Variable Annuities 1

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Variable Annuities 1 1. Which of the following would not be a characteristic of an annuity? surrender charges in the first few years provides a life time income restrictions of how long an annuity can be deferred typical mandatory distributions by age 70 1/2 2. Insurance companies must utilize which of the following to guarantee interest under a variable annuity contract? The average of the companies investment earnings in money market funds A percentage of the companies investments in low risk stocks a percentage of the companies investments in government bonds and mortgages None of the above 3. All of the following statements concerning IRA withdrawals are correct except: Mike, age 45, elects to annuitize his IRA. The 10% penalty would not apply Payments must begin by April 1 following the year in which they reach age 70 1/2 a 50% penalty is imposed if minimum distributions are not made 100% of any withdrawal will be taxed 4. Which of the following would be eligible for a Keogh Plan? Any business A small family held 'S' corporation An independent financial planner 5. DuMarse, the great grouper fisherman, invested $10,000 into his annuity. His payments are projected to be $20,000. How much of his annuity will be subjected to taxes? none 1/2 $10,000 $20,000 6. Florida law requires insurers to distribute to each policyowner an annual report that contains which of the following? Dollar value of each unit Amount of taxable gain on each unit reported to the IRS Anticipated increase in number of units by the next anniversary Forecast of the value of the unit by the next anniversary 7. An agent must report to the Department of Financial Services any changes in address within what time period? 30 days 31 days 45 days 60 days 8. Which of the following statements are true? There is no ordinary income tax during the annuity period The taxes imposed during the accumulation period will be at ordinary income rates During the annuity period taxes will be imposed at ordinary income rates The annuity period might be taxed at ordinary income rates or capital gain rates depending on how long they kept the investments 9. The Self-Employed Individual Retirement Act of 1962 created which plan? Simplified Employee Pension Individual Retirement Account Keogh Plan 401k Plans 10. An Annuitant receives monthly payments from a variable annuity under a joint and 2/3rds survivor option. If the primary annuitant dies what will the surviving annuitant receive? Two thirds of the primary annuitants last check for life. The dollar value of two thirds of the annuity units that were being distributed monthly to the primary annuitant for life. Two thirds of the annuity units accumulated by the annuitant. A cash distribution of two thirds of the primary annuitants reserve. 11. Which of the following statements concerning annuities are true? 1. Annuities liquidate estates, life insurance creates an estate 2. Most annuities guarantee a death benefit 3. May accept periodic payments during the annuity period 4. Immediate annuities may be funded with fixed or periodic payments 1 only 1 & 2 1, 2, & 3 all the above 12. Which of the following contracts require a series of benefit payments be made at specified intervals? Endowment Annuity 20-Pay Life Modified Whole Life 13. With a joint and full survivor annuity option: 1. If the secondary annuitant dies first, payments to the primary annuitant will increase because only one life is now considered. 2. If the primary annuitant dies first, payments to the secondary annuitant will stay the same. 3. If the secondary annuitant dies first, payments to the primary annuitant remain the same for life. 1 only 2 only 3 only 2 & 3 14. A joint & 2/3 fixed or variable annuity may have all the following characteristics except: A predictable monthly Income for life for two people based upon an interest rate in effect at the time it is annuitized. A variable monthly lifetime income for two people based upon the performance of the annuities mutual funds. The company cannot use the SEX of the individuals as a payout factor. The payout may be reduced to the survivor to allow more income while both are alive. 15. Employees of the following type at organizations generally may participate in 403 B plans. Professional sports associations Small business enterprises. Professional corporations. Public school systems and other not for profit groups. 16. How often must an annuitant be informed of the number of units and the value of those units? yearly monthly quarterly bi-annually 17. All of the following might be found in a prospectus except: the risks involved the seperate account past annual returns of the general account a statement reflecting neither approval or disapproval from the SEC 18. A Stock Bonus Plan is like a : Defined Benefit Plan Profit Sharing Plan S.E.P. 401K Plans 19. Under a life income annuity option which of the following is true? The older the annuitant the smaller the monthly payment. The older the annuitant the longer the payment period. The younger the annuitant the shorter the payment period. The older the annuitant the larger the monthly payment. 