Pennsylvania Life Insurance – Uses/Retirement

An individual working part-time has an annual income of $25,000. If this individual has an IRA, what is the maximum deductible IRA contribution allowable?
No deduction allowed
$25,000
$20,000
$10,000
$25,000

A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid
mandatory income tax withholding on the transfer amount
paying transfer fees
paying trustee fees
ever paying income taxes on the distributions
mandatory income tax withholding on the transfer amount

When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve?
Establishes the needs of the individual and his dependents

Contributions made by an employee to a qualified retirement plan are required to be
subject to income taxes
fully refundable
nonforfeitable
subject to a vesting schedule
ubject to a vesting schedule

How are Roth IRA distributions normally taxed?
10% penalty tax is applied
Taxed as ordinary income
Capital gains tax is applied
Distributions are received tax-free
Distributions are received tax-free

Which of these is NOT considered to be a cost connected with an individual’s death?
Funeral expense
Tax liability
Business expenses
Probate costs
Business expenses

Which of these is NOT relevant when determining the amount of personal life insurance needed?
Existing life insurance coverage
Local unemployment rate
Household income
Household debt
Local unemployment rate

Which of these is NOT a reason for a business to buy key person life insurance?
The reduction in sales as a direct result from death of the key employee
A void in leadership if the key person were to die
The loss of company revenues while a replacement is being sought
A pension deficiency if the key employee dies
A pension deficiency if the key employee dies

In life insurance, the needs approach is used mostly to establish
which type of life insurance a client should apply for
how much life insurance a client should apply for
which company a client should use when applying for life insurance
what the maximum amount the client can spend on life insurance
how much life insurance a client should apply for

In an individual retirement account (IRA), rollover contributions are
subject to capital gains tax
subject to ordinary income tax
partially limited by dollar amount
not limited by dollar amount
not limited by dollar amount

How long does an individual have to “rollover” funds from an IRA or qualified plan?
60 days
90 days
120 days
No limit
60 days

Which of these factors does NOT influence an applicant’s need for life insurance?
Lifestyle of the applicant
Number of dependents
Future educational costs of the dependents
Self-maintenance expenses
Self-maintenance expenses

Tom has a qualified retirement plan with his employer that is currently considered to be 80% “vested”. How can this be interpreted?
20% of the funds are subject to taxes
80% of the funds are invested in a separate account
If Tom’s employment is terminated, 20% of the funds would be forfeited
If Tom’s employment is terminated, 80% of the funds would be forfeited
If Tom’s employment is terminated, 20% of the funds would be forfeited

What does a 401(k) plan generally provide its participants?
Tax-free distributions
Salary-deferral distributions
Salary-deferral contributions
A defined retirement benefit
Salary-deferral contributions

Traditional individual retirement annuity (IRA) distributions must start by
age 59 1/2
age 65
April 1st of the year following the year the participant attains age 59 1/2
April 1st of the year following the year the participant attains age 70 1/2
April 1st of the year following the year the participant attains age 70 1/2

An officer for a corporation takes out numerous loans from the company’s qualified retirement plan. Which of these rules is the plan in violation of?
Key employee rule
Top heavy rule
Vesting rule
Exclusive benefit rule
Exclusive benefit rule

An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to capital gains tax
Distribution is subject to ordinary income tax
Distribution is subject to a tax penalty
Distribution is subject to federal income tax withholding
Distribution is subject to federal income tax withholding

Who is normally considered to be the owner of a 403(b) tax-sheltered annuity?
The 403(b) custodian
The financial institution
The employer
The employee
Employee

Rick recently died and left behind an individual IRA account in his name. His widow transferred these funds to her own individual IRA account. What did Rick’s widow qualify for?
Tax credit
Death benefits
Section 1035 exchange
Capital gains taxation
Section 1035 exchange

Employers will frequently purchase life insurance on a key employee in order to
provide an income to the deceased key employee’s family
pay for funeral costs
provide the employer with a tax credit
help offset the cost of finding and training a replacement
elp offset the cost of finding and training a replacement

Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2?
10% tax penalty for early withdrawal
Capital gains tax
Ordinary income tax and a 10% tax penalty for early withdrawal
Ordinary income tax
Ordinary income tax and a 10% tax penalty for early withdrawal

According to the needs approach, an emergency reserve fund’s primary purpose is to
pay off debt
pay for unexpected expenses
pay for the cost of life insurance
provide an supplemental income source
pay for unexpected expenses

All of the following statements about traditional individual retirement accounts are false EXCEPT
10% penalty is applied to withdrawals after age 59 1/2
Withdrawals are normally tax-free to the recipient
10% penalty is applied to withdrawals before age 59 1/2
Contributions are not tax deductible
10% penalty is applied to withdrawals before age 59 1/2

