CRPC Navigating Retirement Healthcare 3 — Questions and Answers
Question 1: Which of the following best describes a Health Savings Account (HSA) triple tax advantage?
- Contributions are pre-tax, growth is tax-deferred, withdrawals for qualified expenses are tax-free (Correct answer)
- Contributions are post-tax, growth is tax-free, withdrawals are always tax-free
- Contributions are pre-tax, growth is tax-free, all withdrawals are tax-free regardless of use
- Contributions are pre-tax, growth is tax-deferred, withdrawals for medical expenses are taxed at capital gains rates
Correct answer: Contributions are pre-tax, growth is tax-deferred, withdrawals for qualified expenses are tax-free
HSAs offer pre-tax contributions, tax-free growth, and tax-free withdrawals when used for qualified medical expenses, creating a unique triple tax benefit.
Question 2: At what age can HSA funds be withdrawn for non-medical expenses without penalty, though ordinary income tax still applies?
- 59½
- 62
- 65 (Correct answer)
- 70½
Correct answer: 65
After age 65, HSA funds withdrawn for non-medical purposes are taxed as ordinary income but are not subject to the 20% penalty, making the HSA behave like a traditional IRA.
Question 3: A retiree enrolled in Medicare Part A wants to continue contributing to his HSA. What is the correct rule?
- He may contribute up to the family HSA limit since he is over 55
- He may contribute a reduced amount based on months of Medicare coverage
- He cannot contribute to an HSA once enrolled in any part of Medicare (Correct answer)
- He may contribute only if enrolled in a high-deductible Medicare Advantage plan
Correct answer: He cannot contribute to an HSA once enrolled in any part of Medicare
Enrollment in any part of Medicare, including Part A alone, disqualifies an individual from making HSA contributions.
Question 4: What is the primary purpose of a long-term care (LTC) insurance benefit trigger?
- To determine when premiums can be reduced
- To define the conditions under which benefits begin to be paid (Correct answer)
- To establish the maximum daily benefit amount
- To specify the inflation protection adjustment rate
Correct answer: To define the conditions under which benefits begin to be paid
Benefit triggers define the qualifying events, typically inability to perform ADLs or cognitive impairment, that must occur before an LTC policy begins paying benefits.
Question 5: Under the HIPAA tax-qualified LTC insurance standard, how many ADL deficiencies must a claimant have to qualify for benefits?
- 1 of 6
- 2 of 6 (Correct answer)
- 3 of 6
- 4 of 6
Correct answer: 2 of 6
HIPAA requires tax-qualified LTC policies to pay benefits when a claimant cannot perform at least 2 of the 6 standard activities of daily living.
Question 6: A hybrid life/LTC insurance policy's primary advantage over a standalone LTC policy is:
- Lower premiums in all scenarios
- Return of premium or death benefit if LTC benefits are never used (Correct answer)
- Guaranteed lifetime LTC benefit payments
- No underwriting requirements at any age
Correct answer: Return of premium or death benefit if LTC benefits are never used
Hybrid policies address the 'use it or lose it' concern of traditional LTC insurance by providing a death benefit or return of premium if LTC benefits go unclaimed.
Question 7: Which Medicaid planning strategy involves converting countable assets into an exempt asset to qualify for nursing home coverage?
- Gifting assets to adult children within the look-back period
- Purchasing an irrevocable funeral trust
- Purchasing an annuity that complies with Medicaid rules (Correct answer)
- Establishing a revocable living trust
Correct answer: Purchasing an annuity that complies with Medicaid rules
A Medicaid-compliant annuity converts countable assets into an income stream, helping a community spouse or applicant meet asset limits while preserving value.
CRPC Navigating Retirement Healthcare 3
Which of the following best describes a Health Savings Account (HSA) triple tax advantage?