wages in the national economy. A) I only B) II only C) both I and II D) neither I nor II

22) Objectives of unemployment insurance include which of the following? I. To help unemployed workers find jobs. II. To encourage employers to stabilize employment. A) I only B) II only C) both I and II D) neither I nor II

22) Which of the following statements is (are) true regarding the calendar-year deductible used in most individual medical expense policies? I. Once the deductible is satisfied, no additional deductible is payable during the calendar year. II. A carryover provision helps to avoid paying two deductibles in a short period of time. A) I only B) II only C) both I and II D) neither I nor II

23) All of the following statements about HMOs are true EXCEPT A) They organize and deliver health care services. B) HMOs place a heavy emphasis on controlling the cost of covered services. C) HMO members pay nothing for medical care until care is provided, then they must pay high deductibles and large coinsurance payments. D) The selection of physicians is usually limited to physicians affiliated with the HMO.

23) All of the following statements about optional disability income benefits are true EXCEPT A) Under a cost-of-living rider, benefits are periodically adjusted for inflation. B) A Social Security rider pays additional benefits if the insured is turned down for Social Security disability benefits. C) Adding a return of premium rider results in a lower initial premium. D) Under an option to purchase additional insurance, the insured has the right to buy additional insurance at specified times without evidence of insurability.

24) Which of the following statements about unemployment insurance benefits is true? A) Benefits are a flat amount regardless of a worker's previous wages. B) Because of federal legislation, the maximum benefit is the same in all states. C) Most states pay regular benefits for a maximum duration of 26 weeks. D) Under the extended benefits program, the federal government continues benefit

25) Connors Company self-funds the medical expense benefits that it provides to its employees. Connors Company has a contract with a commercial health insurance company providing that the health insurance company will pay all claims in excess of $250,000. The arrangement with the health insurance company is called A) reinsurance. B) managed care. C) stop-loss insurance. D) coinsurance.

8) Which of the following statements about retirement benefits under pension plans is true? A) Under a flat percentage of annual earnings defined benefit formula, each employee receives the same dollar benefit. B) A benefit using final pay is usually based on an employee's earnings during the last month of plan participation. C) A unit-benefit formula considers both earnings and years of service. D) Past service benefits are the result of bonuses and overtime pay during the period an employee participated in the plan.

37) Which of the following statements is (are) true with regard to the inflation-indexed annuity option? I. The initial monthly payment is lower than the initial payment a fixed annuity would have provided if purchased at the same age. II. Periodic payments to the annuitant are adjusted for inflation. A) I only B) II only C) both I and II D) neither I nor II

38) Most group health insurance plans have adopted the coordination-of-benefits rules developed by the National Association of Insurance Commissioners. Under these rules, if a dependent child is covered by both of the health insurance plans of the child's married parents, which health plan is primary for the child's medical expenses? A) always the mother's plan B) always the father's plan C) the plan of the parent whose birthday occurs first in the calendar year D) the plan of the parent who works for the larger employer, based on number of total employees

4) After all of the provisions of the Affordable Care Act are implemented, which of the following statements will be true? I. Health insurers cannot use pre-existing conditions exclusions. II. Health insurers cannot impose annual benefit limits and lifetime benefit limits. A) I only B) II only C) both I and II D) neither I nor II

4) Reasons for having a minimum participation requirement before a group is eligible for insurance include which of the following? I. To lower the expense rate per unit of insurance II. To minimize the possibility of insuring a group which consists largely of unhealthy individuals A) I only B) II only C) both I and II D) neither I nor II

40) Med Profs is a group of 18 doctors. These doctors work out of their own offices and treat patients on a fee-for-service basis. In addition, Med Profs doctors also agree to treat HMO members at reduced fees. The type of HMO that uses organizations like Med Profs is called a(n) A) group model plan. B) closed panel plan. C) individual practice association plan. D) network model plan.

9) Which of the following statements about group accidental death and dismemberment (AD&D) insurance is (are) true? I. The principal sum is paid if the employee dies in an accident. II. A percentage of the principal sum is paid for certain types of dismemberments. A) I only B) II only C) both I and II D) neither I nor II

9) Which of the following statements is (are) true with respect to the cash (lump sum) annuity settlement option? I. The taxable portion of the distribution is subject to federal and state income taxes. II. The option results in adverse selection against the insurer as those in poor health are more likely to take cash than to annuitize the funds. A) I only B) II only C) both I and II D) neither I nor II

8) Prior to passage of the Affordable Care Act, insurers could go back to the date a health insurance policy became effective and render the policy void due to a clerical error. This practice, which is prohibited under the Affordable Care Act except in cases of fraud or intentional misrepresentation of a material fact, is called A) estoppel. B) retention. C) rescission. D) reformation.

All of the following are methods used to fund the Affordable Care Act EXCEPT A) an excise tax on the sale of medical devices. B) reduced payments to Medicare Advantage plans. C) tort reform measures that reduce medical malpractice claims. D) savings in the Medicare and Medicaid programs from reduced fraud and abuse.

An important current issue in state workers compensation programs is the overuse of a certain category of pain-killing drugs. These drugs have been associated with drug overdoses and drug addiction. This category of drugs is called A) hypertension drugs. B) statins. C) opiates. D) beta-blockers.

Carl is concerned that if he purchases an equity indexed annuity, he will lose money long-term if the stock index declines. Which equity indexed annuity provision assures Carl that he will not lose money if he holds the equity indexed annuity to term? A) the indexing method B) the participation rate C) the guaranteed minimum value D) the maximum rate cap

30) All of the following statements about cost controls in dental insurance plans are true EXCEPT A) The coinsurance percentage used may vary by type of dental service. B) Cosmetic dental work is usually excluded. C) The limit on benefits may be expressed as an annual limit or as a lifetime limit for certain types of dental services. D) To eliminate small claims, there is no coverage for routine oral examinations, X-rays, or cleaning teeth.

