Life & Health Insurance Annuities and Retirement Plans Flashcards
7 cards from real Life & Health Insurance Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Life & Health Insurance Annuities and Retirement Plans flashcards as text
What provision in a variable annuity guarantees that the annuity's income base will increase to a specified percentage each year, regardless of market performance?
Answer: Guaranteed minimum income benefit (GMIB)
A GMIB rider guarantees that the income base used to calculate future annuity payments will grow at a specified rate, providing a floor for future income regardless of market performance.
If a participant takes a loan from their 401(k) and fails to repay it according to plan terms, what happens?
Answer: The outstanding balance is treated as a taxable distribution subject to penalty
A defaulted 401(k) loan is treated as a deemed distribution, making the unpaid balance subject to ordinary income tax and the 10% early withdrawal penalty if under age 59½.
Which annuity type is most appropriate for a retiree who wants to begin receiving income payments immediately after making a single premium payment?
Answer: Single premium immediate annuity (SPIA)
A single premium immediate annuity (SPIA) begins making income payments within one period (usually one month) after the single lump-sum premium is paid.
What is the maximum annual contribution limit for a Health Savings Account (HSA) used in conjunction with a high-deductible health plan primarily for?
Answer: Paying qualified medical expenses on a tax-advantaged basis
HSAs allow individuals enrolled in high-deductible health plans to contribute pre-tax dollars specifically for qualified medical expenses, with triple tax advantages.
A variable annuity's separate account is significant because it:
Answer: Is kept apart from the insurer's general assets, protecting it from insurer insolvency
The separate account is legally segregated from the insurance company's general account assets, meaning it cannot be used to satisfy the insurer's general creditors.
Which of the following is true about a stretch IRA strategy?
Answer: It allows a spouse to roll over an inherited IRA and defer distributions over their own lifetime
A spousal rollover allows a surviving spouse to treat an inherited IRA as their own, deferring RMDs based on the spouse's own life expectancy — a true 'stretch' strategy still available post-SECURE Act.
What does 'vesting' mean in the context of an employer-sponsored retirement plan?
Answer: The employee's ownership rights in employer contributions over time
Vesting refers to the schedule by which an employee earns non-forfeitable ownership rights to employer contributions made on their behalf.