FIN 230 Lecture Notes - Lecture 23: Insurable Interest, Defined Contribution Plan, Reinsurance

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amberbeetle784

6 Jan 2016

School

University of Illinois

Department

Finance

Course

FIN 230

Professor

Davis Donald

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Document Summary

In general, contributions by an employer on behalf of employees for qualified employee benefits. The employee retirement income security act of 1974 established. Answe r minimum standards for participation in pension plans. minimum standards for funding of pension plans. minimum standards for vesting of pension plans. extensive reporting and disclosure requirements. all of the above. Group life insurance premiums paid by an employer are deductible by the employer and nontaxable to the employee. The beneficiary under key person life insurance normally is the: Answe r estate of the insured. key person"s spouse. key person. the employer. none of the above. The beneficiary under a split dollar life insurance policy normally is the. Answe r the estate of the insured. the key employee"s spouse. the employer. the key employee"s beneficiary and the employer, to the extent of their interests. none of the above. A business valued at ,000 has four partners.

Related Questions

Question 1

Life insurance is viewed as favorable in defined benefit plans because it adds to the limit on deductible contributions

True

False

2 points

Question 2

Some of the advantages of using life insurance in a qualified plan includethe following except:

		plan costs for employer are predictable
		life insurance is considered to be a very safe investmen
		greater rates of return on insurance cash value than alternative investments
		retirement benefits can be guaranteed by both the insurance company and employer
		low cost installation and service of the plan

2 points

Question 3

A defined benefit plan can help an older employee in a small business maximize tax-deferred savings.

True

False

2 points

Question 4

IRS sets a maximum limit on the projected annual benefit that a defined benefit plan can provide a participant.

True

False

2 points

Question 5

An employee can be covered under both a defined benefit and a defined contribution plan.

True

False

2 points

Question 6

Which type of plan has benefit levels that are guaranteed by the employer and also the Pension Benefit Guaranty Corporation (PBGC)?

money purchase plan

defined benefit plan

target benefit plan

cross tested plan

tax deferred annuity

2 points

Question 7

Regarding a cash balance plan, which of the following is (are) true?

		the employee bears investment risk
		each participant has a hypothetical account that the employer credits at least annually
		the plan benefits older workers more than younger workers
		1 and 3
		2 and 3

2 points

Question 8

A traditional defined benefit plan and a cash balance plan share the following characteristics:

Pension Benefit Guaranty Corporation coverage

employer bears investment risk

able to use Social Security integration

all of these

only 1 and 2

2 points

Question 9

If an employer wants to reward an employee

Pension plans provide a savings plan for employees that can be used for retirement. The amount of money in the fund grows in four ways: (1) new contributions by the employee, (2) new contributions by the employer on behalf of the employee, (3) dividends or interest earned by the fund due to its investment in equity or debt securities, and (4) appreciation in the values (capital gains) of the securities in which the fund has invested. In aggregate, most of the contributions come from the employer. Pension funds are major investors in stocks, bonds, and various types of loan packages such as mortgage-backed securities.

What role do you think insurance companies play when it comes to pension funds and financial planning?

Explain the differences between diversification and asset allocation.

Which is more important in portfolio management?

whitejackal625

You have been an employee for the last ten years. Your employer had provided you with health insurance (coverage for just yourself), group term life insurance, and long-term disability coverage. Your employer has just been acquired by another organization and that acquiring company has decided to keep the personnel of your location as independent contractors, not employees, so it will not provide benefits. This means you have lost all your benefits in the next 90 days. How will you go about investigating and finding appropriate coverage based on your current family situation and the role that insurance plays in your financial plan? Describe the process and reveal the appropriate types of coverage that meet your needs and your budget.

FIN 230 Lecture Notes - Lecture 23: Insurable Interest, Defined Contribution Plan, Reinsurance

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Related Questions

		money purchase plan
		defined benefit plan
		target benefit plan
		cross tested plan
		tax deferred annuity

		Pension Benefit Guaranty Corporation coverage
		employer bears investment risk
		able to use Social Security integration
		all of these
		only 1 and 2