30) Which of the following is a current problem with workers compensation programs? A) declining involvement of lawyers in workers compensation claims B) exclusion of deaths and injuries attributable to terrorism C) reduced benefits for occupational illness D) rising share of medical costs as a share of total benefits

32) All the following statements concerning a Roth 401(k) plan are true EXCEPT A) After-tax dollars are used to fund the plan. B) Investment earnings accumulate on a tax-free basis. C) Employees at all income levels may contribute to the plan, but annual contributions are limited. D) Qualified distributions at retirement are fully taxable.

33) Barb was injured in an auto accident. She was totally disabled and collected disability income benefits for 8 months. She would like to return to work on a part-time basis to see if her recovery is complete. During this period, her insurer will pay reduced disability income benefits. This type of disability is called A) recurrent disability. B) presumptive disability. C) permanent disability. D) partial disability.

35) One long-term care insurance benefit trigger considers whether the insured needs supervision to protect against threats to health or safety due to memory loss or disorientation. This benefit trigger is referred to as a(n) A) activities of daily living trigger. B) medical necessity trigger. C) needs test trigger. D) severe cognitive impairment trigger.

37) All of the following statements about 403(b) plans are correct EXCEPT A) Contributions to a 403(b) reduce an employee's taxable income. B) 403(b) plans are designed for employees of public school systems and tax-exempt organizations. C) The law limits the amount of income that an employee can elect to defer under a 403(b) plan. D) Matching employer contributions are not permitted under a 403(b) plan.

38) Which of the following statements is (are) true regarding cash-balance pension plans? I. Cash balance plans are defined contribution plans. II. Under a cash balance plan, the employer creates an investment account for each employee into which the employer makes actual contributions and allocates investment gains and losses. A) I only B) II only C) both I and II D) neither I nor II

40) Marco, a risk manager in California, is interviewing for a new position in the state of Washington. When Marco asked about methods of providing workers compensation, the answer surprised him. In Washington, employers can self-insure the risk or obtain coverage through a state fund. Private insurers do not market workers compensation insurance in Washington. Washington uses a A) competitive state fund. B) guaranty fund. C) reinsurance facility. D) monopoly state fund.

42) Marv is covered by a group health insurance plan at work. His employer funds the entire cost of the group health insurance. Because of this characteristic, the group health insurance plan can be described as A) defined benefit. B) contributory. C) defined contribution. D) noncontributory.

43) Doris started a business 2 years ago. The business has been successful, and Doris is thinking about starting to offer some employee benefits for her workers. She plans to offer a group term life insurance benefit. All of the following are usual eligibility requirements for participation in a group life insurance plan EXCEPT A) full-time employment. B) be actively at work when insurance becomes effective. C) apply for insurance during the eligibility period. D) satisfy a 2-year probationary period.

45) A controversial provision of the Affordable Care Act is the expansion of a public assistance program designed to make health coverage available to low-income individuals. By increasing the maximum income level that can be earned and still qualify for benefits, millions of individuals will be eligible for coverage under this public assistance program. This public assistance program is called A) Medicare. B) Health Maintenance Organization. C) Affordable Health Exchange. D) Medicaid.

46) Winslow Corporation has many long-term employees. The company has never had a pension plan. Recently, a new management team was hired. The new president said he would like to start a pension plan through which he could reward the long-term service provided by many employees. Which of the following types of plans should Winslow Corporation adopt? A) section 403(b) plan B) section 401(k) plan C) money-purchase plan D) defined benefit plan

47) Many group insurers contact employers and arrange for their individual insurance producers to meet with interested employees at the workplace to conduct sales interviews. This distribution method is called a A) mixed marketing program. B) worksite marketing program. C) cafeteria plan. D) mass merchandising program.

48) Under older group medical expense plans, physicians were paid a fee for each covered service and were reimbursed on the basis of reasonable and customary charges, up to a maximum limit. These older group medical expense plans were called A) major medical plans. B) managed care plans. C) point-of-service plans. D) indemnity plans.

48) Which of the following statements concerning Medicare Prescription Drug Plans is (are) true? I. The monthly premium is based on the health status of the beneficiary and the number of prescriptions the beneficiary needs. II. After the beneficiary has paid an initial deductible, Medicare pays the entire cost of all prescription drugs the beneficiary needs. A) I only B) II only C) both I and II D) neither I nor II

49) Under Part A of Medicare, how is reimbursement for inpatient hospital care determined? A) The amount billed to Medicare by the hospital is the amount Medicare pays. B) Eighty percent of the hospital's regular charge for care is paid. C) The hospital's usual, reasonable, and customary charge is paid. D) Hospital care is classified into diagnosis-related groups (DRGs) and the amount reimbursed depends on the DRG classification of the care delivered.

5) One insured status under Social Security requires you to have earned at least six credits duing the last 13 calendar quarters ending with the quarter of death, disability, or entitlement to retirement benefits. This insured status is A) disability insured. B) temporarily insured. C) fully insured. D) currently insured.

51) One provision of the Affordable Care Act is the creation in each state of a new and transparent marketplace where individuals and small employers can purchase affordable, qualified, health insurance plans. This marketplace is called a(n) A) residual pool. B) catastrophic health insurance pool. C) FAIR plan. D) insurance exchange.

53) Under one of the Medicare Advantage Plans, beneficiaries can receive care at a discounted rate by using health care providers that belong to the plan network. Care outside the network is also covered, but beneficiaries must pay higher out-of-pocket costs. This type of Medicare Advantage Plan is a A) Point of Service (POS) plan. B) Medical Savings Account (MSA) plan. C) Health Maintenance Organization (HMO) plan. D) Preferred Provider Organization (PPO) plan.

