Page 1 of 47
CRPC Damage Control Test 1 & 2 ALL 200
QUESTIONS AND DETAILED SOLUTIONS
LATEST UPDATE THIS YEAR
QUESTION: An income-tax-penalty-free distribution cannot be made from a tax-sheltered
annuity (TSA) until the employee does which of the following?
I. separates from service after attaining age 55
II. attains age 55
III. becomes disabled or dies
IV. takes a distribution under most hardship withdrawal rules - ANSWER-I, and III only
Penalty-free distributions can be made from a TSA or 401(k) when an employee separates from
service after attaining age 55, attains age 59½, becomes disabled or dies, or takes a hardship
distribution for deductible medical expenses only. All other hardship withdrawals are subject to
early withdrawal penalty rules. Attaining age 55 means the worker is 55 on December 31 of the
year of separation—not that the worker was 55 on the day of separation.
QUESTION: A springing durable power of attorney - ANSWER-gives the attorney-in-fact
authority only when the principal becomes incompetent.
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The very purpose of any durable power of attorney is to give the attorney-in-fact authority to
act after the principal becomes incapacitated. However, such authority does not survive the
principal's death. Such authority is created in an independent document (not part of a living
will), and is effective immediately in this type of power of attorney. A springing durable power
of attorney becomes effective when the principal becomes incompetent or incapacitated.
(LO 5-2)
QUESTION: A Medicare Part A patient must pay
all costs for a hospital stay beyond 150 days.
the annual deductible for out-of-hospital doctor's services.
all costs above the hospital deductible for a 30-day stay in a hospital.
the approved costs of care in a skilled nursing facility for the first 10 days. - ANSWER-all costs
for a hospital stay beyond 150 days.
The patient must pay all costs related to a hospital stay beyond 150 days. Answer b. is wrong
because it describes a gap in Medicare Part B coverage, not Part A. Answer c. is incorrect
because it does not describe a gap; Medicare pays for the cost of the first 60 days in a hospital,
but the patient must pay the Part A deductible. Answer d. is wrong because Medicare will pay
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the approved charges for the first 20 days in a skilled nursing facility. The gap results from the
cost of care that exceeds 20 days (the patient pays the per day copayment) or the need for
custodial care.
QUESTION: Which of the following statements accurately describe basic provisions of Medicare
Part B?
I. Coverage includes benefits for physicians' services.
II. Individuals who are eligible for Part A are automatically eligible for Part B.
III. Coverage includes benefits for inpatient hospital services.
IV. Participants pay a monthly premium. - ANSWER-I, II, and IV only
Medicare Part B includes coverage for physicians' services; Part A covers hospital charges. Part
A is provided to eligible individuals at no charge, but participants must pay a premium for Part
B. Individuals who are eligible for Part A are automatically eligible for Part B, and receive it if
they pay the related premium.
(LO 5-3)
This year, your 63-year-old client had $17,025 of earned income and $30,000 of investment
income. He was also drawing Social Security benefits. Which one of the following correctly
describes the impact on his Social Security benefits?
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He loses $1 of benefits for every $1 above the "allowable limit."
He loses $1 of benefits for every $2 above the "allowable limit."
He loses $1 of benefits for every $3 above the "allowable limit."
There is no reduction to his benefits. - ANSWER-There is no reduction to his benefits.
The client's earnings (earned income) are below the allowable limit for the current year
($17,640 for 2019). Remember that according to the work penalty rule, only earned income is
counted toward the "allowable limit."
(LO 3-3)
QUESTION: Which one of the following is correct regarding tax-exempt interest and the
taxation of Social Security benefits?
None of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits.
4
CRPC Damage Control Test 1 & 2 ALL 200
QUESTIONS AND DETAILED SOLUTIONS
LATEST UPDATE THIS YEAR
QUESTION: An income-tax-penalty-free distribution cannot be made from a tax-sheltered
annuity (TSA) until the employee does which of the following?
I. separates from service after attaining age 55
II. attains age 55
III. becomes disabled or dies
IV. takes a distribution under most hardship withdrawal rules - ANSWER-I, and III only
Penalty-free distributions can be made from a TSA or 401(k) when an employee separates from
service after attaining age 55, attains age 59½, becomes disabled or dies, or takes a hardship
distribution for deductible medical expenses only. All other hardship withdrawals are subject to
early withdrawal penalty rules. Attaining age 55 means the worker is 55 on December 31 of the
year of separation—not that the worker was 55 on the day of separation.
QUESTION: A springing durable power of attorney - ANSWER-gives the attorney-in-fact
authority only when the principal becomes incompetent.
1
,Page 2 of 47
The very purpose of any durable power of attorney is to give the attorney-in-fact authority to
act after the principal becomes incapacitated. However, such authority does not survive the
principal's death. Such authority is created in an independent document (not part of a living
will), and is effective immediately in this type of power of attorney. A springing durable power
of attorney becomes effective when the principal becomes incompetent or incapacitated.
(LO 5-2)
QUESTION: A Medicare Part A patient must pay
all costs for a hospital stay beyond 150 days.
the annual deductible for out-of-hospital doctor's services.
all costs above the hospital deductible for a 30-day stay in a hospital.
the approved costs of care in a skilled nursing facility for the first 10 days. - ANSWER-all costs
for a hospital stay beyond 150 days.
The patient must pay all costs related to a hospital stay beyond 150 days. Answer b. is wrong
because it describes a gap in Medicare Part B coverage, not Part A. Answer c. is incorrect
because it does not describe a gap; Medicare pays for the cost of the first 60 days in a hospital,
but the patient must pay the Part A deductible. Answer d. is wrong because Medicare will pay
2
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the approved charges for the first 20 days in a skilled nursing facility. The gap results from the
cost of care that exceeds 20 days (the patient pays the per day copayment) or the need for
custodial care.
QUESTION: Which of the following statements accurately describe basic provisions of Medicare
Part B?
I. Coverage includes benefits for physicians' services.
II. Individuals who are eligible for Part A are automatically eligible for Part B.
III. Coverage includes benefits for inpatient hospital services.
IV. Participants pay a monthly premium. - ANSWER-I, II, and IV only
Medicare Part B includes coverage for physicians' services; Part A covers hospital charges. Part
A is provided to eligible individuals at no charge, but participants must pay a premium for Part
B. Individuals who are eligible for Part A are automatically eligible for Part B, and receive it if
they pay the related premium.
(LO 5-3)
This year, your 63-year-old client had $17,025 of earned income and $30,000 of investment
income. He was also drawing Social Security benefits. Which one of the following correctly
describes the impact on his Social Security benefits?
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He loses $1 of benefits for every $1 above the "allowable limit."
He loses $1 of benefits for every $2 above the "allowable limit."
He loses $1 of benefits for every $3 above the "allowable limit."
There is no reduction to his benefits. - ANSWER-There is no reduction to his benefits.
The client's earnings (earned income) are below the allowable limit for the current year
($17,640 for 2019). Remember that according to the work penalty rule, only earned income is
counted toward the "allowable limit."
(LO 3-3)
QUESTION: Which one of the following is correct regarding tax-exempt interest and the
taxation of Social Security benefits?
None of the tax-exempt interest is included in the computation of the taxation of Social
Security benefits.
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