Insurance MCQ

Which of the following statements regarding Roth IRAs is FALSE? A There are no Required Minimum Distribution (RMD) age or amounts B Contributions are not tax-deductible C As long as the account owner is under age 59 1/2 there is no maximum contribution limit D If the account owner is at least 59 1/2 and has held the account assets at least 5 years, there is no tax on earnings withdrawn Answer: C

Which is true regarding the taxation of the cash value in a Universal Life Policy prior to withdrawal? A Tax free B Tax interpolated C Tax deferred D Tax deductible Answer: C

Generally, the ________ is the amount of premiums paid into the policy less any dividends or withdrawals previously taken. A Cost basis B Cash value C Net premium D Loan amount Answer: A

Which of the following plans is for employees of non-profits and schools? A HR 10s B 401(k)s C TSAs D SEPs Answer: C

The exclusion ratio states that once the entire cost basis has been recovered from a non-qualified annuity income benefit payout then any further payments are __________. A Still tax favored for annuitants over the age of 70 B Fully taxable since the excess payments must represent only earnings C Taxed as capital gain but only 50% of the gain is applied D Taxed at the favorable annuity continuation income rates Answer: B

Which of the following statements about Section 1035 transactions is TRUE? A Any surrender charges satisfied on the old policy carry over into the new policy B A new application is required when moving into a new life insurance policy C All surrender charges are waived on any existing policy D A 1035 allows an annuity to be exchanged for life insurance Answer: B

How often may a person perform a rollover from one IRA to another? A Once every 2 years B Once each quarter C Every 6 months D Once a year Answer: D

To be a qualified accelerated death benefit it must meet all of the following criteria, except: A The benefit amount cannot exceed the lesser of $50,000 or 7.5% of AGI B The amount of the benefit must at least be equal to the present value of the reduced death benefit remaining after payment of the accelerated benefit C A physician must give a prognosis of 24 months or less life expectancy for the named insured D The insurer provides a monthly report to the insured showing the amount paid and the amount of benefit remaining in the life insurance policy Answer: A

ERISA sets ________ standards for pension plans in private industry. A Flexible B Voluntary C Minimum D Maximum Answer: C

Nancy has an IRA and wants to move her funds directly from one financial institution to another while still maintaining the assets within an IRA account. How many times can she do this? A Once every 6 months B As often as she likes C Once a year D Once a quarter Answer: B

Once a policy is classified as a MEC, it will maintain that classification for ____________. A For 7 years B Until the issue of overfunding is resolved C For 10 years D The life of the policy Answer: D

Which of the following policies would be deemed a MEC? A 10-pay Whole Life B Variable Universal Life C Single Premium Whole Life D Universal Life Answer: C

When an employee receives a fixed and known benefit at retirement, it comes from a(n) __________ plan. A Defined Contribution B Defined Benefit C SEP-IRA D Profit-Sharing Answer: B

______ plans do not meet the requirements of federal law to be eligible for favorable tax treatment. A Pension B Qualified C ERISA D Non-qualified Answer: D

All employer-paid premiums for amounts of group life insurance over $__________ are reported as taxable income to the employee. A $25,000 B $100,000 C $50,000 D $150,000 Answer: C

Generally, the payment of an accelerated death benefit is _______ to a recipient if the benefit payment is qualified. A Taxable to the extent it exceeds 7.5% of AGI B Taxable C Tax free D Tax free up to $50,000 Answer: C

If an annuity is annuitized, then the _________ investment is recovered income tax-free over the income benefit payment period. A Non-guaranteed B Exclusion C Pre-tax D After-tax Answer: D

Qualified plan employer contributions are tax deductible when _________. A The employee dies B The employee makes a contribution C They are made D The employee retires Answer: C

An Individual Retirement Account (IRA) may be funded with all of the following, except: A Annuities B Mutual Funds C Life Insurance D Certificates of Deposit (CDs) Answer: C

ERISA requires which of the following? A Qualified plans must meet certain minimum standards B Employers must be able to benefit equally with the employees and beneficiaries C That every plan has the same vesting schedule D That employers establish pension plans for their employees Answer: A