Chapter 10: Distributions Upon Death and Life Insurance Flashcards
The distribution notice describes the benefit payment options, right to delay distribution until at least normal retirement age, and direct rollover feature.
True or False?
True
Certain distribution notice requirements depend on whether the QJSA rule applies to the participant.
True or False?
True
The Supreme Court’s invalidation of DOMA §3 (in Windsor) allows same-gender couples who are legally married to have the rights of opposite-gender couples, such as allowing for hardship distributions for spousal medical expenses.
True or False?
True
A plan that requires spousal consent for a loan will need to obtain spousal consent from same-gender spouses as well as opposite-gender spouses.
True or False?
True
Distribution notice requirements refer to information that must be provided to the participant before distributions may be made.
True or False?
True
The $7,000 threshold for the notice and consent requirements is based on the participant’s vested account balance as of the date of distribution.
True or False?
True
When a participant takes a partial distribution, the consent given applies to the full account balance.
True or False?
False. The consent given for a partial distribution only applies to the partial distribution, not the full account balance.
The beneficiary of a life insurance policy will be taxed on the total distribution from the policy.
True or False?
False. The beneficiary is taxed on the net insurance proceeds, which is the face amount of the policy less the reserve accumulation.
A self-employed individual’s contributions for the purchase of life insurance are not deductible by the self-employed individual.
True or False?
True
Nonpension plans may use the 100-times rule for determining incidental benefit limits regarding life insurance.
True or False?
False. The 100-times rule is only applicable to pension plans.
Which of the following information is not required to be provided to a participant prior to receiving a distribution due to termination of employment?
A. Loan procedures
B. Taxation issues
C. Information about how a distribution will be taxed
D. The optional forms of payment available
A. The loan policy is not a notice that must be given at the time of distribution.
Which notice must be provided to the participant?
*The plan is a target benefit plan.
*The participant is age 35 and terminates employment.
*The participant has a vested account balance of $750.
*The plan will make involuntary cash out of benefits.
A. Waiver of the QJSA notice
B. Optional forms of benefit notice
C. Right to delay distribution to NRA notice
D. Rollover notice
D. A participant with an account balance of less than $5,000 is only required to receive the rollover notice when an involuntary distribution is made.
Which of the following is not affected by the Court’s invalidation of DOMA §3?
A. Definition of spouse
B. Rules for family attribution
C. Rollover to spousal IRA
D. Allocation of participant’s contribution
D. Employer and employee contribution allocations are not affected by DOMA.
Which of the following statements regarding life insurance in defined contribution plans is/are TRUE?
1. The participant is required to pay taxes on the term cost of the insurance each year.
2. Net insurance proceeds paid to the beneficiary are not taxable.
3. Incidental life insurance can remain in the plan post-retirement until the participant elects a distribution.
A. 1 only
B. 3 only
C. 1 and 2 only
D. 2 and 3 only
C. A life insurance policy must be converted to retirement income or distributed to the participant no later than the normal retirement date under the plan in order to satisfy the incidental life insurance requirements.
Which of the following statements regarding the incidental life insurance benefit limit is/are TRUE?
1. The limit for a term life insurance policy is 25% of the aggregate contributions.
2. The limit for a whole life insurance policy is less than 50% of the aggregate contributions.
3. The limit for a universal life insurance policy is less than 50% of the aggregate contributions.
A. 3 only
B. 1 and 2 only
C. 2 and 3 only
D. 1, 2, and 3
B. The limit for a whole life insurance policy is 50% of the aggregate contributions. The limit for term is that it cannot exceed 25% of aggregate contributions and for whole life it cannot exceed 50% of aggregate contributions.
