Review Questions Module 4
GROUP CARVE-OUT




Tom is covered by a group carve-out plan. Which of the following statements about coverage under his universal life insurance policy are CORRECT?

A  Tom may continue insurance coverage after retirement.
B  Tom may continue coverage if he quits jobs.
C  Tom can make voluntary contributions to the universal life insurance policy that will grow tax-deferred.
D   All of the above


What happens to an employer's costs when it installs a group carve-out plan?

A  Costs may increase.
B  Costs may decrease.
C  Both A and B
D  Neither A nor B

Which of the following are employer benefits under group carve-out plans?

I    No plan discrimination concerns
II   Current income tax deduction for premiums
III  Cost increase is offset by premium deductions

A   I only
B  I and II only
C  I and III only
D  II only

Under a group carve-out plan, which of the following is CORRECT?

A  The premiums paid for the group term life insurance are deductible by the employer as an employee benefit.
B  The premiums paid for the universal life insurance policy are deductible by the employer as compensation.
C  Both A and B
D  Neither A nor B


If Dan receives $150,000 of coverage under a group term life insurance plan, he must report the value of what amount as taxable income?

A  $50,000
B $100,000
C  $150,000
D  None must be reported.


Under a group carve-out plan, the Table I cost to the executive is

A  increased
B  reduced
C eliminated
D maintained at the same level


Who owns the universal life insurance policy under a group carve-out plan?

A  Executive
B Employer
C  Both A and B
D Neither A nor B



What type of life insurance plan is normally used to replace excess group term life insurance in a group carve out plan?

A.     Term insurance
B.     Whole life insurance
C.     Universal life insurance
D.     Endowment insurance



What is the government table on which excess group term insurance amounts are taxed?

A.     P.S.58 rates
B.     Table 2001 rates
C.     Table I rates
D.     P.S.38 rates




John Wilson is an executive in a company that has a group carve out plan.  Johnís employer pays $400 per year for Johnís group term life insurance and $600 per year for Johnís group carve out policy.  If John is in a 25% tax bracket, how much additional income tax will he pay as a result of these premium payments?

A.     $100
B.     $150
C.     $250
D.     nothing




Which of the following would NOT be an employee benefit of participation in a group carve out plan?

A.     Post-retirement death benefits
B.     Portability
C.     Tax-deferral of employer premium payments
D.     Supplemental executive retirement plan



What are the consequences if a group term life insurance plan is deemed discriminatory?

A.     The employer is fined
B.     Its tax advantages may be lost
C.     The plan is disqualified
D.     The employees are subject to tax audit




In a group carve out plan group term life insurance amounts in excess of ________ are replaced by individual life insurance policies.

A.     $50,000
B.     $75,000
C.     $100,000
D.     $250,000


The employerís premium for group term life insurance is tax-deductible to the employer as:

A.     additional compensation
B.     bonus compensation
C.     an employee benefit
D.     a dividend


The employerís premium for the individual life insurance policies issued in the group carve out plan is tax-deductible to the employer as:

A.     compensation
B.     an employee benefit
C.     a dividend
D.     a charitable contribution



What happens to the $50,000 of group term life insurance in a group insurance plan with a group carve out if the executive terminates his service with the employer?

A.     The coverage terminates
B.     The coverage is portable and stays with the executive
C.     The coverage reduces by 50%
D.     The coverage becomes fully paid-up for the executive