AD Banker Retention Questions Ch 7

Under what circumstances would a policy loan on a life insurance policy be taxable?

• Policy loans on a life insurance policy are always tax-free

• If the policy owner dies, the policy loan becomes taxable

• If the policy lapses or is surrendered, any loan amount in excess of cost basis is taxable

• If the insured dies, the policy loan is taxable unless there is sufficient death benefit available to pay off the loan

To be considered terminally ill, federal law defines a terminal illness as one which is expected to result in the person's death within how many months?

• 36

• 24

• 12

• 6

When may an employer deduct the premiums if it pays for an employee's life insurance benefit?

• As long as the business does not derive a direct benefit from the policy

• If the business does not receive more than 50% of the death benefit

• An employer cannot ever deduct premiums it pays for an employee's life insurance benefit

• Employers can always deduct the premiums it pays for an employee's life insurance benefit

If a life insurance policy becomes a MEC, what was the cause?

• The policy owner stopped paying premiums after 7 years

• The policy was rolled over into an IRA

• The policy failed the 7-pay test

• The policy was exchanged for an annuity

All of the following tax-free exchanges of life insurance and annuities are permitted, EXCEPT?

• Life insurance into an annuity

• Annuity to long-term care insurance

• Life insurance to long-term care insurance

• Annuity to life insurance

An annuitant contributed $50,000 to her nonqualified annuity, and when she annuitized the policy, the insurance company determined that, based on her life expectancy, she will receive $100,000 in payments. If her initial monthly payment was $1,000, how much of that payment was taxable?

• $0

• $500

• $1,000

• $100,000

The federal law that governs the rights of plan participants and beneficiaries of most employer-sponsored benefit plans is _____.

• COBRA

• HIPPA

• FCRA

• ERISA

Roth IRA is unique for which of the following reasons?

• Contributions are tax deductible and distributions are nontaxable

• Contributions are nondeductible and distributions are nontaxable

• Contributions are nondeductible and distributions are taxable

• Contributions are tax deductible and distributions are taxable

What is "defined" in a defined contribution plan?

• The percentage or amount of an employee's deposits to the plan

• The percentage or amount of an employee's distributions from the plan

• The percentage of the employee's income provided as life insurance to the employee

• The employer's percentage or amount of distribution to an employee from the plan

A Tax Sheltered Annuity may be established and funded by which of the following?

• A not-for-profit community hospital association

• XYZ's Catering, a small unincorporated business

• Johnson Accountants, Inc.

• A professional law firm