6) The period of time during which an employee can sign up for group insurance coverage without furnishing evidence of insurability is called a(n) A) probationary period. B) noninsurability window. C) waiting period. D) eligibility period.

7) During the funding period, the premiums paid for a variable annuity are used to purchase A) annuity units. B) immediate participation shares. C) mutual fund shares. D) accumulation units.

7) Which of the following statements about the full retirement age under the Social Security program is true? A) The current retirement age for full benefits is age 62. B) Beginning in the year 2020, the retirement age will be gradually increased to age 72. C) Early retirement with reduced benefits is allowed as early as age 55. D) Delayed retirement beyond the age for full benefits increases the amount of the monthly benefit.

9) Which of the following statements about a worker's primary insurance amount is (are) true? I. It is the monthly amount paid to a worker who elects early retirement at age 62. II. It is equal to 50 percent of the worker's final average pay that was subject to Social Security taxes. A) I only B) II only C) both I and II D) neither I nor II

One type of Medicare Advantage Plans provides focused care for a specific group of people, such as diabetics and nursing home residents. This type of Medicare Advantage Plan is a A) Point of Service (POS) plan. B) Private Fee-for-Service plan. C) Health Maintenance Organization (HMO) plan. D) Special Needs plan.

Which of the following statements about Social Security disability benefits is true? A) Benefits replace ninety percent of a disabled person's work earnings. B) A waiting period is not required for Social Security disability benefits. C) Social Security disability benefits are limited to a maximum duration of 60 months. D) A strict definition of disability is used in the Social Security program.

Which statement is true regarding IRA distributions? A) The minimum distribution rules apply to Roth IRAs, but not to traditional IRAs. B) Distributions from a Roth IRA are taxed at the individual's marginal tax rate. C) The IRA penalty tax applies to all traditional IRA distributions before age 59.5 with no exceptions. D) Unless a life annuity is issued, a retiree may still be alive when the IRA account is exhausted.

19) An HMO physician who determines if medical care from a specialist is necessary is called a(n) A) capitator. B) internist. C) network facilitator. D) gatekeeper.

22) Which of the following statements about SIMPLE retirement plans is true? A) They are limited to employers with 100 or fewer eligible employees and who do not maintain another qualified plan. B) Employees are not permitted to make SIMPLE plan contributions. C) Employers are subject to more stringent nondiscrimination rules than those that apply to most qualified plans. D) Employer contributions are fully taxable in the year of the contribution, but qualified distributions are received tax-free.

25) Which of the following statements is (are) true with respect to vesting under a qualified retirement plan? I. Vesting helps to reduce labor turnover. II. An employee who terminates employment after four years of service has no vested retirement benefit under graded vesting. A) I only B) II only C) both I and II D) neither I nor II

27) Maria is covered under a group medical expense plan as an employee. She is also covered under her husband's plan as a dependent. If Maria is hospitalized, how will each plan respond to her medical bills if both plans have the typical coordination-of-benefits provision? A) Maria's plan is primary, and her husband's plan is excess. B) Her husband's plan is primary, and Maria's plan is excess. C) The primary plan is determined by which birthday, Maria's or her husband's, is earlier in the year. D) Both plans will pay benefits on a pro rata basis.

29) Which of the following statements about the continuation of group health insurance under the COBRA law is true? A) A continuation of coverage must be made available even if an employee voluntarily terminates employment. B) The length of the continuation of coverage is 90 days. C) The option to continue coverage applies to minor children only, not to adults. D) The employer must pay the entire cost of coverage during the continuation period.

3) Which of the following statements about the characteristics of social insurance programs is true? A) They are designed to provide a floor of income with respect to the risks that are covered. B) The method of determining benefits is determined by insurance contractual provisions. C) Participants are required to satisfy a means test to receive benefits. D) With few exceptions, participation in social insurance programs is voluntary.

30) Donna is single and earns $30,000 annually. She is covered under her employer's retirement plan. Donna would like to start a traditional IRA and contribute $3,000 this year. Which of the following describes her ability to establish a traditional IRA and the tax treatment of her contribution? A) Her contribution is fully tax deductible. B) Her contribution is partially tax deductible. C) No portion of the contribution is tax deductible. D) Donna is not eligible to establish a traditional IRA, so no contribution can be made.

30) Harrison Company just received notice from the Internal Revenue Service that there is a problem with its retirement plan. Because over 60 percent of the benefits are designated for highly compensated employees, a special set of rules apply. These rules require more rapid vesting for non-highly compensated employees and certain minimum benefits for non-highly compensated employees. What name is given to such plans? A) top-heavy plans B) top-hat plans C) golden handshake plans D) defined-benefit plans

31) Which of the following statements about problems and issues in workers compensation insurance is (are) true? I. The cost of medical care under workers compensation continues to rise. II. Enactment of workers compensation statutes has eliminated litigation with respect to work-related illnesses and injuries. A) I only B) II only C) both I and II D) neither I nor II

32) All of the following are typical characteristics of individual medical expense coverage EXCEPT A) first-dollar coverage. B) broad coverage. C) deductibles. D) coinsurance.

33) Which of the following statements regarding individual retirement accounts (IRAs) is (are) true? I. If an individual's only income during the year is from investments, he or she cannot make an IRA contribution. II. The funds in the IRA can be used to purchase life insurance on the owner. A) I only B) II only C) both I and II D) neither I nor II

35) Advantages of cafeteria plans include all of the following EXCEPT A) simplicity of benefit administration. B) employees can select benefits that best match their needs. C) reduced taxes for employees. D) greater employer control over increasing benefit costs.

