Insurance MCQ

Which type of retirement account allows contributions to continue beyond age 70½ and does not force distributions to start at age 70½ A) Roth IRA B) Flexible IRA C) Standard IRA D) Traditional IRA Answer: Roth IRA

A tax-sheltered annuity is a special tax-favored retirement plan available to A) Anyone. B) Certain age groups only. C) Certain groups depending on factors such as race, gender, and age. D) Certain groups of employees only Answer: Certain groups of employees only

A 35-year-old spouse of the insured collects early distributions from her husband's retirement plan as a result of a divorce settlement. What penalties, if any, will she have to pay A) 15% penalty tax B) Age-based penalty stipulated in the contract C) No penalties D) 10% penalty tax Answer: No penalties

All of the following types of distributions are considered exceptions to the early distribution rule and, therefore, are not subject to the penalty tax EXCEPT A) Death of participant. B) A loan from the plan. C) Participant's debt. D) Participant's disability Answer: Participant's debt

All of the following would be eligible to establish a Keogh retirement plan EXCEPT A) A sole proprietor of film development store with no employees. B) A hair dresser who operates her business at her house. C) The president and employee of a family corporation. D) A sole proprietor of a service station who employs four employees Answer: The president and employee of a family corporation

An individual has been contributing to a retirement account after taxes are taken out of his paycheck. His financial advisor told him that he will be allowed to make contributions after age 70½. The account owner does not have to pay taxes on the growth of his account. What type of retirement account is it A) Roth IRA B) 403(b) plan C) Simplified Employee Pension Plan D) Traditional IRA Answer: Roth IRA

All of the following statements are true regarding tax-qualified annuities EXCEPT A) Employer contributions are not tax deductible. B) Tax accumulation is deferred. C) They must be approved by the IRS. D) Withdrawals are taxed Answer: Employer contributions are not tax deductible

If a company has a Simplified Employee Pension plan, what type of plan is it A) A qualified plan for a small business B) The same as a 401(k) plan C) The same as an IRA, with the same contribution limits D) An undefined contribution plan for large businesses Answer: A qualified plan for a small business

Two attorneys at law and operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose A) Section 457 Deferred Compensation Plan. B) 403(b) plan. C) 401(k) plan. D) HR-10 (Keogh Plan) Answer: HR-10 (Keogh Plan)

Which of the following is an IRS qualified retirement program for the self-employed A) Keogh B) Split Dollar C) Buy and Sell Agreement D) 401(k) Answer: Keogh

Which of the following is NOT true regarding a nonqualified retirement plan A) It needs IRS approval. B) Contributions are not currently tax deductible. C) It can discriminate in benefits and selecting participants. D) Earnings grow tax deferred Answer: It needs IRS approval

Under the 401(k) bonus or thrift plan, the employer will contribute A) 30% of what the employee contributes. B) 75% of what the employee contributes. C) An undetermined percentage for each dollar contributed by the employee. D) All of the money to the plan Answer: An undetermined percentage for each dollar contributed by the employee

If a retirement plan or annuity is "qualified," this means A) It accepts after-tax contributions. B) It is noncancellable. C) It is approved by the IRS. D) It has a penalty for early withdrawal Answer: It is approved by the IRS

An IRA purchased by a small employer to cover employees is known as a A) Simplified Employee Pension plan. B) 401(k) plan. C) Defined contribution plan. D) 403(b) plan Answer: Simplified Employee Pension plan

How are contributions to a tax-sheltered annuity treated with regards to taxation A) They are taxed as income for the employee, but are tax free upon withdrawal. B) They are not included as income for the employee, but are taxable upon distribution. C) They are never taxed. D) They are taxed as income for the employee Answer: They are not included as income for the employee, but are taxable upon distribution

SIMPLE Plans require all of the following EXCEPT A. No more than 100 employees B. Employees must receive a minimum of $5,000 in annual compensation C. At least 1,000 employees D. No other qualified plan can be used Answer: C. At least 1,000 employees

Which type of retirement account does not require the owner to start takin distributions at age 72? A. Traditional IRA B. Roth IRA C. Nonqualifed IRA D. Standard IRA Answer: B. Roth IRA

In a defined contribution plan, A. The contribution and the benefit are known B. The contribution is known and the benefit is unknown C. The benefit is known and the contribution is unknown D. The contribution and the benefit are unknown Answer: B. The contribution is known and the benefit is unknown

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT A. Funds accumulate on a tax-deferred basis B. Employee and employer contributions are not counted as income to the employee for income tax purposes C. At distribution, all amounts received by the employee are tax free D. Employer contributions are tax deductible as ordinary business expense Answer: C. At distribution, all amounts received by the employee are tax free

An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? A. Tax-sheltered account plan B. HR 10 plan C. Profit sharing plan D. 401(k) plan Answer: C. Profit sharing plan