Insurance pt. 4
Teachers and not-for-profit organizations
A 403(b)plan, commonly referred to as a TSA, is available to be used by
The amount of the distribution is reduced by the amount of a 20% withholding tax
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
The purpose of the group was to purchase life insurance
A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why?
Costs of training a replacement
A key person insurance can pay for which of the following?
Costs of training a replacement
A key person insurance policy can pay for which of the following?
Survivor protection
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Survivor protection
A producer is helping a married couple determine the financial needs of their children in the event one or both should dies prematurely. This is a personal use of life insurance known as
Certain groups of employees only
A tax-sheltered annuity is a special tax-favored retirement plan available to
At distribution, all amounts received by the employee are tax free
All of the following are TRUE of federal tax advantages of a qualified plan EXCEPT
Premiums are determined by the age, sex and occupation of each individual certificate holder
All of the following are characteristics of group life insurance EXCEPT
The plan must provide an offset for social security benefits
All of the following are general requirements of a qualified plan EXCEPT
Being age 65
All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT
The plan is funded by permanent insurance only
All of the following are true of key person insurance EXCEPT
Members cannot be excluded from coverage on the basis of insurability
All of the following are true regarding the issuance of group life insurance to labor unions EXCEPT
The CEO of a private corporation
All of the following employees may use 403(b) plan for their retirement EXCEPT
The amount of insurance on the life of any debtor may exceed the greater of the scheduled or actual amount of unpaid indebtedness to the creditor
All of the following statements are TRUE concerning Debtor Groups EXCEPT
The policy is owned by the company
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
MEWAs are groups of at least 3 employers
All of the following statements describe a MEWA except
Simplified Employee Pension plan
An IRA purchased by a smaller employer to cover employees is known as a
Has at least 50 members
An association could buy group insurance for its members if it meets all of the following requirements EXCEPT
The insured may choose to convert to term or permanent individual coverage
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
$10,000, no tax consequence
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
Attained age
An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his
Profit sharing plan
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
A portion of the benefit up to a limit is tax free; the rest is taxable income
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?
$3,000
An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At the policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?
He will have to pay a penalty if he is younger than 59 1/2
An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true?
Are subject to vesting requirements
Employer contributions made to a qualified plan
100% participation of members is required in noncontributory plans
Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?
They are not included as income for the employee, but are taxable upon distribution
How are contributions to a tax-sheltered annuity treated with regards to taxation?
$3,000
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?
A qualified plan for a small business
If a company has a Simplified Employee Pension plan, what type of plan is it?
Settlement option
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a
It is only taxable if the cash value exceeds the amount paid for premiums
If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?
Fully insured
If an insured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is
From trustee to trustee
In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?
The owner
In a life settlement contract, whom does the life settlement broker represent?
Grow tax deferred
In life insurance policies, cash value increases
5
In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?
Blackout period
In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse turns age 60 called?
Executive is the owner, and the executive pays the premium
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?
Generally not taxed as income
Life insurance death proceeds are
Any form of life insurance
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
At least 1,000 employees
SIMPLE plans require all of the following EXCEPT
Tax-deductible contributions
The advantage of qualified plans to employers is
A nonqualified annuity plan.
The president of a manufacturing company has offered on of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is
6 credits
To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?
Owner's income
Traditional IRA contributions are tax deductible based on which of the following?
They are tax deferred until withdrawn
Under SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?
Vision, Inc.
Vision, Inc. employs 500 people. The company offers group life insurance to its employees after 90 days of service. Who is considered the policyholder of the life insurance policies Vision, Inc. offers?
Cash value can be borrowed at any time
What does "liquidity" refer to in a life insurance policy?
5 months
What is the elimination period for Social Security disability benefits?
It determines if the insurance policy is a MEC
What is the main purpose of the Seven-pay test?
Old age survivor disability insurance
What is the official name for the Social Security program?
To lessen the risk of financial loss because of death of a key employee
What is the purpose of key person insurance?
100%
What percentage of a company's employees must take part in a noncontributory group life plan?
Interest only
When a beneficiary receives payments consisting of both principal and interest portions, which parts are taxable as income?
Executive bonus
When an employer offers to give an employee a wage increase in the amount of the premium of a new life insurance policy, this is called a(n)
$11,000
When the owner of a $250,000 life insurance policy died, the beneficiary decided to leave the proceeds of the policy with the insurance company and selected the Interest Settlement Option. If at the time of withdrawal the interest paid was $11,000, the beneficiary would be required to pay income tax on
The earnings in a qualified plan accumulate tax deferred
Which of the following best describes the tax advantage of a qualified retirement plan?
Those who have been insured under the plan for at least 5 years
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?
Third-party ownership
Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?
The employees receive individual policies
Which of the following is INCORRECT concerning a noncontributory group plan?
Workers compensation
Which of the following is NOT an example of a business use of Life Insurance?
The seller must be terminally ill
Which of the following is NOT true of life settlements?
It needs IRS approval
Which of the following is NOT true regarding a nonqualified retirement plan?
Money borrowed from the cash value is taxable
Which of the following is NOT true regarding policy loans?
Premiums are not tax deductible as a business expense
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?
To create an estate
Which of the following is the best reason to purchase life insurance rather than annuities?
75%
Which of the following is the required number of participants in a contributory group plan?
They allow several small employers purchase less expensive insurance together
Which of the following is true regarding METs?
Dividends are not taxable
Which of the following is true regarding taxation of dividends in participating policies?
PIA (Primary Insurance Amount)
Which of the following refers to the amount of retirement benefits a worker receives under Social Security based on the worker's earnings and retirement age?
SEPs are suitable for large companies
Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?
Buy-sell agreements are normally funded with a life insurance policy
Which of the following statements concerning buy-sell agreements is true?
Lump-sum death benefits are not taxable
Which of the following statements is TRUE concerning whole life insurance?
Withdrawals are not taxable
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
Dividend
Which of the following terms is used to name the nontaxed return of unused premiums?
Life expectancy
Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?
Split-dollar plan
Which of the following would be considered a nonqualified retirement plan?
A joining together by employers to provide health benefits for employee
Which statement best defines a Multiple Employer Welfare Arrangement (MEWA)?
Roth IRA
Which type of retirement account does not require the owner to start taking distributions at age 72?
A policyowner who is not the insured
Who is a third-party owner?
The employer is the owner and beneficiary
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?
Self-employed plumber
Who may contribute to a Keogh (HR-10) plan?
