Federal Tax Considerations for Accident & Health Insurance

All of the following are true of the Key Person disability income policy EXCEPT A Benefits are considered taxable income to the business. B Premiums are not deductible to the business. C It is typically written to protect the company in the event a key employee becomes disabled and is unable to work. D The income may be used to find a replacement for the key employee.

A

How are excess funds in an employee's HSA handled? A The funds can be carried forward to the next year B The funds are forfeited C The funds go towards the next years' deductible D The funds are not tax deductible

A

How do employer contributions to a Health Savings Account affect the insured's taxes? A The employer contributions are not included in the individual insured's taxable income. B The employer contributions are taxed at the same rate as the Social Security tax rate. C The employer contributions are taxed to the individual insured as earned income. D The employer contributions are deducted from the individual insured's tax calculations.

A

In an individual long-term care insurance plan, the insured is able to deduct the premiums from taxes. What income taxation will be imposed on the benefits received? A No tax B Tax deductible C State income tax D Federal income tax

A

Under a Key Person disability income policy, premium payments A Are made by the business and are not tax-deductible. B Are made by the employee and are not tax-deductible. C Are made by the employee and are tax-free. D Are made by the business and are tax-deductible.

A

Under what condition are group disability income benefits received by an employee NOT taxable as income? A When the benefits received are equal or less than the employee's percentage of the contribution. B When the employer makes all the premium payments. C When the employee is 59 ½. D When the amount of the benefit is equal or less than the amount of contributed by the employer.

A

Which of the following is NOT an advantage of an HRA for an employer? A HRAs are defined benefit programs B Employer contributions are tax-deductible C HRAs give smaller employers an opportunity to compete with larger employers in the benefits offered to employees D HRAs permit an employer to reduce health plan costs by coupling the HRA with a high-deductible (and usually lower-cost) health plan

A

Which of the following is NOT true regarding a flexible spending account? A It does not have limits on contributions. B It operates on "use-or-lose" basis. C It provides an opportunity to receive benefits on a pretax basis. D It is a cafeteria plan.

A

Which of the following is not true of Disability Buy-Sell coverage? A Benefits are considered taxable income to the business. B It is typically written to cover partners or corporate officers of a closely held business. C Premium payments are not deductible to the business. D The policies provide funds for the business organization to purchase the business interest of a disabled partner.

A

All of the following would be qualified as a dependent under a Dependent Care Flexible Spending Account, EXCEPT A Pete is severely autistic and refuses to take care of his own personal needs, which are taken care of by his father B Jeremy had to have both legs amputated, but has learned how to take care of himself and to get around in a wheelchair C Joe was paralyzed from the neck down in a car accident and is cared for by his wife D Matt must be constantly watched due to his violent muscle spasms which often lead to Matt injuring himself

B

An insured makes regular contributions to his Health Savings Account. How are those contributions treated in regards to taxation? A They are taxed as income. B They are tax deductible. C They are considered after-tax contributions. D They are not deductible.

B

Employers can reduce health plan costs by coupling a HRA with A Nothing; HRAs cannot be coupled with any other health plan. B A high deductible health plan. C A low deductible health plan. D An IRA.

B

Group disability income insurance premiums paid by the employer are A Tax deferred to the employer. B Deductible by the employer as an ordinary business expense. C Taxable to the employee. D Tax deductible by the employee.

B

Under which condition would an employee's group medical benefits be exempt from income taxes? A When the premiums and other unreimbursed medical expenses exceed 10% of the employee's adjusted gross income B An employee's group medical benefits are generally exempt from taxation as income. C An employee's group medical benefits are never exempt from taxation as income. D When the premiums and other unreimbursed medical expenses exceed 5% of the employee's adjusted gross income

B

Under which of the following employer-provided plans are the benefits taxable to an employee in proportion to the amount of premium paid by the employer? A Basic Medical Expense B Disability Income C Major Medical D Dental Expense

B

Which of the following is correct regarding the taxation of group medical expense premiums and benefits? A Premiums are tax deductible and benefits are taxed. B Premiums are tax deductible and benefits are not taxed. C Premiums are not tax deductible and benefits are taxed. D Premiums are not tax deductible and benefits are not taxed.

B

Which of the following is true regarding benefits paid to disabled employees? A Disability benefits are not taxed. B They may be subject to taxation if the premium was paid by the employer. C They are exempt from taxation if any portion of the premium was paid by the employee. D Tax withholding is required if the employee paid the premium.

B

Which type of insurance provides funds for a business organization to purchase the business interest of a disabled partner? A Corporate Disability B Disability Buy-Sell C Disability Interest Buy-out D Corporate Transfer

B

Your client wants to know what the tax implications are for contributions to a Health Savings Account. You should advise her that the contributions are A Subject to capital gains taxes. B Tax deductible. C Subject to personal income taxes. D Post-tax dollars.

B

Which of the following is true regarding benefits paid to disabled employees? A Tax withholding is required if the employee paid the premium. B Disability benefits are not taxed. C They may be subject to taxation if the premium was paid by the employer. D They are exempt from taxation if any portion of the premium was paid by the employee.