20. All of the following are general qualification requirements for employer-sponsored retirement plans except: life insurance benefits must be incidental to retirement benefits annuity payments must be available in the form of a joint & survivor annuity a plan must be for the exclusive benefit of employees the plan may be established by the employer, employee, or both 21. All the following statements regarding SIMPLE plans are true except? for companies with a maximum of 100 employees may be integrated with a defined contribution plan 100% vesting in employer's contribution may be established by tax-exempt and government entities 22. Which of the following is true concerning Section 457 deferred compensation plans? life insurance must be incidental to retirement benefits anyone under 70 1/2 may participate who has earned income a special plan for military personnel may be funded with life insurance 23. An individual may hold only a variable annuity license. True False 24. Variable Annuity insurance companies are regulated by which of the following? The S.E.C. and the state's Chief Financial Office The S.E.C. and the state's Office of Insurance Regulation The S.E.C. and the insurance commissioner The S.E.C. and F.D.I.C. 25. Which of the following regarding a Roth IRA is true? withdrawals must commence by April 1 of the year following attainment of age 70 1/2 as with traditional IRA's, there are income limits for contributions one of the qualified withdrawal requirements is that the funds must have been held in the account for five years A spousal Roth IRA is available 26. Until what time will a "fixed amount" settlement option pay? until both primary and contingent beneficiaries die only until the primary beneficiary dies until the end of the period which was elected until the funds are exhausted 27. What is dollar cost averaging? Total number of shares of stock divided by the price A method of group investing Investing equal amounts of money at regular intervals A guaranteed investment strategy in which gaining outweighs loss 28. Which of the following statements regarding Keogh plans is incorrect? They are subject to the same contribution & benefit limits as qualified plans They must comply with the same participation requirements as qualified corporate plans They are subject to the same nondiscrimination rules as qualified corporate plans They do not have to qualify for employer contributions to be a deductible expense 29. To determine the amount of income that is considered taxable from a life annuity, an exclusion ratio is used. Which of the following would be correct? The amount invested divided by the life expectancy The amount invested divided by the expected interest rate The amount invested divided by the expected return The full amount would be considered as taxable income 30. Profit Sharing and Money Purchase Plans are: Defined Contribution Plans Defined Benefit Plans Require yearly contributions Can't remember 31. A Florida life insurance company may issue "Group Variable Annuity Contracts" without registering as an investment firm if the contracts are used for qualified retirement plans and cover at least _____ people? 50 25 10 5 32. A Life with 20 yr. period certain annuity would pay: only 20 years 20 yrs. or life of the annuitant whichever is longer until both spouses die until the first spouse dies 33. Which of the following statements concerning the differences between IRA's and Simplified Employee Pension plans is/are correct? 1. Contribution limits are 25% or $30000 for SEPs, $4000 for IRAs 2. Both are individual accounts 3. Contribution limits are 25% of the employee's income or $44,000 ,whichever is less for SEPs, & $4000 for IRAs 4. SARSEPs are no longer allowed 1 only 1 & 2 2 & 3 only 4 only 34. Tom is receiving 100 annuity units each month. If the variable annuity company's seperate account was worth $90,000,000 and they had 3,000,000 annuity units outstanding, how much would Tom's check be? $300 none of the above $2700 $3000 35. Which of the following statements concerning SIMPLE plans is/are correct? 1. Tax exempt and 100 employees or less are eligible 2. Mandatory employer contributions up to 5% of the employees contribution 3. 100% immediate vesting 4. Graded Vesting schedules 1 & 2 1 & 3 1 & 4 2 & 4 36. An annuity which pays out a minimum guaranteed amount for a specified period or number of years is a: Fixed Benefit Fixed Period Lump Sum Period Certain 37. Under the 1035 exchange rules, which would not be an acceptable course of action for tax purposes? changing from an annuity to life insurance changing from an endowment to annuity changing from an annuity to annuity changing from life insurance to annuity 38. To qualify for tax purposes, a defined benefit plan must meet all the following except: the plan must provide primarily retirement benefits the plan must provide a systematic payment of benefits to employees over a period of years the plan must provide for definately determinable benefits the plan must provide equal benefits to all employees in the same actuarial class 39. Variable annuity companies can be classified as : Closed-end investment companies Open-end investment companies Bonded companies Open-end or Closed-end investment companies 40. The exclusion ratio for a Variable Annuity is 100% 75% 50% 25% 41. Qualified corporate retirement programs must meet all requirements below EXCEPT: Must be for the exclusive benefit of employees. Life Insurance benefits must be incidental to retirement benefits. Cannot be discriminatory by sex. Employee contributions must be vested by 3 years. 42. An Annuity is designed to provide which of the following financial features? 