Chapter 9 Flashcards
What is a 403(b) Plan?
A retirement plan for certain employees of public schools, specific tax-exempt organizations, and certain ministers.
What is a 1035 Contract Exchange?
A provision that allows an annuity to be exchanged for another annuity without realizing a tax gain. This applies to life insurance policies or endowment contracts exchanged for an annuity, but not the reverse.
What is the Accumulation Period?
The period during which premiums paid into an annuity are credited as accumulation units, continuing even after premium payments cease until payouts begin.
What are Accumulation Units?
Units representing the value of contributions made by the annuitant, minus expenses. Their value varies based on the underlying stock investment.
Who is an Annuitant?
The person to whom an annuity is payable or whose continued life future payments depend on.
What are Annuity Units?
Units used to make payments to the annuitant, received after accumulation units are converted at the start of the payout period.
What is the Cash Refund Option?
An option that pays designated beneficiaries the excess of the amount paid over total annuity payments received upon the annuitant’s death.
What is a Deferred Annuity?
An annuity that postpones payments until a specified period or age, which can be purchased on a single-premium or flexible premium basis.
What is an Equity Indexed Annuity (EIA)?
A fixed deferred annuity offering a guaranteed minimum interest rate and an excess interest feature based on an external equities market index.
What is the Exclusion Ratio?
A fraction used to determine the amount of annual annuity income exempt from federal income tax, calculated by dividing total contributions by the expected ratio.
What is a Fixed Annuity?
An annuity providing a guaranteed rate of return, with interest declared in advance by the insurer.
What is an Immediate Annuity?
An annuity purchased with a single payment that typically begins paying income within one month.
What is the Joint Life and Survivor Option?
An annuity payout option for two people, where payments continue to the survivor for life after one dies, with various survivor benefit amounts.
What is the Life with Period Certain Option?
A payout option that guarantees income for life but ensures payments continue to a beneficiary for a specified minimum period if the annuitant dies.
What is a Market Value Adjustment?
An adjustment attached to a deferred annuity that can increase or decrease actual crediting rates based on market conditions.
