MICHIGAN VARIABLE ANNUITIES FINAL EXAM 2025/2026
QUESTIONS WITH ANSWERS GRADED A+
✔✔Money Purchase Plan - ✔✔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.
✔✔Section 457 Plans - ✔✔-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 - ✔✔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 - ✔✔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.
✔✔administration charge - ✔✔under an insurance or annuity contract, the charge the
insurance company makes to compensate for maintaining records, accounting and
reports generation
✔✔Annuitant - ✔✔The person that buys an annuity; may or may not be an annuity's
policyowner; receives the distribution from an annuity contract
✔✔annuity - ✔✔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 - ✔✔the period of time when the owner recieves payment;
, ✔✔Annuity Units - ✔✔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)
✔✔Assumed Interest Rate (AIR) - ✔✔Rate of growth built into an annuity table which
determines payout on a variable annuity; forms the basis for an initial annuity pmt as
well as a "floor" from which to measure gain
✔✔Combined Annuity - ✔✔"balanced"; An annuity combining the features of the fixed
and variable annuities.
✔✔Death Benefit Guarantee - ✔✔an amount equal to the higher of the separate
account balance or the sum of the purchase pmts, which is paid to the beneficiary of a
variable annuitant in the event of their death during the accumulation phase
✔✔Deferred Annuity - ✔✔An annuity that starts sometime in the future.
✔✔Direct Method - ✔✔an approach to managing a variable products separate account
that utilizes an open-ended investment company (similar to a mutual fund family)
created inside the structure of an insurer
✔✔diversification - ✔✔an investing technique characterized by buying a variety of
different investments so that the market risk is spread out and reduced
✔✔Dual Licensure - ✔✔requirement that a person who sells variable life or variable
annuities must be state licensed to sell life insurance, and also federally licensed as a
reg rep of an NASD member to sell variable products
✔✔Expense Guarantee - ✔✔a guarantee made by an insurer that expenses for a
variable product will not exceed certain maximum levels
✔✔Fixed Amount Option - ✔✔an insurance or annuity settlement option in which a
chosen amount is paid out for an approximate length of time when principal and interest
are exhausted
✔✔Fixed Annuity - ✔✔an annuity providing that the insurer will pay the annuitant a
guaranteed, fixed amount during the annuity phase
✔✔Fixed Period Option - ✔✔an insurance or annuity settlement option in which an
approximate amount is paid out for a chosen length of time when principal and interest
are exhausted
QUESTIONS WITH ANSWERS GRADED A+
✔✔Money Purchase Plan - ✔✔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.
✔✔Section 457 Plans - ✔✔-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 - ✔✔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 - ✔✔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.
✔✔administration charge - ✔✔under an insurance or annuity contract, the charge the
insurance company makes to compensate for maintaining records, accounting and
reports generation
✔✔Annuitant - ✔✔The person that buys an annuity; may or may not be an annuity's
policyowner; receives the distribution from an annuity contract
✔✔annuity - ✔✔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 - ✔✔the period of time when the owner recieves payment;
, ✔✔Annuity Units - ✔✔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)
✔✔Assumed Interest Rate (AIR) - ✔✔Rate of growth built into an annuity table which
determines payout on a variable annuity; forms the basis for an initial annuity pmt as
well as a "floor" from which to measure gain
✔✔Combined Annuity - ✔✔"balanced"; An annuity combining the features of the fixed
and variable annuities.
✔✔Death Benefit Guarantee - ✔✔an amount equal to the higher of the separate
account balance or the sum of the purchase pmts, which is paid to the beneficiary of a
variable annuitant in the event of their death during the accumulation phase
✔✔Deferred Annuity - ✔✔An annuity that starts sometime in the future.
✔✔Direct Method - ✔✔an approach to managing a variable products separate account
that utilizes an open-ended investment company (similar to a mutual fund family)
created inside the structure of an insurer
✔✔diversification - ✔✔an investing technique characterized by buying a variety of
different investments so that the market risk is spread out and reduced
✔✔Dual Licensure - ✔✔requirement that a person who sells variable life or variable
annuities must be state licensed to sell life insurance, and also federally licensed as a
reg rep of an NASD member to sell variable products
✔✔Expense Guarantee - ✔✔a guarantee made by an insurer that expenses for a
variable product will not exceed certain maximum levels
✔✔Fixed Amount Option - ✔✔an insurance or annuity settlement option in which a
chosen amount is paid out for an approximate length of time when principal and interest
are exhausted
✔✔Fixed Annuity - ✔✔an annuity providing that the insurer will pay the annuitant a
guaranteed, fixed amount during the annuity phase
✔✔Fixed Period Option - ✔✔an insurance or annuity settlement option in which an
approximate amount is paid out for a chosen length of time when principal and interest
are exhausted
