Taxes,Retirement

Question 1

Group insurance is written as

Answer 1

annually renewable term insurance

Question 2

group underwriting differs from that of individual insurance, and is based on the group characteristics and makeup which include:

Answer 2

1) Purpose or nature of the group
2) Size of the group
3) Turnover of the group
4) Financial Strength of the group

Question 3

Another unique aspect of group underwriting is that the cost of coverage is based on the average age of the group and the

Answer 3

ratio of men to women

Question 4

In order to reduce adverse selection, the insurer will require a minimum number of participants in the group, depending on whether the employer or employees pay the

Answer 4

premium

Question 5

Another characteristic of group insurance is the conversion privilege. If an employee terminates membership in the insured group, the employee has the right to convert to an individual policy ____ ____ ___ at a standard rate, based on individuals attained age

Answer 5

without proving insurability

Question 6

If the insured dies during the conversion period, a death benefit equal to the maximum amount of individual insurance which would have been issued must be paid by the group policy, whether or not the application for the individual policy was

Answer 6

completed

Question 7

If a maser contract is terminated, every individual who has been on the plan for at least ___ years will be allowed to convert to individual permanent insurance of the same coverage

Answer 7

5

Question 8

When an employer pays all of the premiums, the plan is referred to as a _______ ____. Under this, an insurer will require 100% of all the eligible employees to be included in the plan

Answer 8

noncontributory plan

Question 9

Key person insurance may be issued as term or permanent life, with _______ and _____ policies being used most often

Answer 9

whole life and universal life

Question 10

With key person insurance, business cannot take a ____ _______ for the expense of the premium. However if key employee dies, the benefits paid to the business are usually received tax free

Answer 10

tax deduction

Question 11

A _______ is a legal contract that determines what will be done with a business in the vent than owner dies or becomes disabled. Also referred to as a business continuation agreement

Answer 11

buy-sell agreement

Question 12

_____ ____ is an arrangement where the employer offers to give the employees a wage increase in the amount of premium on a new life insurance policy on the employee. Considered a nonqualified benefit plan

Answer 12

Executive bonus

Question 13

Executive bonus is ____ _____ to the employer and income taxable to the employee

Answer 13

tax deductible

Question 14

An employer-sponsored qualified retirement plan is approved by the _____ which then gives both the employer and employee benefits such as deductible contributions and tax-deferred growth

Answer 14

IRS

Question 15

A ______ is a tax-free distribution of cash from one retirement plan to another. Generally, IRA ____ must be completed within 60 days from the time the money is taken out of the first plan

Answer 15

rollover

Question 16

The term _____ refers to a tax-free ____ of funds from one retirement program to a traditional IRA or a ____ of interest in a traditional IRA from one trustee directly to another

Answer 16

transfer

Question 17

HR-10 or ______ make it possible for self-employed persons to be covered under an IRS qualified retirement plan. These plans allow the self-employed individuals to fund their retirement programs with pre-tax dollars as if under corporate retirement or pension plan. Must be self-employed or a partner who owns at least 10% of the business

Answer 17

Keogh plan

Question 18

Contributions to HR-10 plans is _______ and it accumulated tax deferred until withdrawn

Answer 18

tax deductible

Question 19

In a SEP employer contributions are __ included in the employees gross income. Primary difference between SEP and an IRA is the much larger amount than can be contributed each year to a SEP

Answer 19

not

Question 20

A _____ plan is available to small businesses that employ no more than 100 employees who receive at least $5,000 in compensation from the employer during the previous year.

Answer 20

SIMPLE

Question 21

Tax is ____ on both contributions and earning until funds are withdrawn in a SIMPLE plan

Answer 21

deferred

Question 22

If 401 (k) plan does not provide a definite formula for figuring the profits to be shared, employer contributions must be

Answer 22

systematic and substantial

Question 23

Premiums are not

Answer 23

tax deductible

Question 24

Cash values grow

Answer 24

tax deferred

Question 25

Upon surrender or endowment of cash value, any cash value in excess of cost basis is

Answer 25

taxable as ordinary income

Question 26

Money borrowed against cash value in policy loans is

Answer 26

not income taxable

Question 27

Accelerated benefits are paid under a life insurance policy to a terminally ill insured, the benefits are received

Answer 27

tax free

Question 28

With settlement options, when the beneficiary receives payments consisting of both principal and interest, the interest portion of the payments received is

Answer 28

taxable as income

Question 29

The premiums than an employer pays for life insurance on an employee, whereby the policy is for the employee’s benefit, __________ as a business expense

Answer 29

are tax deductible to the employer

Question 30

Following arrangements are not tax deductible

Answer 30

1) Key-employee insurance
2) Stock redemption or entity purchase agreement
3) Split-dollar insurance

Question 31

Any life insurance policy that fails a 7-pay test is classified as a _______ and loses the standard tax benefits of a life insurance contract

Answer 31

Modified Endowment Contract

Question 32

Once a MEC,

Answer 32

always a MEC

Question 33

MEC distributions are taxed on ______,

Answer 33

LIFO basis

Question 34

Social Security uses ______ system to determine whether or not an individual is qualified for Social Security

Answer 34

Quarter of Coverage

Question 35

Anyone working in jobs covered by Social Security or operating his/her own business may earn up to a maximum of __ credits for each year of work

Answer 35

4

Question 36

A term fully insured refers to someone who has earned _______ of coverage (equivalent of 10 years of work), and is therefore entitled to receive Social Security retirement, premium-free Medicare Part A, and survivor benefits

Answer 36

40 quarters

Question 37

Social security was created to provide

Answer 37

1) Disability Income
2) Retirement income
3) Survivors benefits

Question 38

Split dollar plan is condered a _______ retirement plan

Answer 38

nonqualified

Question 39

Benefits available under Social Security are

Answer 39

1) Old-age and retirement
2) Disability
3) Death benefits