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Insurance > Chapter 9 > Flashcards

Chapter 9 Flashcards

1
Q

For employers offering SEP plans, where are contributions made on behalf of their employees directed?

A

In the employees individual SEP IRA

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2
Q

Anyone with __________ income may contribute to an IRA.

A

Earned

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3
Q

Qualified plan withdrawals prior to age 59 1/2 are taxable and also subject to a ____% IRS early withdrawal penalty.

A

10

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4
Q

List some of the benefits provided by Social Security.

A

Medicare, retirements, survivors, disability, dependent benefits, and life insurance death benefit

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5
Q

T/F: The larger the database of statistics, the more predictable loss ratios become.

A

T; according to the law of large numbers

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6
Q

May individuals invest in an out of state 529 plan?

A

Yes. Individuals may chose to invest in an in state or out of state 529 plan

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7
Q

Prior to age 59 1/2, penalty free withdrawals from an IRA may be taken for ______________ expenses.

A

Qualified education

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8
Q

Who bears the investment risk in a defined benefit plan?

A

The employer

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9
Q

Contributions to a Keogh plan are solely based on ___________ income.

A

Self-employment

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10
Q

What type of group plan requires the employee to pay all or part of insurance premium?

A

A contributory group plan

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11
Q

An employer contributes ___% of an employees wages to Social Security.

A

7.65

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12
Q

What is a Coverdell education savings plan?

A

A savings plan that funds both elementary and higher education

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13
Q

T/F: SEPs require employees to become immediately vested in the full amount contributed.

A

T

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14
Q

Identify the acronym: SIMPLE

A

Savings incentive match plans for employees

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15
Q

There is a ____% penalty for early withdrawals from an IRA.

A

10

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16
Q

________ are college savings plans with high contribution limits set by the state sponsor.

A

529 plans

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17
Q

A rollover of qualified plan money from one account to another must be completed within _____ days of withdrawal.

A

60

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18
Q

What percentage does an employer pay in a noncontributory group plan?

A

100%

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19
Q

A fully insured individual under the Social Security system has how many quarters of contribution credit?

A

Fully insured means a FICA contribution of at least 40 quarters.

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20
Q

The lump sum death benefit of Social Security is $_____ as of 2010.

A

$255

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21
Q

For what reasons may early withdrawals be taken without the 10% IRS penalty applying?

A

Death, disability, divorce, qualified financial hardship, and qualified loans

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22
Q

May an aunt set up a 529 plan for her nieces?

A

Yea. The donor of a 529 plan is not required to be a parent.

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23
Q

Hank, age 71, has a Roth IRA. What penalty is assessed for his failure to begin distributions?

A

There is no penalty since Roth IRAs do not have a RMD.

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24
Q

Is a person permitted to contribute to her own 529 plan?

A

Yes

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25
Q

T/F: Social Security benefits are based on the Primary Insurance Amount and the insureds SS status.

A

T

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26
Q

In group life insurance, premiums paid for death benefits over $______ are taxed as ordinary income to employees.

A

$50,000

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27
Q

When must IRA withdrawals begin in order to avoid the late withdrawal penalty?

A

By April 1st of the year after an individual turns age 72

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28
Q

Is there an income threshold for 529 College Savings Plan contributors?

A

No. There are no income limits imposed for these plans

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29
Q

Provide examples of individuals who would qualify to participate in a 403b plan.

A

School and university employees, nurses, and individuals who work for other types of nonprofit organizations

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30
Q

If an employer makes a Keogh contribution on his own behalf, what must be done for his employees?

A

Employee contributions must be at the same percentage as made for the employer

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31
Q

If a married person dies, what can be done with her IRA assets?

A

These assets may be combined with those of her surviving spouse.

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32
Q

The maximum contribution to an IRA is the lesser of $_____ or ____% of earned income.

A

$6,000; 100%

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33
Q

Define the term: Persistency

A

The length of time a groups insurer has provided coverage for a particular insured group

34
Q

How are withdrawals from a Traditional IRA treated for tax purposes?

A

If all contributions were deductible, then the entire withdrawal is taxed as ordinary income

35
Q

Per Social security, how many quarters of SS contributions are needed to be fully insured?

A

40 quarters of FICA contributions (not consecutive) or 10 years (according to SS)

36
Q

What retirement plan is available to the self employed individuals?

A

There are two plans specifically available to the self employed — a Keogh and a SEP IRA

37
Q

T/F: A profit sharing plan required annual contributions regardless of the company profitability.

A

F

38
Q

How many quarters of contribution credit does a currently insured individual have under the SS system?

A

Currently insured is determined by an individual having made a FICA contribution in 6 of the last 13 quarters

39
Q

Identify the acronym: TSA

A

Tax Sheltered Annuity (a qualified contract)

40
Q

What is a Simplified Employee Pension Plan (SEP)?