1. The liquidation of principal and interest 2. A favorable tax treatment for income received 3. The creation of an estate 1 and 2 only 1 and 3 only 2 and 3 only 1, 2, and 3 43. ANNUITIES can be designed to provide all the following EXCEPT: A stable and predictable monthly income for the remainder of the annuitant's life. A variable monthly income based upon the value of a fixed number of mutual fund units being retired monthly A regular monthly income from previously committed funds which do not require any decisions by an infirm or senile annuitant. A predictable death benefit to a beneficiary. 44. A tax penalty is imposed if a healthy person takes constructive receipt of his I.R.A. funds before age: 59 1/2 62 70 1/2 65 45. Owners of Variable Annuities will realize better investment growth when? The bond market outperforms fixed-dollar investments The futures market outperforms the bond market The stock market outperforms fixed-dollar investments Fixed dollar investments outperform all other investments 46. Who will receive the lowest monthly annuity payment, all else being equal? an elderly man an elderly woman a young man a young woman 47. An annuitant, age 65, chooses a life income with a 20 year period certain. Which of the following statements concerning this option is true? If the annuitant died at age 75, his beneficiary would receive income for 20 years All payments would cease at age 85 Payments will continue for the life of the annuitant , no matter how long that life lasts There are no survivorship options with a life annuity 48. Joan elects to receive a straight life income option from her fixed annuity.The company has calculated that Joan will receive $850.00 per month for life. Which of the following statements is not correct? If Joan died after receiving one month's payment, the insurance company would keep the balance The benefit factor under a straight life income option is the highest of all options should Joan die after receiving one month's payment the balance would be paid to a named beneficiary the straight life income option has the most risk to Joan 49. Which of the following statements concerning equity indexed annuities is/are correct: 1. The returns are credited to a specific equity or stock index 2. There are guaranteed interest rates 3. The principle is guaranteed 4. Annuitization can be fixed or variable 1 & 2 2 & 3 1 & 4 all the above 50. What determines the market value of a stock that is freely traded on the open market? Buyer & Seller The N.Y. S. E. the company issuing the stock The S.E.C. & N.A.S.D. 51. Which is not a qualified retirement plan? A Defined benefit plan A salary continuation plan Keogh Plan S.E.P. 52. Which of the following terms defines an employee's right to money that has been invested in the retirement account? participation contribution vesting funding 53. All of the following should be able to establish a Keogh plan EXCEPT: An unincorporated dentist in private practice. Partners in a furniture store The sole proprietor of a jewelry store. A minority stockholder/employee of a family corporation. 54. A money-purchase plan is: A fixed contribution with a fixed benefit A fixed contribution with a variable benefit A variable contribution with a fixed benefit a variable contribution with a variable benefit 55. What is the maximum annual contribution an eligible person may make to an Individual Retirement Account (IRA)? $1,500 or 15% of earned income, whichever is less. The greater of $3,000 or 20% of salary or wages. $7,500 or 15% of annual income, whichever is less. The lesser of $4000.00 or 100% of income 56. Which of the following would be entitled to a tax free rollover from an IRA? a surviving spouse the person who establishes the IRA and any named beneficiary the person who established the IRA, a spouse, and children all the above 57. Which of the following statements about a life annuity with 10 years certain is/are true? 1. If the annuitant lives for 20 years after the start of the income period, he will receive income payments for 20 years. 2. If the annuitant dies 5 years after the start of the income payment period, the beneficiary will receive income payments for an additional 10 years. 1 only 2 only 1 and 2 Neither 1 nor 2 58. Which of the following is not a determining factor in the payout of an annuity? Interest Rate Inflation Rate Principal Amount Length of the payout period 59. Who has jurisdiction over all variable annuity contracts issued by life insurance companies? The State The S.E.C. The State and the S.E.C. The State, the S.E.C. and the F.D.I.C. 60. Sam, age 47, decides to annuitize his variable annuity. The agent should inform him that 1. he will pay a 10% penalty 2. there will be no 10% penalty 3. he will be subjected to ordinary income tax on any gains 4. he will be subjected to capital gains taxes on any gains 1 & 3 1 & 4 2 & 3 2 & 4 61. The purpose of the Variable Annuity exclusion is to show that: The Principle is tax-free, the interest is taxable The Principle is taxable, the interest is tax-free Both principle and interest are taxable Both principle and interest are tax-free 62. Which type of annuity plan allows for pre-tax dollars to be invested? 501 c 3 403 b terminus remaindus trustus no wonus pitifulmus 63. Pamella is the sole proprietor of a craft shop. She decides it is time to start her retirement planning. In order to obtain the maximum legal amount in a qualified plan which should she choose? Invidual Retirement Account Simplified Employee Pension Individual Retirement Account with a Spousal contribution 401k plan

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