NMLAHIP New Mexico Life Accident and Health Insurance Producer - Set 3 - Part 3

Test your knowledge of technical writing concepts with these practice questions. Each question includes detailed explanations to help you understand the correct answers.

Question 41: A private-sector employer sponsors a retirement plan for its employees, and a federal law sets minimum standards for how the plan must handle participant vesting, fiduciary conduct by those managing plan assets, and reporting and disclosure to participants. Which federal law establishes these minimum standards for private-sector employee benefit plans?

The Internal Revenue Code alone

The Fair Labor Standards Act

The Employee Retirement Income Security Act

The Social Security Act

Question 42: A married couple selects an annuity payout option that continues sending income for as long as either spouse remains alive, only ending after both spouses have died, making it a common choice for couples planning shared retirement income. Which payout option does this describe?

Life with period certain

Fixed period option

Straight life

Joint and survivor

Question 43: An injured plaintiff and the defendant's insurer agree that, instead of one lump sum payment resolving the claim, the defendant's insurer will fund an annuity that pays the injured party fixed periodic payments over many years. Which term describes this funding arrangement?

A structured settlement

A period certain annuity

A qualified retirement plan

A viatical settlement

Question 44: A plan participant leaving her employer directs the administrator to transfer her retirement account balance directly to a new employer's qualified plan, with the funds moving straight from one trustee to another and never passing through the participant's own hands. How does federal tax law treat this transfer?

Ordinary income tax applies immediately

No current tax or withholding applies

An early withdrawal penalty applies

Only half the balance may transfer

Question 45: A beneficiary named under a life insurance policy receives a lump-sum death benefit after the insured dies, with proceeds paid in a single payment rather than spread across installments. Under the general federal income tax rule, how must the beneficiary treat this lump-sum death benefit on her income tax return?

Report it as ordinary income

Report it as capital gain income

Exclude it from gross income

Include the amount above premiums paid

Question 46: The owner of a nonqualified deferred annuity dies during the accumulation period, and a named beneficiary receives the remaining account value in a single lump sum that includes the original principal and accumulated gain. How does federal tax law treat the gain portion of this payment to the beneficiary?

Fully excluded like a life insurance payout

Taxed as long-term capital gain

Deferred until the beneficiary's own retirement

Taxed to the beneficiary as ordinary income

Question 47: A life insurance policy insuring one member of a business partnership is sold for valuable consideration to another individual partner in that same partnership, and the insured partner later dies while the buying partner still holds the contract. Under the transfer-for-value exceptions, how is the resulting death benefit treated?

It remains fully income-tax-free

Only amounts the partner paid are excluded

It is fully taxable since consideration changed

The buyer must pass the seven-pay test

Question 48: A retiree elects a lifetime payout option on her annuity, and by the time she reaches an advanced age she has already received far more in total payments than the account value she originally had. Which guarantee explains why the insurer must keep paying her?

A refund of unused premium

Income the annuitant cannot outlive

A guaranteed death benefit

A fixed rate of investment return

Question 49: An owner cancels her deferred annuity only three years after purchase, and the insurer deducts a declining percentage based fee from her account value before paying out the balance, because she cancelled during the contract's early years. Which feature does this fee represent?

A policy fee

A mortality charge

A surrender charge

An exclusion ratio

Question 50: A retirement plan sponsor designs its plan to satisfy the federal requirements governing eligibility, vesting, contribution limits, and nondiscrimination, earning the plan favorable tax treatment under the tax code. Which federal tax advantage does this qualified status primarily provide to the plan's participants?

Contributions are always fully tax-free

Distributions are never subject to tax

Only the employer receives any tax benefit

Contributions and earnings grow tax-deferred

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