A

An employer sponsored IRA for the self employed and it’s employees

41
Q

T/F: Defined contribution plans focus on contribution amounts, it do not guarantee preset retirement accounts.

A

T

42
Q

For whole is a 457 deferred compensation program designed?

A

Those who work for a municipality (state employees)

43
Q

In what form must IRA contributions be made?

A

In cash

44
Q

What right does the “incident of ownership” provide to an employee?

A

An employees “incident of ownership” allows the employees the right to name or change a beneficiary designation

45
Q

A 401k plan uses _________ contributions and the growth of the account is ____________.

A

Pre tax; tax deferred

46
Q

What provides a detailed description of the group plan that is given to the employer?

A

Master contracf

47
Q

T/F: If 529 plan funds are not used for a child’s education, they may be transferred to a relatives plan.

A

T

48
Q

What is another name for a 403b plan?

A

A TSA

49
Q

Employer contributions into an employee qualified plan are ____________ to the employer.

A

Tax deductible

50
Q

What is the maximum annual IRA contribution for a 58 year old whose only income is investment income?

A

$0, since the individual has no earned income

51
Q

In general, a 401k plan is available to individuals who work for a ____________ corporation.

A

For profit

52
Q

T/F: Qualified plans receive favorable tax treatment by the IRS.

A

T

53
Q

Who funds a 529 plan?

A

The donor

54
Q

For what reasons may an individual take an early withdrawal from his IRA without penalty?

A

Death, disability, qualified higher education, home buyer ($10,000 limit), birth or adoption of a child ($5,000 limit)

55
Q

Describe the tax treatment of contributions made to a 529 plan.

A

The contributions are made after tax, but may possibly grow tax free.

56
Q

T/F: Defined benefit programs determine retirement benefits using income average and years of service.

A

T

57
Q

How are withdrawals from Roth IRAs treated for tax purposes?

A

Withdrawals are tax feee if the account is open for at least 5 years and is not considered an early withdrawal

58
Q

What is bad risk or selection called?

A

Adverse selection

59
Q

Who bears the investment risk in a defined contribution plan?

A

The employee

60
Q

What is another name for Social Security?

A

Old age, survivors, disability, and health insurance program

61
Q

How much may be contributed to a coverdell each year?

A

After tax $2,000

62
Q

When may a person begin taking penalty free withdrawals from her 401k?

A

As early as age 59 1/2

63
Q

Who owns the investments contained within a 457 plan?

A

The employer

64
Q

How much may be contributed to a 529 plan and avoid gift tax?

A

A do or may give up to $16000 per year and avoid gift tax

65
Q

How is a Roth IRA contribution different from a traditional IRA contribution?

A

Roth IRA contributions are always made after tax while traditional IRA contributions are deductible.

66
Q

In a 529 Plan, what happens if the funds are withdrawn, but not used for qualified education expenses?

A

The earnings would be subject to ordinary income tax plus 10% penalty

67
Q

Social security contribution taxes are known as _______ taxes.

A

FICA

68
Q

What are some of the acceptable investments for IRA contributions?

A

Stocks, bonds, mutual funds, and CDs

69
Q

How much may a married couple earning $335,000 contribute to a Roth IRA?

A

$0, since the couples income exceeds the income threshold

70
Q

An individual turns 72 in December. When must she begin the RMDs from her IRA?

A

By April 1 of the following year

71
Q

What an individual reaches age _______, he may begin withdrawing from an IRA without penalty.

A

59 1/2

72
Q

A contribution of $________ may be made to a Spousal IRA for a non-working spouse.

A

$6,000

73
Q

403b contributions are pre tax contributions made on a _________ reduction basis.

A

Salary

74
Q

What is waived for the first time home buyer in the event of an IRA distribution?

A

The IRS penalty is waived; however, the withdrawal is subject to tax

75
Q

What is used to verify group participation and is given to enrolled employees?

A

A certificate of coverage

76
Q

Are employee contributions to an employee qualified retirement account considered income to the employee?

A

No

77
Q

For what type of individual is a 403b plan primarily designed?

A

An individual who works for a nonprofit organization

78
Q

Who is religions to make tax deductible contributions to an IRA?

A

A person not covered by an employer plan, or, if covered, a person who meets the income restriction

79
Q

An employee pays ____% of his wages to Social Security.

A

7.65%

80
Q

What penalty is assessed on the withdrawal of funds for an unqualified expense from a 529 plan?

A

A 10% IRS penalty plus federal taxation

81
Q

How is social security funded?

A

By payroll taxes

82
Q

Define vesting.

A

The right an employee gradually acquired by length of service at a company to receive employer contributed benefits

Insurance (10 decks)

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