Risk Management and Insurance Flashcards
investment in life insurance contract (basis)
premiums paid - divs received - outstanding loans or withdrawals = investment in contract
MEC taxation
death benefit = no income tax
withdrawals/loans = LIFO , taxed as ordinary income and if under 59.5 then additional 10% penalty on both loans and withdrawals
life insurance taxation (non MEC)
death benefit = no income tax
loans = no income tax
withdrawals = FIFO, taxed as ordinary income
life insurance gain
surrender value - investment in contract taxed as ordinary income
fixed annuity exclusion ratio
investment in contract/expected return
taxation of annuitization
partial return of basis and partially taxable using the exclusion ratio
taxation of lump sum annuity withdrawals (prior to annuitization)
Pre Aug 14 1982: FIFO
after: LIFO, and 10% penalty if before age 59.5
variable annuity exclusion ratio
investment in contract/annuitant’s life
payments beyond life expectancy are fully taxable (unless payments begin on or before Dec 21 1986)
Any Occ
inability to perform the duties of any occupation then policy will pay - must be unable to do any job (strictest)
Own Occ
inability to perform your own job then policy will pay (best if you are the insured)
disability: guaranteed insurability rider
guarantees the insured the right to purchase additional amounts of disability without future evidence of disability
disability: noncanellable
policy is continuous, guarantees the right to renew until a certain age or number of years with a fixed premium
disability: guaranteed renewable
right to renew is guaranteed, but insurance company can increase premiums based on class (group basis)
disability: conditionally renewable
continuous term policy that the insurance company may terminate if certain contractual conditions are met (ex: retirement)
taxation of disability benefits
ER pays premiums: taxable to EE, tax deductible by ER
EE pays premiums: tax free benefits
COBRA terms of coverage
18 months: change in employment status up to 29 months: EE meets SS def of disability 36 months: death, divorce, termination of plan, medicare
COBRA applies to
employers who have a plan and 20 or more employees (part time = 1/2 employee)
Medicare Parts
A: Hospital care benefits
B: physician’s services, home health services, diagnostic tests, medical equipment, and outpatient services
C: medicare advantage
D: Drugs
Medicare Part A
hospital care benefits - medicare pays for up to 90 days for each benefit period. Benefit period ends when patient is out of the hospital for 60 days.
skilled nursing care - will pay the first 20 days, for days 21-100 will only pay partial amount, no coverage after 100 days
most people do not pay a monthly premium for part A if they or their spouse have 40 or more quarters of medicare covered employment
- 30-39 quarters pay $259
- few than 30 pay $471
HSA
above the line deduction, and tax free distribution if used for qualifying medical expenses for qualifying individuals with a high deductible health plan
if contributions exceed limits, 6% excess tax imposed on excess (mind the max or 6% tax)
nonqualified withdraws subject to 20% penalty. NO penalty after age 65
can do a one time rollover from FSA or HRA to HSA
can also do a one time rollover from IRA to HSA
HSAs can let funds accumulate until needed, NO RMDS