35) Which of the following statements is true with regard to the Medicare program? A) While Social Security old-age benefits are available at age 62, Medicare Part A benefits are not available, in most cases, until age 65. B) If an individual delays collecting Social Security old-age benefits until after the full retirement age, he or she is not eligible for Medicare benefits until he or she begins to collect old-age benefits. C) Part B of Medicare is funded through a payroll tax. D) Beneficiaries must pay a monthly premium for Medicare Part A coverage.

38) EFG Company experienced a reduced demand for its products during a recession. EFG managers were considering laying off some workers when the personnel director said, "Let's not lay off these workers. If we do, our unemployment insurance premiums will increase. The state considers employment stability when determining our premium." Considering the firm's employment record when determining the rate to charge for unemployment insurance is called A) experience rating. B) class rating. C) schedule rating. D) retrospective rating.

39) Some physicians, hospitals, and health care organizations agree to make medical services available to insureds at discounted prices. Insureds are not required to use these entities, but if they do, care costs are less than if these entities are not used. Such health care entities are called A) preferred providers. B) Health Maintenance Organizations (HMOs). C) Blue Cross/Blue Shield Plans. D) health savings accounts (HSAs).

4) Stan paid an insurance company $50,000 for a fixed annuity when he was 50 years old. At age 62, Stan plans to begin to receive payments from the insurer. There are no guarantees on the number of payments he will receive. Based on the description provided, this annuity can be described as a(n) A) deferred annuity. B) life annuity with guaranteed payments. C) immediate annuity. D) variable annuity.

4) Which of the following statements about participation in the Social Security program is (are) true? I. Most private sector employees are covered under the Social Security program. II. Each employee has the right to "opt out" of the Social Security program if the employee does not wish to participate in the program. A) I only B) II only C) both I and II D) neither I nor II

1) Which of the following is a reason that social insurance programs exist? A) to compete with private insurance programs B) to provide a base of economic security C) to provide need-tested benefits to low-income individuals D) to reduce involvement of the government in insurance markets

39) Which of the following statements is (are) true concerning the joint and survivor annuity settlement option? I. Under this option, payments begin after the first annuitant dies. II. This settlement option is often selected by married couples. A) I only B) II only C) both I and II D) neither I nor II

33) Special vesting rules apply to qualified defined contribution plans with voluntary employee contributions and matching employer contributions. Which of the following statements is (are) true with respect to these vesting rules? I. Employer contributions must vest immediately. II. Graded vesting is permitted, and employer contributions must be 20 percent vested after 2 years, with an additional 20 percent vested in each of the next 4 years. A) I only B) II only C) both I and II D) neither I nor II

33) Tony is 48 years old. He earned the maximum taxable wage base under Social Security annually between the time when he was 26 and when he was 40. At age 40, he dropped out of the workforce to care for children as his wife had a high-paying job. Which statement is true regarding Tony's insured status under Social Security? A) Tony is fully insured and currently insured. B) Tony is fully insured, but not currently insured. C) Tony is currently insured, but not fully insured. D) Tony is neither fully insured nor is he currently insured.

33) Which of the following statements about group long-term disability income plans is true? A) The definition of disability becomes less restrictive after a worker has been disabled for 2 years. B) Coverage is provided for both occupational and nonoccupational disabilities. C) Benefits are increased if a worker is eligible for Social Security or workers compensation benefits. D) Maximum monthly benefits under long-term disability income plans are lower than the benefits paid under short-term disability income plans.

34) Frank is doing some life insurance planning. A financial advisor said, "be sure to consider Social Security when examining sources of funds available for family support if you die." The financial advisor was referring to which Social Security benefit? A) retirement benefits B) survivor benefits C) disability benefits D) health insurance benefits

34) Prior to passage of the Affordable Care Act, insurance policies typically contained a provision excluding coverage for impairments that were present or were treated during a specified period prior to the effective date of the policy. This provision is a(n) A) time limit on certain defenses. B) preexisting-conditions clause. C) benefit period provision. D) incontestable clause.

34) Small business owners have a number of retirement plans available to them. One type of plan is limited to employers with 100 or fewer eligible employees. Under this type of plan, small employers are exempt from most of the nondiscrimination and administrative rules that apply to qualified plans. Such plans are called A) Keogh plans. B) SIMPLE retirement plans. C) cash balance plans. D) simplified employee pension (SEP) IRAs.

34) Which of the following statements about cafeteria plans is (are) true? I. Unspent flexible spending account balances are refunded to the employee, tax-free, at year-end. II. Cafeteria plans enable employees to select benefits that meet their specific needs. A) I only B) II only C) both I and II D) neither I nor II

35) The fundamental purpose of a variable annuity is to A) provide funding flexibility to the purchaser. B) provide a hedge against inflation. C) fund the purchase of cash value life insurance. D) guarantee a fixed-dollar benefit throughout retirement.

35) Which of the following statements is (are) true with respect to profit-sharing plans? I. There is no limit on the amount that an employer can contribute annually to an employee's account under a profit sharing plan. II. Profit sharing plans offer greater funding flexibility for employers than under other qualified plans. A) I only B) II only C) both I and II D) neither I nor II

36) Lynn works for a state university. In addition to her regular pension plan, Lynn established another retirement savings plan. She elected to have $5,000 of her salary withheld and contributed to a tax-sheltered annuity with an insurer. The type of plan that Lynn established is called a A) SIMPLE plan. B) 403(b) plan. C) defined benefit plan. D) Keogh plan.

