Massachusetts State Life Insurance Practice Exam

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Study for the Massachusetts State Life Insurance Exam. Use our flashcards and multiple choice questions, each with hints and explanations. Prepare confidently for your test!

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For a group life insurance plan to qualify for favorable tax treatment, what percentage of employees must benefit from the plan?

50%
70%
85%
100%

The correct answer is: 70%

For a group life insurance plan to qualify for favorable tax treatment under IRS regulations, at least 70% of employees must benefit from the plan. This requirement ensures that the plan covers a substantial portion of the workforce, promoting inclusivity and making the benefits accessible to a broad group of employees. This tax treatment is advantageous for both employers, who can deduct premiums as a business expense, and employees, who typically receive benefits tax-free. It's crucial for employers to meet this threshold because failure to do so can result in the plan being classified as discriminatory, which would lead to negative tax consequences. The specific percentage is significant, and while higher percentages like 85% or 100% would certainly ensure favorable treatment, the minimum criterion set by regulations is distinctly at 70%. Understanding this percentage helps employers design compliant and beneficial group life insurance plans for their employees.