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EA-2(A) Examination Questions

Fall, 2002

Question 1 (3 points)

Effective date: 1/1/1996.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

Credit balance in funding standard account as of 12/31/2001: $0.

Selected valuation results and other information as of 1/1/2002:

Actuarial value of assets $2,100,000

Market value of assets 2,000,000

Accrued liability, entry age normal method 2,325,000

Normal cost, entry age normal method 150,000

Expected benefit payments 0

Net charges in funding standard account as of 12/31/2002: $445,600.

Normal cost plus limit adjustment as of 12/31/2002: $534,000.

Current liability as of 12/31/2002: $1,625,000.

In what range is the deductible limit for 2002?

(A) Less than $380,000

(B) $380,000 but less than $430,000

(D) $480,000 but less than $530,000

(E) $530,000 or more

Question 2 (5 points)

Plan effective date: 1/1/1995.
Actuarial cost method: Frozen initial liability.
Valuation interest rate: 7% per year.

Initial accrued liability: $500,000.

Credit balance in the funding standard account as of 12/31/2001: $0.

Selected valuation results and funding standard account items as of 1/1/2002:

Present value of future benefits $1,460,000

Market value of assets 610,000

Actuarial value of assets 630,000

Present value of future compensation 1,700,000

Expected compensation for 2002 200,000

Accrued liability, entry age normal method 625,000

Normal cost, entry age normal method 50,000

Expected benefit payments for year 0

OBRA ’87 current liability (including expected increase due to benefits

accruing during the plan year) projected to 12/31/2002: $700,000

RPA ’94 current liability (including expected increase due to benefits

accruing during the plan year) projected to 12/31/2002: $750,000

In what range is the deductible limit for 2002?

(A) Less than $55,000

(B) $55,000 but less than $75,000

(D) $95,000 but less than $115,000

(E) $115,000 or more

Question 3 (5 points)

Plan effective date: 1/1/1987.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

Credit balance in funding standard account as of 12/31/2001: $25,000.

The plan was amended to increase benefits effective 1/1/2002.

Selected valuation results as of 1/1/2002:

Present value of benefits after amendment $4,000,000

Actuarial (market) value of assets 2,200,000

Present value of future compensation 8,800,000

2002 compensation 780,000

Amortization charges for all bases in the funding standard account as of 1/1/2002:

Initial unfunded liability $86,000

1/1/1998 base due to a change in assumed retirement rates (15,500)

1/1/2002 base due to benefit increase 35,000

In what range is the minimum required contribution for 2002 as of 1/1/2002?

(A) Less than $132,000

(B) $132,000 but less than $142,000

(D) $152,000 but less than $162,000

(E) $162,000 or more

Question 4 (5 points)

Plan effective date: 1/1/1975.

Valuation interest rate: 7% per year.

Current liability interest rate: 5.75% per year.

Credit balance in funding standard account as of 12/31/2001: $20,000.

Selected valuation results and other information as of 1/1/2002:

Normal cost $ 75,000

Actuarial (market) value of assets 1,100,000

Amortization charges:

Due to initial accrued liability 75,000

Due to net experience losses 30,000

Due to change in actuarial assumptions (10,000)

RPA ’94 current liability 1,850,000

Expected increase in RPA ‘94 current liability

due to benefits accruing during the plan year 60,000

Balance of unfunded old liability 250,000

Remaining amortization period for

unfunded old liability 5 years

Applicable percentage of unfunded new liability 30%

Highest number of participants:

During 2001 145

During 2002 148

The plan is not exempt from the additional funding charge for 2002.

In what range is the additional funding charge for 2002 as of 12/31/2002?

(A) Less than $91,800

(B) $91,800 but less than $97,800

(D) $103,800 but less than $109,800

(E) $109,800 or more

Question 5 (4 points)

Plan effective date: 1/1/1986.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

All amortization bases in funding standard account:

Base Date established Initial amount

Initial unfunded 1/1/1986 $600,000

Assumption change

(charge base) 1/1/1996 60,000

Credit balance in funding standard account as of 12/31/2001: $30,000.

Selected valuation results as of 1/1/2002:

Present value of benefits $ 2,000,000

Actuarial value of assets 900,000

Present value of future compensation 20,000,000

Expected compensation for 2002 1,000,000

In what range is the minimum required contribution for 2002 as of 12/31/2002?

(A) Less than $60,000

(B) $60,000 but less than $75,000

(D) $90,000 but less than $105,000

(E) $105,000 or more

Question 6 (5 points)

Normal retirement benefit: $100 per month times years of service.

Early retirement benefit: None.

Vesting schedule:

Years of service Percent vested

Less than 3 0%

3 20%

4 40%

5 60%

6 80%

7 100%

Selected actuarial assumptions:

Valuation interest rate 7% per year

Pre-retirement decrements other than turnover None

Selected turnover rates, applied at the beginning of the year:

Age Turnover

63 0.03

64 0.01

Data for participant Smith:

Date of birth 1/1/1939

Date of hire 1/1/1997

Selected annuity value: = 9.24

In what range is the present value of Smith’s future benefits, including withdrawal benefits, as of 1/1/2002?

(A) Less than $66,500

(B) $66,500 but less than $69,300

(D) $72,100 but less than $74,900

(E) $74,900 or more

Question 7 (5 points)

Normal retirement benefit:

1.2% × final salary for each year of service up to 15 years

plus

1.45% × final salary for each year of service in excess of 15 years

Actuarial cost method: Unit credit.

