South Carolina Life and Health Practice Exam

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Study for the South Carolina Life and Health Exam. Engage with flashcards and multiple choice questions; each question is outlined with hints and explanations. Prepare for your certification journey!

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Which scenario would disqualify a company's retirement plan from receiving favorable tax treatment?

It is permanent
It is temporary
It is fully funded
It follows IRS regulations

The correct answer is: It is temporary

A retirement plan that is deemed temporary disqualifies a company from receiving favorable tax treatment because the Internal Revenue Service (IRS) typically requires retirement plans to be established with the intention of providing long-term benefits to participants. Favorable tax treatment is generally reserved for plans that are designed to be permanent, thereby ensuring that employees can rely on these benefits as part of their long-term financial security. Temporary plans lack the sustained commitment to employee retirement benefits that the IRS aims to promote, which undermines the purpose of tax-advantaged retirement savings. On the other hand, plans that are permanent, fully funded, and compliant with IRS regulations all contribute toward the legitimacy and stability of a company's retirement offerings, thereby qualifying them for favorable tax treatment.