Retirement Chapter 8

Question 1

Incidental rules for death benefits

Answer 1

Universal life and term insurance - 25% rule

Whole life - 50% rule

SEPs and SIMPLEs cannot have life insurance

DC/DB/403(b) can have life insurance

only profit-sharing plans can hold second-to-die insurance (pension plans cannot)

Question 2

When life insurance is purchased in a qualified plan to provide death benefits, the current cost of “pure insurance” protection is subject to taxation. The cost attributable to this pure life protection will be the lower of which of the following?

Answer 2

Actual cost as provided by the carrier and Table 2001

Question 3

What type of plans are eligible to hold disability insurance?

Answer 3

Qualified plans

Question 4

412(i) is a fully funded insurance plan which would allow for…

Answer 4

large contributions.

beneficiary would receive the pure death benefit income tax-free

at retirement, can buy the policy from the plan and keep it in retirement years

Question 5

When can a SEP be established?

Answer 5

After an ER’s fiscal year-end; an ER has until the due date of the business tx return, including extensions, to establish and make contributions to a SEP for the taxable year (noteworthy advantage)

Question 6

When can a SIMPLE be established?

Answer 6

Between Jan 1 and Oct 1