Which of the following is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made?
Surrender charge is applied
The account can be rolled into the surviving spouse’s IRA
Distributions will be received tax-free if surviving spouse is over age 59 1/2
Future distributions are payable to the owner’s estate
The account can be rolled into the surviving spouse’s IRA

A retirement plan that sets aside part of the company’s net income for distributions to qualified employees is called a
rollover plan
403(b) plan
profit-sharing plan
salary reduction plan
profit-sharing plan

A 55 year old recently received a $30,000 distribution from a previous employer’s 401k plan, minus $10,000 withholding. Which federal taxes apply if none of the funds were rolled over?
Only income taxes on $30,000
Only income taxes on $20,000
Income taxes plus a 10% penalty tax on $30,000
Income taxes plus a 10% penalty tax on $20,000
Income taxes plus a 10% penalty tax on $30,000

Which of the following is TRUE about a qualified retirement that is “top heavy”?
More than 30% of plan assets are in key employee accounts
More than 40% of annual additions are for key employee accounts
More than 50% of plan assets are in key employee accounts
More than 60% of plan assets are in key employee accounts
ore than 60% of plan assets are in key employee accounts

When funds are shifted straight from one IRA to another IRA, what percentage of the tax is withheld?
10%
20%
20%
None
None

In a qualified retirement plan, the yearly contributions to an employee’s account
are not tax-deductible
are restricted to minimum levels set by the IRS
are restricted to maximum levels set by the IRS
must be matched dollar-for-dollar by the employer
are restricted to maximum levels set by the IRS

What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan?
30%
40%
50%
60%
50%

An employer that offers a qualified retirement plan to its employees is eligible to
avoid ERISA regulations
make tax-deductible contributions to the plan
make tax deductible contributions to key employees only
make partial tax-deductible contributions to the plan
make tax-deductible contributions to the plan

Premature IRA distributions are assessed a penalty tax of
0%
10%
15%
20%
10%

What is the maximum number of employees (earning at least $5,000) that an employer can have in order to start a SIMPLE retirement plan?
25
50
100
250
100%

A qualified profit-sharing plan is designed to
allow key employees to participate in the profits of the company
allow employees to participate in the profits of the company
keep key employees from leaving the company
allow employees to elect company officers
allow employees to participate in the profits of the company

First-time homebuyers are able to withdraw up to how much from their qualified IRA’s without incurring the 10% early withdrawal penalty?
$2,500
$5,000
$7,500
$10,000
$10,000

What is considered a valid reason for small businesses to insure the lives of its major shareholders?
To provide an income for the surviving dependents
Reduce the company’s tax liability
To pay for final expenses
Fund a buy-sell agreement
Fund a buy-sell agreement

Which of these is NOT a reason for purchasing life insurance on the life of a minor?
If both parents were to die, it would provide death benefits to the child
Provides funds for final expenses if the child were to die
Provides living benefits for the child’s college education
Provides child with insurance now, in case the child becomes uninsurable later
If both parents were to die, it would provide death benefits to the child

When using the needs approach to life insurance planning, lump sums may be created for all of the following reasons EXCEPT
Final expenses
Charitable donation
Education
Employee benefits
Employee benefits

The premiums paid by an employer for his employee’s group life insurance is usually considered to be
tax-deductible to the employer
partially deductible to the employee
tax-deductible to the employee
taxable income to the employee
tax-deductible to the employer

Which of the following is NOT a valid insurance policy exchange?
An annuity exchanged for a life insurance policy
An annuity exchanged for another annuity
A life insurance policy exchanged for another life insurance policy
A life insurance policy exchanged for an annuity
An annuity exchanged for a life insurance policy

Which of these is a true statement regarding survivor benefits under a qualified retirement plan?
Survivor benefits can only be waived with the written consent of a married employee’s spouse
Survivor benefits CANNOT be waived with the written consent of a married employee’s spouse
Survivor benefits are rarely included in small company plans
Survivor benefits do not apply to divorced employees
Survivor benefits can only be waived with the written consent of a married employee’s spouse

An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction?
10% is withheld for income taxes
20% is withheld for income taxes
30% is withheld for income taxes
Nothing is withheld
20% is withheld for income taxes

Introduction Many businesses offer group life and health insurance plans to their employees as part of a benefits package. This type of coverage is offered to every employee of the company. As an employer, this can provide benefits such as …

Introduction Many businesses offer group life and health insurance plans to their employees as part of a benefits package. This type of coverage is offered to every employee of the company. As an employer, this can provide benefits such as …

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Life insurance policies comes in many forms. Some of the typical policies include: ?Term Life: the insured is covered while the policy is in e%ect, usually 10-20 years. ?Whole Life: similar to term life, but allows the policyholder to borrow …

Life insurance policies comes in many forms. Some of the typical policies include: ?Term Life: the insured is covered while the policy is in e%ect, usually 10-20 years. ?Whole Life: similar to term life, but allows the policyholder to borrow …

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