36) Which of the following statements is (are) true with respect to the Medicare Advantage Plans? I. These plans replace the original Medicare program, Parts A and B, which are no longer available to new retirees. II. These plans provide an opportunity for retirees to receive Medicare coverage through private health care plans. A) I only B) II only C) both I and II D) neither I nor II

37) Dale, age 65, was dismayed to learn about all of the deductibles, co-pays, limits, and exclusions in the Medicare program. Dale bought a type of health insurance specifically designed to supplement Medicare, and selected his coverage from among 10 standard policies that private insurers offer. What type of health insurance did Dale purchase? A) long-term care insurance B) Medigap insurance C) major medical insurance D) viatical insurance

38) The Affordable Care Act has provisions that improve the quality of health care and provide several advantages. All of the following are examples of these provisions EXCEPT A) reducing paperwork and administrative expenses. B) increasing the number of physician specialists and reducing the number of general practitioners. C) compensating physicians based on value rather than service volume. D) encouraging integrated health care systems.

38) Which of the following statements about converting a traditional IRA to a Roth IRA is (are) true? I. Such conversions can be done with no income tax consequences. II. Qualified distributions from a Roth IRA after a conversion are received tax-free. A) I only B) II only C) both I and II D) neither I nor II

39) Turner Company self-insures its group life and group health insurance plans. Turner entered into an agreement with ABC Insurance through which ABC handles the plan design, claims processing, and record keeping for Turner. The agreement between Turner and ABC is called a(n) A) preferred provider agreement. B) administrative services only contract. C) exclusive provider agreement. D) point-of-service contract.

39) Which of the following statements concerning defined benefit and defined contribution pension plans is (are) true? I. The employer bears the investment risk with a defined contribution plan. II. Defined benefit plans favor workers who enter the plan at older ages. A) I only B) II only C) both I and II D) neither I nor II

Which of the following statements about the impact of the implementation of the Affordable Care Act (ACA) on workers compensation is true? A) Implementation of the ACA will increase fraudulent workers compensation claims. B) Implementation of the ACA will create higher healthcare provider prices. C) Implementation of the ACA will reduce the waiting time to see a physician, to have tests performed, and to begin physical therapy. D) Implementation of the ACA will discourage annual physical check-ups and implementation of workplace wellness programs.

Which of the following statements is true regarding disability income insurance? A) The purchase of disability income insurance is not necessary if you are covered under workers compensation. B) Increasing the elimination period reduces the premium for disability income insurance. C) Disability income insurance usually replaces 100 percent of lost income. D) A uniform definition of disability appears in all disability income policies.

Which of the following statements regarding the Emergency Unemployment Compensation (EUC) program is true? A) EUC benefits are limited to individuals who have exhausted regular state benefits and have annual incomes below the federal poverty level. B) EUC benefits are funded entirely by the federal government. C) EUC benefits are limited to employees who have lost their job because of a labor dispute. D) EUC benefits are available on a case-by-case based and awarded at the discretion of the Secretary of Labor.

10) Purposes of the coinsurance provision in major medical insurance policies include which of the following? I. to reduce premiums II. to prevent overutilization of policy benefits A) I only B) II only C) both I and II D) neither I nor II

10) Vesting refers to A) the employer's right to terminate contributions if a pension plan is adequately funded. B) the employer's right to recapture employee contributions to a pension plan if employment terminates prior to retirement. C) the employee's right to the employer's contributions or benefits attributable to the contributions if employment terminates prior to retirement. D) the employer's right to discriminate against non-highly compensated employees when determining pension benefit levels.

10) Which of the following statements is (are) true with respect to variable annuities? I. The price at which accumulation units can be purchased fluctuates during the funding period. II. The value of annuity units fluctuates over time. A) I only B) II only C) both I and II D) neither I nor II

11) Which of the following statements is (are) true with respect to the Social Security earnings test? I. The earnings test does not apply to dividends, interest, and rental income. II. The earnings test does not apply to work earnings for those individuals who have reached the full retirement age under Social Security. A) I only B) II only C) both I and II D) neither I nor II

13) Insurers offering variable annuities charge a number of fees and expenses. One category of fees and expenses is charged to cover the cost of record keeping, paperwork, and periodic reports to annuity owners. This expense is the A) investment management charge. B) surrender charge. C) administrative charge. D) front-end load.

13) Which of the following distributions from a qualified retirement plan would be exempt from the 10 percent penalty tax if the distribution occurred before the covered employee was age 59.5? I. A distribution made to an employee with a qualifying disability. II. A distribution made to a beneficiary or to the employee estate's after the employee's death. A) I only B) II only C) both I and II D) neither I nor II

14) In addition to most persons over age 65, which of the following persons is (are) eligible for Medicare benefits? I. Persons under age 65 who have been entitled to Social Security disability benefits for at least 24 months II. Persons under 65 who need long-term kidney dialysis treatment or a kidney transplant A) I only B) II only C) both I and II D) neither I nor II

15) Which of the following requirements must be met by a top-heavy pension plan to retain its qualified status? I. A special rapid vesting schedule must be used for non-key employees. II. Certain minimum benefits or contributions must be provided for non-key employees. A) I only B) II only C) both I and II D) neither I nor II

15) Which of the following statements about the coverage of health care services under Part A of Medicare is (are) true? I. Services in the patient's home are covered if the patient requires skilled care and meets certain conditions. II. Hospice care is available for beneficiaries with a terminal illness. A) I only B) II only C) both I and II D) neither I nor II

25) Which of the following statements about the financing of unemployment insurance benefits is true? A) Each state maintains its own trust fund at the state level, and the state pays qualified beneficiaries from the trust fund the state administers. B) While experience rating is used for other types of insurance, it is not used in unemployment insurance. C) Part of an employer's contribution is used for administrative expenses, to fund extended benefits, and to maintain a loan fund that can be drawn upon if the state's account is depleted. D) Most state programs are financed primarily by payroll taxes paid by employees.

