Massachusetts Life Producer Practice Exam

A corporate pension plan administrator bought an accumulation annuity for 2,000 employees. What type of contract is this?

1. Individual annuity

2. Group deferred annuity

3. Single premium annuity

4. Variable annuity

The correct answer is: Group deferred annuity

The selection of a group deferred annuity as the correct answer reflects the nature of the contract formed by the pension plan administrator. In this context, a corporate pension plan is designed to provide retirement benefits to a group of employees. By purchasing an accumulation annuity for a specific number of employees, the administrator is effectively pooling resources to manage their retirement savings collectively. A group deferred annuity is specifically tailored for a group rather than for individual employees, allowing the employees to accumulate funds over time until they retire. This accumulation phase is critical, as it permits contributions to grow on a tax-deferred basis. The group nature of the annuity allows for potentially lower fees and a more streamlined process for managing the investments than if each employee had an individual contract. Overall, this arrangement aligns with the purpose of stability and predictability in managing retirement funds for employees, distinguishing it from other types of annuities that cater to individual arrangements or which may not have the same pooling effect.