Qualifiednplans/Tax Cnsiderations

Question 0

If a retirement plan is “qualified” what does that mean?

Answer 0

The plan has favorable tax treatment

Question 1

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

Answer 1

Portion in excess of premium paid.

Cash minus premiums paid

Question 2

What are the consequences of withdrawing funds from a traditional IRA prior to age 59 1/2?

Answer 2

10 % penalty

Question 3

What portion of a nonqualified annuity payment would be taxed?

Answer 3

Interest earned on principal

Question 4

Why are dividends in life insurance policies not taxable?

Answer 4

They are a return of unused premium.

Question 5

In a direct rollover, how is the money transferred from one retirement plan to a new one?

Answer 5

From trustee to trustee.

Question 6

What are the three types of social security benefits?

Answer 6

Retirement
Disability
Survivors

Question 7

According to the taxation rules of life insurance policies, how are cash value increases taxed?

Answer 7

Tax deferred

Question 8

When should life insurance policy proceeds be included in the insured’s taxable estate?

Answer 8

When the insured is the policy owner

When death occurs with three years of a policy being gifted to another person or entity.

Question 9

What is the name for an overfunded life insurance policy?

Answer 9

Modified endowment contract

Question 10

Way is required to qualify an individual to contribute to a traditional IRA?

Answer 10

Must earn income

Question 11

A employer is sponsoring a qualified retirement plan for its employees where the employer contributes money whenever the business has profit. What is this type of plan called?

Answer 11

Profit sharing plan

Question 12

What is the primary purpose of a 401 k plan?

Answer 12

Provide retirement income

Question 13

What is the general taxation rule for death benefits payable to the beneficiary?

Answer 13

Not subject to income taxes

Question 14

What is the main purpose of the seven-pay test?

Answer 14

To determine if a policy is a modified endowment contract

Question 15

For a retirement plan to be qualified, it must be designed for whose benefit?

Answer 15

Employees

Question 16

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?

Answer 16

Interest only

Question 17

Is the death benefit of a life insurance policy taxed to the beneficiary if its received as a lump sum?

Answer 17

No

Question 18

In qualified plans, are employer contributions taxed as income to the employees?

Answer 18

No

Question 19

SIMPLE plans are available to groups of how many employees?

Answer 19

No more than 100

Question 20

Who would be considered a third party owner?

Answer 20

Someone who is not the insured.

Question 21

What are some examples of qualified plans?

Answer 21

IRA, 401K, HR10 (Keogh), SEP, SIMPLE

Question 22

What qualified plan is suitable for the self employed?

Answer 22

HR-10 Keogh

Question 23

What type of plan is a 401(k)?

Answer 23

Qualified profit sharing plan?

Question 24

Wo qualifies for tax-sheltered annuities, or 403(b) plans?

Answer 24

Employees of Non profit orgs, employees of public schools systems

Question 25

What is the penalty for excessive contributions to a traditional IRA?

Answer 25

6%

Question 26

Who may contribute to an HR-10?

Answer 26

self employed person

Question 27

In what form of payment must the contributions to a traditional IRA be made?

Answer 27

Cash

Question 28

What are the income tax benefits of a qualified plan?

Answer 28

Employer contributions are tax deductible and are not taxed to the employee. The earning accumulate tax deferred.

Question 29

How are income payments from a 403(b) plan taxed?

Answer 29

Contributions are excluded but become taxable upon withdrawal