26) Which of the following statements about the problems and issues of unemployment insurance programs is (are) true? I. Many state programs are inadequately financed. II. Only a small portion of the total unemployed receive benefits at any time. A) I only B) II only C) both I and II D) neither I nor II

27) ACME Company is considering starting a retirement plan for its employees. One option ACME is considering is a profit-sharing plan. All of the following are advantages of this type of retirement plan EXCEPT A) The employer's cost is not affected by the age and the number of employees. B) Profit sharing plans provide an incentive for employees to work harder and more efficiently. C) The 10 percent penalty tax does not apply to distributions prior to age 59.5. D) ACME enjoys greater flexibility in employer contributions.

28) Which of the following statements about workers compensation programs is true? A) Injured workers must prove the employer was responsible for their injuries to collect benefits. B) Workers compensation disability income benefits (amount and duration) are uniform from state to state. C) Options available for complying with the law may include one or more of the following: self-insurance, private insurance, or insurance through a state fund. D) Most states have elective laws whereby the employer can choose whether or not to provide workers compensation coverage to employees.

3) Beginning in 2014, the Affordable Care Act requires that most U.S. citizens and legal residents have qualifying health insurance or pay a financial penalty. This provision of the Affordable Care Act is known as the A) affordable health insurance exchange option. B) public option. C) individual mandate. D) premium subsidy option.

31) JKL Company just converted its traditional defined-benefit plan to another type of plan. Under the plan, benefits are defined in terms of a hypothetical account balance, with retirement benefits dependent upon the value of the participant's account at retirement. Each year, employees receive an interest rate credit and a pay credit which is a specified percentage of compensation. This type of plan is called a A) section 401(k) plan. B) deposit-administration plan. C) cash-balance plan. D) trust fund plan.

31) Which of the following statements about group short-term disability income plans is true? A) Most plans pay benefits for a period of 3 to 5 years. B) Most plans cover occupational disabilities only. C) Most plans provide benefits for total disabilities only. D) Most plans have a 90-day elimination (waiting) period.

31) Which of the following statements about the withdrawal of funds from a traditional IRA is true? A) Withdrawals of deductible contributions between the ages of 59.5 and 65 are subject to a tax penalty unless they are withdrawn because of specified circumstances such as death or long-term disability. B) Amounts attributable to nondeductible contributions are fully taxable as ordinary income when received. C) Withdrawals must begin no later than April 1 of the year following the calendar year in which an individual attains age 70.5. D) Withdrawals must be taken in the form of an annuity.

32) Marion owns substantial financial assets. She was surprised that she qualified for Social Security retirement benefits when she retired because of her high investment income. What characteristic of social insurance programs is Marion overlooking with respect to her Social Security retirement benefits? A) Social insurance programs are financially self-supporting. B) Social insurance program benefits are loosely related to earnings. C) Social insurance benefits are not means tested. D) Full funding of social insurance programs is unnecessary.

32) Which of the following statements about group short-term disability income plans is true? A) Most plans have a short elimination period for accidents but cover sickness from the first day of disability. B) Disability is usually defined in terms of any substantial, gainful, employment. C) The amount of disability income benefits typically is equal to some percentage of a worker's normal earnings. D) Most short-term plans cover occupational disability only.

34) Which of the following statements is (are) true with regard to IRAs? I. Contribution limits are higher for workers aged 50 and older. II. A spouse who does not work outside of the home may make a fully deductible contribution to a traditional IRA even if his or her spouse is covered by a retirement plan at work. A) I only B) II only C) both I and II D) neither I nor II

36) Beth's disability income insurance policy provides benefits for accidental death, dismemberment, and loss of sight. The maximum amount payable under this benefit is known as the A) face value. B) cash value. C) principal sum. D) monthly benefit.

36) Which of the following statements is (are) true concerning high deductible health plans? I. An employee can withdraw money tax-free from a health savings account or health reimbursement account to pay covered medical costs. II. There is a cap on an employee's out-of-pocket expenses under the plan. A) I only B) II only C) both I and II D) neither I nor II

37) Jan needed health insurance. She met with an agent who described the provisions of a health insurance policy. Jan purchased the policy. When she received the policy, she noted that several provisions were different from the provisions the agent described. She was not satisfied with the policy and immediately sent it back to the agent with a note stating her reasons for returning the policy. Jan is guaranteed a premium refund because of which policy provision? A) waiting period B) time limit on certain defenses C) ten-day right to examine the policy D) waiver-of-premium provision

37) Tracy had continuous group health insurance coverage at her previous employer for 6 years. Tracy decided to change jobs. Under federal law, if Tracy changes jobs, the new employer or group health plan must give her credit for previous and continuous health insurance coverage. This characteristic is called A) renewability. B) vesting. C) portability. D) convertibility.

40) Under a 401(k) plan, what is compared to determine if the plan unfairly discriminates in favor of highly compensated employees? A) the average percentage of salary made available for the highly compensated to take as cash or to put into the plan is compared to the average percentage of salary made available for other eligible employees to take as cash or to put into the plan B) the ratio of eligible-to-participate highly compensated employees is compared to the ratio of eligible-to-participate other employees C) the average percentage of salary deferred by the highly compensated is compared to the average percentage of salary deferred by other eligible employees D) the percentage of highly compensated employees over age 50 who participate is compared to the percentage of all other employees who participate

40) Which of the following statements is true concerning traditional and Roth IRAs? A) The investment income portion of Roth IRA distributions must be reported as taxable income. B) Roth IRA contributions are tax deductible. C) There are minimum distribution requirements for traditional IRAs. D) There are no limits on the tax deductibility of traditional IRA contributions once the account owner has reached age 50.

