04 Retirement Flashcards
Who qualifies for tax sheltered annuities, 403B plans?
Employees of nonprofit organization under section 501(c)(3) and employees of the public school systems.
Who owns a group life insurance contract?
The employer (also known as the sponsor of the group).
In what form of payment must the contributions to a traditional IRA be made?
In cash (or cash equivalents).
What is the penalty for excessive contributions to a traditional IRA?
6%.
When would life insurance policy proceeds be included in the insured’s taxable estate?
When there is an incident of ownership at the time of death.
What is the main purpose of the 7 pay test?
To determine if life insurance policy is a Modified Endowment Contract.
Why are dividends in life insurance policies not taxable?
Dividends are not considered income for tax purposes; they are a return of unused premium.
What qualified plan is suitable for the self employed?
HR-10 or Keogh.
Who may contribute to an HR-10 plan?
Self employed individual.
What does liquidating mean in life insurance policy?
Availability of cash value.
What are some examples of qualified plans?
IRA, 401(k), HR-10 (Keogh), SEP, SIMPLE.
What type of policy issues certificates of insurance to the insureds?
Group policy.
If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?
Interest only.
Is the death benefit of a life insurance policy taxed to the beneficiary if it’s received a lump sum?
No, lump sum benefits are received tax free.
Life insurance maybe used to pay state inheritance taxes and federal estate taxes is eliminating the need to sell assets from the estate. What is this called?
Estate conservation.
What are the personal uses of life insurance?
Survivor protection, estate creation and conservation, cash accumulation and liquidity.
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
Group’s purpose, size, financial strength and turnover.
What type of policy is typically issued without proof of insurability from the insured?
Group policy.
If a retirement plan is qualified, what does that mean?
The plan has favorable tax treatment.
In qualified plans, are employees contributions taxed as income to the employees?
No, employer contributions are not taxed as income to the employees.
What are the three types of Social Security benefits?
Retirement, disability, and survivors.
SIMPLE plans are available to groups of how many employees?
No more than 100.
If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?
Whole life.
What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy?
Death benefits are generally not subject to income taxes.
