test 4 second time around answers

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1. Correct!
2. Which of the following statements concerning social security benefits is true?
Correct Answer:	Michael retired at age 65. He has a 15 year old totally disabled daughter and a wife, age 45. The child will receive income for life. The wife also will receive a monthly benefit, even though she is under age 62.
Explanation:	DEATH BENEFITS: The child only receives a benefit until he/she is 18 (19 if in high school). They did away with college funding. RETIREMENT BENEFITS: The wife will receive a benefit, even though she is under age 62, because the child was disabled before age 22. The child will receive a benefit indefinately. DISABILITY BENEFITS: His disability benefit will be less because he had taken early retirement. TAXATION: S.S. benefits may be taxed up to 85%.
Concept:	None
	No further information available.
3. A Coverdell Savings Account is:
Correct Answer:	An after tax savings vehicle for education
Explanation:	These are education savings accounts funded with after tax dollars where the interest will not be taxed if the money is used for educational purposes. The monies must begin being distributed by the time the child reaches age 18. The contribution limits are capped at $2000. There are income limits that apply and a 10% penalty if certain conditions are not met. Page 250
Concept:	None
	No further information available.
4. Correct!
5. Which of the following statements is true concerning split dollar insurance?
Correct Answer:	It is a method of purchasing insurance.
Explanation:	Split dollar is a method of purchasing insurance. It is used by the businees owner, who has the ability to pay for insurance in order to help the employee purchase insurance if the emplyee has the need, but not the ability to pay.
Concept:	None
	No further information available.
6. In a typical split dollar policy the employer and the employee split the cost of the insurance. On an annual basis, the employer's outlay is equal to the:
Correct Answer:	increase in cash value
Explanation:	The employer's part of the premium is equal to the increase in cash value. The employee pays the balance. This is not really the way it is done, but the book says so. So be it!
Concept:	None
	No further information available.
7. Correct!
8. Correct!
9. Correct!
10. Correct!
11. Correct!
12. Which is not the primary purpose of Key Person insurance?
Correct Answer:	tax deductible premiums
Explanation:	Premiums are not deductible.
Concept:	None
	No further information available.
13. Which of the following best describes the normal conversion benefit available to terminated employees under a group life insurance policy?
Correct Answer:	The employee may convert to an individual whole life policy within 31 days without submitting evidence of insurability.
Explanation:	none
Concept:	None
	No further information available.
14. Correct!
15. Correct!
16. Correct!
17. Correct!
18. Correct!
19. Correct!
20. Correct!
21. Correct!
22. Correct!
23. Which of the following is true concerning key person life insurance?
Correct Answer:	The cash values are listed as an asset on the company's balance sheet.
Explanation:	The policy is acually a liability. But, the cash value is a tangible amount that adds to the balance sheet. The premiums are not tax dedcutible. As for split dollar, there is no such beast as a split dollar policy, split dollar is a METHOD of buying insurance, not a particular policy.
Concept:	None
	No further information available.
24. Correct!
25. Correct!
26. Correct!
27. Correct!
28. Correct!
29. Correct!
30. All the following statements concerning deferred compensation plans are correct except:
Correct Answer:	They receive favorable tax treatment from the IRS.
Explanation:	If someone were in a high tax bracket and receiving a bonus, taxes could eat the bonus. The bonus would be deferred, applying the bonus to a cash value policy on the life of anyone the company chooses. If the person died before retirement the proceeds of the policy would be paid to the person's beneficiary. If the person lived to retirement, the cash would be used to supplement retirement. Can discriminate with a deferred comp. plan.
Concept:	None
	No further information available.
31. Correct!
32. Correct!
33. Correct!
34. Correct!
35. Correct!
36. Which type of group coverage would give the individual a policy?
Correct Answer:	franchise insurance
Explanation:	Franchise insurance, also known as wholesale insurance, would give the indiviual a policy. Remember, with employer group insurance, the employee receives a certificate.
Concept:	None
	No further information available.
37. Correct!
38. For a group life plan to receive favorable tax treatment, the government imposes certain requirements to ensure that the rank-and-file employees are not discriminated against. Which of the following statements regarding eligibility requirements is not correct?
Correct Answer:	The life insurance must be the same amount for all.
Explanation:	The insurance does not have to be the same dollar amount. However, the amount of insurance provided to all employees must bear a uniform relationship to their level of compensation or position. In other words, a manager would receive more insurance than a supervisor. The cost for any amount of insurance above $50,000 would be included in the employee's salary for tax purposes.
Concept:	None
	No further information available.
39. Correct!
40. Correct!
41. Correct!
42. Correct!
43. Correct!
44. Correct!
45. Correct!
46. Correct!
47. Correct!
48. Correct!
49. Correct!
50. Correct!
51. Correct!
52. Correct!
53. Correct!
54. Correct!
55. Correct!
56. Correct!
57. Which of the following statements concerning Multiple Employer Trusts (METs) are true? 1. They are designed for employers with a large number of employees. 2. They may be self-funded or funded with contracts from insurance companies. 3. The employer must join the trust. 4. Employees receive a policy.
Correct Answer:	2 & 3
Explanation:	METs are designed for employers who have a small number of employees. If the MET is funding the trust with insurance contracts rather than self-funding, then the trust is the contract holder and each employee is receiving a certificate. Pg 190
Concept:	None
	No further information available.
58. Correct!
59. For whom is the entity plan best suited?
Correct Answer:	a partnership with many partners
Explanation:	The word "entity" tells you the question is referring to a partnership. The business purchases "one" policy on each of the partners. Had it been a corporation, the "stock-redemption" would have been used. Corporations-stock-redemption....Partnerships-Entity
Concept:	None
	No further information available.
60. Concerning Buy/Sell Plans in a corporation, with 3 equal stockholders, how many policies would be needed?
Correct Answer:	Stock Redemption - 3 policies
Explanation:	none
Concept:	None
	No further information available.

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