Review
Chapter 1 Review Questions
A. Its enabling the employer to recover its costs
B. Its enabling the employer to meet its objectives in establishing the plan
C. Its ability to allow the employer to discriminate
D. Its ability to minimize employer benefit costs
A. Employer tax-deductibility of plan contributions
B. The ability to tailor a plan to fit the executive’s needs
C. Employer cost recovery
D. The ability to favor one key employee
A. Humanely retiring all of a firm’s employees
B. Attracting a key executive
C. Arranging for business succession
D. Funding an ESOP
A. Split dollar plans
B. Executive bonus plans
C. Salary continuation plans
D. Group carve out plans
A. Minimum coverage requirement
B. Non-discrimination requirement
C. Vesting requirement
D. Cost recovery requirement
Chapter 2 Review Questions
A. retirement benefits
B. medical reimbursement benefits
C. disability benefits
D. pre-retirement survivor benefits
A. Survivor benefits are always tax-free
B. Survivor benefits are subject to capital gain taxation
C. Survivor benefits are income taxable up to the policy’s cash value
D. Survivor benefits are fully taxable as income
A. A regular corporation
B. An S corporation
C. A sole proprietorship
D. Regular corporations, S corporations and sole proprietorships may all establish deferred compensation plans for executives
A. Lack of a ready market in which to sell shares
B. Deferred compensation plans normally give participants vested interests
C. Restrictions on the right to sell shares
D. A desire on the part of the owners to limit ownership
A. Rabbi trust
B. Secular trust
C. Grantor retained income trust
D. Secular trust
Chapter 3 Review Questions
A. The entire premium
B. The portion of the premium that is equal to the policy’s cash value increase
C. One-half the annual premium
D. The portion of the premium equal to the reportable economic benefit
A. The insured
B. A trust
C. The employer
D. The beneficiary
A. Funding a deferred compensation plan
B. To provide death benefits in qualified plans
C. To provide key person coverage
D. To fund buy-sell agreements
A. The type of split dollar plan
B. The size of the death benefit
C. The ownership of the policy
D. The age of the insured
A. below market loans
B. additional compensation
C. a gift
D. a bequest
Chapter 4 Review Questions
A. The insured
B. The employer
C. The beneficiary
D. A trust
A. taxable as ordinary income
B. tax-free
C. tax-deferred
D. taxable as a dividend
A. identify the plan participants by name
B. state that the bonus is additional compensation
C. recite the ERISA provision under which the plan will be approved
D. identify each participant as a member of a select group of corporate managers
A. Premium flexibility permits different bonus payments each year only
B. Universal life cash value withdrawals permit easy access to cash value only
C. Both premium flexibility and easy cash value access
D. Neither premium flexibility nor easy cash value access
A. At retirement only
B. At any time permitted by the board resolution
C. At retirement or in the case of hardship only
D. At any time
Chapter 5 Review Questions
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
A. $50,000
B. $75,000
C. $100,000
D. $250,000
A. additional compensation
B. bonus compensation
C. an employee benefit
D. a dividend
A. compensation
B. an employee benefit
C. a dividend
D. a charitable contribution
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
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