41) Which of the following statements is (are) true with regard to the adequacy of IRA funds during retirement? I. To assure lifetime income, the IRA funds can be used to purchase a life annuity. II. The duration of IRA benefit payments depends on the rate of return earned on the invested assets after retirement and the withdrawal rate. A) I only B) II only C) both I and II D) Neither I nor II

42) In the context of employee benefits, the term "discrimination" refers to benefit comparisons between A) male and female employees. B) current employees and retirees. C) highly compensated employees and non-highly compensated employees. D) members of an under-represented group (by religious preference, race, or national origin) and the majority of employees.

42) Which of the following statements about high deductible health insurance plans is (are) true? I. Coverage under a high deductible health plan is necessary to establish a qualified health savings account (HSA). II. High deductible health plans provide a maximum limit on annual out-of-pocket expenses. A) I only B) II only C) both I and II D) neither I nor II

44) Which of the following is an advantage of longevity insurance? A) Death benefits are paid to a beneficiary if death occurs during the deferral period. B) The interest rate credited to the cash value is higher than what is earned on traditional life insurance. C) Monthly benefits begin at an advanced age when other assets are likely to have been depleted. D) The policyowner has unrestricted access to the funds during the deferral period through loans and cash withdrawals.

45) HMOs typically pay network physicians or medical groups a fixed annual or monthly payment for each member, regardless of the frequency or type of service provided. This payment is called a A) pro-rata charge. B) persistency bonus. C) capitation fee. D) corridor payment.

46) All of the following statements about the Medicare prescription drug benefit are true EXCEPT A) Beneficiaries are required to pay a monthly premium for the benefit. B) The plan provides protection against catastrophic prescription drug expenditures. C) Coverage is limited to when a beneficiary is hospitalized or a resident of rest home. D) The plan has a coverage gap before a beneficiary has coverage for catastrophic costs.

46) One type of managed care plan has a network of preferred providers. When care is needed, the member has the option to seek care in the network or to go outside the network. If care is received outside the network, the member must pay substantially higher deductibles and coinsurance. This type of managed care plan is a(n) A) individual practice association plan. B) staff model plan. C) point-of-service plan. D) network model plan.

46) Traditionally, tables have been prepared showing how long IRA funds will last based on rates of return and annual withdrawal rates. These tables, however, assume constant returns over the projection period. Many financial planners are now using a technique that allows for fluctuations in market returns. A computer is programmed to estimate how long funds will last under many different return scenarios and to determine the probability that funds will last until a specified age. This technique is called A) decision-tree analysis. B) sensitivity analysis. C) computer simulation. D) cost-benefit analysis.

52) An employer-funded plan with favorable tax advantages, which repays employees for medical care not covered by the employer's standard medical plan is a(n) A) 401(k) account. B) individual retirement account (IRA). C) health reimbursement arrangement (HRA). D) flexible spending account (FSA).

52) As an alternative to the Original Medicare Plan, beneficiaries can elect to enroll in private health insurance plans that cover all services that the Original Medicare Plan covers except hospice care. These private health insurance plans that are an alternative to the Original Medicare Plan are called A) Medigap Insurance Programs. B) PACE Programs. C) Medicare Advantage Plans. D) Medicare Prescription Drug Plans.

54) All of the following provisions under the Affordable Care Act have an impact on the current Medicare Program EXCEPT A) free preventative care for seniors. B) additional funding to reduce fraud in the Medicare Program. C) free rest home care for beneficiaries over age 90. D) rebates for the Part D coverage gap (donut hole).

6) Which of the following statements concerning defined contribution pension plans is (are) true? I. The contribution rate is fixed. II. The retirement benefit varies. A) I only B) II only C) both I and II D) neither I nor II

7) Which of the following statements about group term life insurance is true? A) It usually is written in the form of 5-year level term insurance. B) An employee who leaves the group can usually convert the coverage to an individual term life insurance policy. C) Many employers provide a reduced amount of coverage on retired employees. D) It represents only about 5 percent of the group life insurance in force.

8) High deductible group health insurance plans have all of the following characteristics EXCEPT A) health savings accounts or health reimbursement accounts. B) high dollar deductibles. C) low coverage limits. D) major medical insurance.

18) Which of the following statements about trust fund plans is (are) true? I. The trustee typically purchases annuities for retiring employees. II. The trustee guarantees the adequacy of the fund to pay the promised benefits. A) I only B) II only C) both I and II D) neither I nor II

11) Bridget started to fund a variable annuity. Three years later, she experienced financial difficulty. She called her agent and cancelled the contract. The insurer returned all but 4 percent of the account balance. The 4 percent kept by the insurer is a(n) A) account administration fee. B) investment management fee. C) front-end load. D) surrender charge.

13) Which of the following statements about disability benefits under Social Security is true? A) There is a one-year waiting period before benefits are payable. B) Benefits are payable as long as the disabled worker is unable to perform his or her regular occupation. C) Benefits are payable only if the condition causing the disability is expected to result in death prior to age 65. D) In addition to the disabled worker receiving the benefits, benefits can also be paid to eligible dependents.

14) As Social Security slants benefits in favor of lower-paid workers, the Internal Revenue Service permits employers to adjust pension contributions so that the overall contributions (pension plus Social Security) are nondiscriminatory. This adjustment permits employers to increase pension contributions for highly-compensated employees. Adjusting contributions to consider Social Security contributions is called A) prorating. B) indexing. C) offset. D) integration.