C

Which of the following is not true of Disability Buy-Sell coverage? A It is typically written to cover partners or corporate officers of a closely held business. B Premium payments are not deductible to the business. C The policies provide funds for the business organization to purchase the business interest of a disabled partner. D Benefits are considered taxable income to the business.

D

Which of the following statements is correct concerning taxation of long-term care insurance? A Benefits may be taxable as ordinary income. B Premiums may be taxable as income. C Premiums are not deductible in any case. D Excessive benefits may be taxable.

D

Which of the following is NOT true regarding a flexible spending account? A It provides an opportunity to receive benefits on a pretax basis. B It is a cafeteria plan. C It does not have limits on contributions. D It operates on "use-or-lose" basis.

C

All of the following are true of the Key Person disability income policy EXCEPT A It is typically written to protect the company in the event a key employee becomes disabled and is unable to work. B The income may be used to find a replacement for the key employee. C Benefits are considered taxable income to the business. D Premiums are not deductible to the business. Incorrect! Key person disability benefits are not considered taxable income to the business. Review Content Next Question

C

An individual is insured under his employer's group Disability Income policy. The insured suffered an accident while on vacation that left him unable to work for 4 months. If the disability income policy pays the benefit, which of the following would be true? A For the business, payments are not considered tax deductible as an ordinary business expense. B The insured can deduct his medical expense benefits from his income tax. C Benefits that are attributable to employer contributions are fully taxable to the employee as income. D The insured has to wait 2 more months to start receiving the benefits.

C

An insured is covered by a partially contributory group disability income plan that pays benefits of $4,000 a month. If the insured pays 25% of the monthly premium, how much of the monthly benefit would be taxable? A None B $1,000 C $3,000 D $4,000

C

How are employer contributions to Health Reimbursement Accounts treated in regards to taxation? AThey are treated as income tax for the employer. BThey are excluded from all taxation. CThey are tax deductible. DThey are taxed as a regular business expense.

C

Individuals who itemize deductions can claim deductions for medical expenses not covered by health insurance that exceed what percent of their adjusted gross income? A 5% B 7% C 10% D 15%

C

Other than for a qualified life event, when can a change be made in benefits for a Flexible Spending Account (FSA)? A Within 3 months of the cause of the change B No changes can be made once the policy is issued C During the open enrollment period D At any time as necessary

C

The benefits received by the business in a Disability Buy-Sell policy are A Partially taxable. B Fully taxable. C ncome tax free. D Tax deductible.

C

Under which of the following employer-provided plans are the benefits taxable to an employee in proportion to the amount of premium paid by the employer? A Dental Expense B Basic Medical Expense C Disability Income D Major Medical

C

What are the 2 types of Flexible Spending Accounts? A Medical Savings Accounts and Dependent Care Accounts B Medical Savings Accounts and Health Reimbursement Accounts C Health Care Accounts and Dependent Care Accounts D Health Care Accounts and Health Reimbursement Accounts

C

Which of the following is INCORRECT concerning taxation of disability income benefits? A If the insured paid the premiums, any disability income benefits are tax-free. B If the benefits are for a permanent loss, the benefits paid to the employee are not taxable. C If paid by the individual, the premiums are tax deductible. D If the employer paid the premiums, income benefits are taxable to the insured as ordinary income.

C

A noncontributory group disability income plan has a 30-day waiting period and offers benefits of $2,000 a month. If an employee is unable to work for 7 months due to a covered disability, the employee will receive A $14,000, none of which is taxable. B $14,000, all of which is taxable. C $12,000, none of which is taxable. D $12,000, all of which is taxable.

D

All of the following are true regarding Key Employee Disability Income insurance EXCEPT A The employer owns the policy. B Benefits are paid to the employer to retrain a new person. C Premiums are not tax deductible for the employer. D Benefits are taxable to the employer.

D

Concerning group Medical and Dental insurance, which of the following statements is INCORRECT? A Benefits received by the employee are free from federal income tax. B Premiums paid by the employer are deductible as a business expense. C Employee paid premiums may be deducted if certain conditions are met. D Employee benefits are tax deductible the year in which they were received.

D

Employers can reduce health plan costs by coupling a HRA with A A low deductible health plan. B An IRA. C Nothing; HRAs cannot be coupled with any other health plan. D A high deductible health plan.

D

For group medical and dental expense insurance, what percentage of premium paid by the employer is deductible as a business expense? A 50% B 60% C 90% D 100%

D

Health Savings Accounts (HSAs) are designed to A Increase individual interest income. B Insure against catastrophic losses. C Provide duplicate coverage for health care expenses. D Help individuals save for qualified health expenses.

D

How are excess funds in an employee's HSA handled? A The funds are forfeited B The funds go towards the next years' deductible C The funds are not tax deductible D The funds can be carried forward to the next year

D

Under a Key Person disability income policy, premium payments A Are made by the employee and are not tax-deductible. B Are made by the employee and are tax-free. C Are made by the business and are tax-deductible. D Are made by the business and are not tax-deductible.

D