1|Page
Michigan Variable Annuities Exam |
Actual Questions With Verified Answers
Section 1035 Exchanges-correct-answer-deals with life insurance, annuities,
endowments, and qualified long-term care insurance
any of these four can be exchanged for the same type of product (ex. life
insurance for life insurance), but only the following certain exchanges are also
allowed:
>life insurance policy for any of the other 3, but not the other way around
>any of the other 3 for a quailfiied long-term care insurance policy, but qual lt care
can only be exchaged for itself
>endowment for annuity, but not other way around
Money Purchase Plan-correct-answer-Defined contribution plan that uses a fixed
percentage of employee earnings to defer compensation. It works well for
organizations with relatively stable earnings from year to year because the
percentage is fixed, and, once established, contributions must be made every year.
The contribution limits are the same as for profit-sharing plans.
,2|Page
Section 457 Plans-correct-answer--deferred compensation plan (yearly deduction
for deferred amount)
-for employees of state, political subdivision of state, and any agency of a state
-also allowed for hospitals, charities, unions etc
-NOT allowed for churches
Key Points:
-exempt from ERISA, no NDR
-Tax-exempt organizations: only highly compensated persons
-Governmental: any employee/contractor may participate
-distributions may NOT be rolled into an IRA
-NO 10% early withdrawal penalty
-Can have 457 and 403(b) and make max contr. to both
-Loans only available to government plans, higher restrictions, not required to
offer
Accumulation Phase-correct-answer-the period of time by which the owner of the
contract pays in to the annuity; a beneficiary must be named if the policy owner
dies during the accumulation phase.
Accumulation Units-correct-answer-premiums an annuitant pays into a variable
annuity are credited as ______. At the end of the accumulation period
accumulation units are converted to annuity units.
, 3|Page
administration charge-correct-answer-under an insurance or annuity contract, the
charge the insurance company makes to compensate for maintaining records,
accounting and reports generation
Annuitant-correct-answer-The person that buys an annuity; may or may not be an
annuity's policyowner; receives the distribution from an annuity contract
annuity-correct-answer-a contract in which the insurer agrees, for a price, to
make regular pmts to an individual for life or some fixed period
Annuity Phase-correct-answer-the period of time when the owner recieves
payment;
Annuity Units-correct-answer-At the time the variable annuity benefits are to be
paid out to the annuitant, the accumulation units in the participant's individual
account are converted into annuity units; accounting measure used to determine
the amount of each pmt of the annuitant during the annuity (payout) phase of a
variable annuity (number of annuity units never changes)
Michigan Variable Annuities Exam |
Actual Questions With Verified Answers
Section 1035 Exchanges-correct-answer-deals with life insurance, annuities,
endowments, and qualified long-term care insurance
any of these four can be exchanged for the same type of product (ex. life
insurance for life insurance), but only the following certain exchanges are also
allowed:
>life insurance policy for any of the other 3, but not the other way around
>any of the other 3 for a quailfiied long-term care insurance policy, but qual lt care
can only be exchaged for itself
>endowment for annuity, but not other way around
Money Purchase Plan-correct-answer-Defined contribution plan that uses a fixed
percentage of employee earnings to defer compensation. It works well for
organizations with relatively stable earnings from year to year because the
percentage is fixed, and, once established, contributions must be made every year.
The contribution limits are the same as for profit-sharing plans.
,2|Page
Section 457 Plans-correct-answer--deferred compensation plan (yearly deduction
for deferred amount)
-for employees of state, political subdivision of state, and any agency of a state
-also allowed for hospitals, charities, unions etc
-NOT allowed for churches
Key Points:
-exempt from ERISA, no NDR
-Tax-exempt organizations: only highly compensated persons
-Governmental: any employee/contractor may participate
-distributions may NOT be rolled into an IRA
-NO 10% early withdrawal penalty
-Can have 457 and 403(b) and make max contr. to both
-Loans only available to government plans, higher restrictions, not required to
offer
Accumulation Phase-correct-answer-the period of time by which the owner of the
contract pays in to the annuity; a beneficiary must be named if the policy owner
dies during the accumulation phase.
Accumulation Units-correct-answer-premiums an annuitant pays into a variable
annuity are credited as ______. At the end of the accumulation period
accumulation units are converted to annuity units.
, 3|Page
administration charge-correct-answer-under an insurance or annuity contract, the
charge the insurance company makes to compensate for maintaining records,
accounting and reports generation
Annuitant-correct-answer-The person that buys an annuity; may or may not be an
annuity's policyowner; receives the distribution from an annuity contract
annuity-correct-answer-a contract in which the insurer agrees, for a price, to
make regular pmts to an individual for life or some fixed period
Annuity Phase-correct-answer-the period of time when the owner recieves
payment;
Annuity Units-correct-answer-At the time the variable annuity benefits are to be
paid out to the annuitant, the accumulation units in the participant's individual
account are converted into annuity units; accounting measure used to determine
the amount of each pmt of the annuitant during the annuity (payout) phase of a
variable annuity (number of annuity units never changes)