14) Dirk suffered a heart attack and was rushed to the hospital where heart surgery was performed. His total bill for medical services was $50,000. Dirk has a major medical policy with a $1,000 calendar-year deductible and a $5,000 out-of-pocket limit. His coinsurance percentage is 20 percent. The out-of-pocket limit applies to coinsurance only. Assuming this hospitalization was the first medical care that Dirk received during the year and that all of the hospital services were eligible for coverage under the policy, how much of the $50,000 bill will the insurer pay? A) $39,000 B) $39,200 C) $40,000 D) $44,000

17) Under an equity-indexed annuity, what name is given to the percentage increase in the stock index that is credited to the contract? A) the expense rate B) the exclusion ratio C) the indexing rate D) the participation rate

19) Which of the following statements about individual disability income policies is true? A) Benefits are typically paid only for disabilities resulting from sickness. B) Benefits paid for partial disabilities are usually greater than benefits paid by the same policy for total disabilities. C) Most policies pay a benefit equal to 100 percent of the disabled person's lost income. D) Newer policies often provide or make available a residual disability benefit for persons who are able to work but at a reduced income.

2) When selling life annuities, what risk is the insurer pooling? A) bad investment performance B) premature death C) bad expense experience D) excessive longevity

2) Which of the following statements about group insurance underwriting principles is (are) true? I. If a plan is contributory, 100 percent of the eligible employees must be covered. II. Employees should be allowed to determine their own level of benefits. A) I only B) II only C) both I and II D) neither I nor II

20) All of the following statements about individual disability income policies are true EXCEPT A) Premiums are often waived while a person is disabled but must be resumed if the insured recovers. B) At the time of purchase, the insured can choose the length of the benefit period from among several available options. C) In order to encourage rehabilitation, benefits may be continued during periods of vocational training. D) Most disability income insurance policies contain an elimination period of 10 or fewer days.

21) Juanita paid a life insurer $45,000 in exchange for an immediate life annuity. Juanita will receive $500 per month from the insurer, and her life expectancy is 15 years (180 months). If Juanita is alive 20 years later, how much of the $6,000 received during the year is taxable? A) nothing B) $3,000 C) $4,500 D) $6,000

22) A managed care plan under which members can receive medical care from non-network providers at higher out-of-pocket costs is an example of a(n) A) group practice plan. B) individual practice plan. C) exclusive provider organization. D) point-of-service plan.

23) In order to receive unemployment insurance benefits, an unemployed worker must meet all of the following eligibility requirements EXCEPT A) have qualifying wages and employment. B) be able to work. C) be actively seeking work. D) satisfy a 6-month waiting period.

24) Rita went to work for a manufacturing company. The company offers a defined-benefit pension plan. The benefit at retirement is equal to 1.5 percent multiplied by years of service with the company, with the result multiplied by average salary in the three highest consecutive years of paid employment with the company. The benefit formula used at Rita's company is a A) flat dollar amount for all employees. B) flat percentage of annual earnings. C) flat dollar amount for each year of service. D) unit-benefit formula.

25) Rita is 66 years old. She earned $20,000 this year working part-time at a store and her modified adjusted gross income was $28,000. Rita is considering making a $3,000 contribution to her traditional IRA. Which of the following statements is true regarding this contribution? A) Rita cannot contribute to her traditional IRA because she is over age 65. B) Rita can make a $3,000 contribution to her traditional IRA, but it is not tax deductible. C) Rita can make a $3,000 contribution to her traditional IRA, but it is only partially tax deductible. D) Rita can make a $3,000 contribution to her traditional IRA, and it is fully tax deductible.

25) Which of the following statements about provisions in individual health insurance policies is true? A) Insurers are not permitted to place time limits on filing claims or providing proof of loss. B) After a policy is in force for 3 months, the time limit on certain defenses provision prohibits the insurance company from denying a claim based on a fraudulent misstatement in the application. C) The usual length of the grace period is 180 days. D) Under the reinstatement provision, a health insurance policy that has lapsed can be put back in force.

26) One provision of the Affordable Care Act provides the creation in each state of a transparent and competitive insurance marketplace where individuals and small firms with fewer than 100 employees can purchase affordable and qualified health coverage. This marketplace is called a(n) A) Medicaid plan. B) Medicare plan. C) Health Maintenance Organization (HMO). D) Affordable Health Insurance Exchange.

27) Prior to the passage of workers compensation laws, all of the following common law defenses could be used by employers to avoid financial responsibility for work-related injuries EXCEPT A) contributory negligence. B) the fellow-servant doctrine. C) assumption of the risk. D) joint and several liability.

28) ABC Company offers a qualified retirement plan. ABC selected a funding instrument with an insurer in which the insurer guarantees a relatively high interest rate for a number of years on a lump sum deposit. This funding instrument is called a A) trust-fund plan. B) group deferred annuity. C) separate investment account. D) guaranteed investment contract.

28) All of the following statements about traditional and Roth IRAs are true EXCEPT A) Traditional IRA contributions may be fully, partially, or not income tax deductible. B) Qualified distributions from Roth IRAs are received income tax free. C) Contributions to Roth IRAs are made with after-tax dollars. D) Traditional IRAs are exempt from the penalty tax on premature distributions.

29) RST Company offers a qualified retirement plan. Each employee contributes 4 percent of his or her pretax income to the plan, and RST matches each employee's contribution. An employee's benefit at retirement is determined by his or her account balance at the time of retirement. What type of retirement plan does RST offer? A) defined benefit, flat percentage of annual earnings B) defined benefit, flat dollar amount for all employees C) defined benefit, unit-credit formula D) defined contribution money purchase plan

29) The inability of the insured to perform some but not all of the important duties of his or her occupation is called A) residual disability. B) total disability. C) recurrent disability. D) partial disability.

3) Which of the following statements about group insurance underwriting principles is true? A) Employees should be required to remit premiums directly to the insurance company. B) The average age of the group should ideally increase over time. C) A group should be formed for the specific purpose of obtaining insurance. D) The employer should ideally share in the cost of a group insurance plan.

CHP 10 -14

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