Selected valuation assumptions:

Valuation interest rate 7% per year

Compensation increases:

Before 2002 3% per year

After 2001 4% per year

Pre-retirement decrements None

Data for sole participant as of 1/1/2002:

Date of birth 1/1/1962

Date of hire 1/1/1982

2001 compensation $20,000

Actuarial (market) value of assets as of 1/1/2002: $8,000.

Credit balance in funding standard account as of 12/31/2001: $0.

Selected annuity value:

= 9.24

In what range is the absolute value of the change in the 2002 minimum contribution as of 12/31/2002 due to the change in assumptions?

(A) Less than $760

(B) $760 but less than $850

(D) $940 but less than $1,030

(E) $1,030 or more

Question 8 (4 points)

Participant entry dates: January 1 and July 1.

Valuation interest rate: 7% per year.

Current liability interest rate: 5.75% per year.

Normal cost as of 1/1/2002: $ 30,000.

Amortization charges in the funding standard account as of 1/1/2002:

Initial unfunded $25,000

Experience (gain)/loss (15,000)

Plan amendments due to increase in benefits 5,000

Waived deficiency 20,000

Increase due to change in assumptions 10,000

Deficit reduction contribution for 2002: $270,000.

Amount necessary to increase funded current liability percentage to 100% for 2002: $310,000.

Number of participants as of:

1/1/2001 143

7/1/2001 146

12/31/2001 144

1/1/2002 148

7/1/2002 149

The plan is not exempt from the additional funding charge for 2002.

In what range is the additional funding charge for 2002 as of 12/31/2002?

(A) Less than $184,500

(B) $184,500 but less than $191,500

(D) $198,500 but less than $205,500

(E) $205,500 or more

Question 9 (4 points)

Plan effective date: 1/1/2002.

Normal retirement benefit: 2% of highest three-year average compensation times years of service.

Actuarial cost method: Level dollar entry age normal cost based on all years of service.

Actuarial assumptions:

Valuation interest rate 7% per year

Annual compensation increases 4% per year

Pre-retirement decrements None

Data for sole participant as of 1/1/2002:

Date of birth 1/1/1952

Date of hire 1/1/1987

2002 compensation $50,000

Selected annuity value:

=9.24

In what range is the minimum required contribution for 2002 as of 12/31/2002?

(A) Less than $11,000

(B) $11,000 but less than $14,000

(D) $17,000 but less than $20,000

(E) $20,000 or more

Question 10 (3 points)

Plan effective date: 1/1/1995.

Actuarial cost method first effective 1/1/1998: Entry age normal.

Asset valuation method effective 1/1/1995: Three-year smoothing of (gains)/losses.

Selected valuation results as of January 1, 2002:

Accrued liability (entry age normal) $1,500,000

Accrued liability (unit credit) 1,350,000

Actuarial value of assets 1,300,000

Market value of assets 1,550,000

Credit balance in funding standard account as of 12/31/2001: $0.

The following method changes are being considered for the 2002 valuation:

I. Changing the actuarial cost method to unit credit.

II. Changing the asset valuation method to market value.

III. Changing the valuation date to December 31.

Restrictions on automatic approval under Revenue Procedure 2000-40 that are not addressed in the above data do not apply.

Which (if any) of the above changes are eligible for automatic approval pursuant to Revenue Procedure 2000-40?

(A) None

(B) I only

(D) III only

(E) The correct answer is not given by (A), (B), (C), or (D) above.

Question 11 (2 points)

Each of questions 11 through 13 consists of an assertion in the left-hand column and a reason in the right-hand column.

ASSERTION REASON

Mortality experience for If the definition of disability is “total and

disabled lives varies with permanent disability” and it is strictly

the definition of disability BECAUSE administered, at least in the short term, the

and the manner in mortality experienced by disabled lives is

which it is administered. expected to be lower than if a more liberal interpretation is used.

Which of the following statements is true?

(A) Both the assertion and the reason are true statements and the reason is a correct explanation of the assertion.

(B) Both the assertion and the reason are true statements, but the reason is NOT a correct explanation of the assertion.

(D) The assertion is a false statement, but the reason is a true statement.

(E) Both the assertion and the reason are false statements.

Question 12 (2 points)

Each of questions 11 through 13 consists of an assertion in the left-hand column and a reason in the right-hand column.

ASSERTION REASON

When setting an assumption Past expenses may have been affected by

for expenses paid from extraordinary events, such as a change in

a pension plan, past expenses BECAUSE whether the PBGC variable rate premium

should not be considered. applied or a change in the plan sponsor’s policy

as to which expenses are paid by the plan.

Which of the following statements is true?

(A) Both the assertion and the reason are true statements and the reason is a correct explanation of the assertion.

(B) Both the assertion and the reason are true statements, but the reason is NOT a correct explanation of the assertion.

(D) The assertion is a false statement, but the reason is a true statement.

(E) Both the assertion and the reason are false statements.

Question 13 (2 points)

Each of questions 11 through 13 consists of an assertion in the left-hand column and a reason in the right-hand column.

ASSERTION REASON

It is not necessary to consider the Current liability cannot reflect the

number of participants electing a BECAUSE interest rate subsidy, if any, inherent

lump sum option when setting the in lump sum distributions.

assumptions for determining

minimum funding requirements.

Which of the following statements is true?

(A) Both the assertion and the reason are true statements and the reason is a correct explanation of the assertion.

(B) Both the assertion and the reason are true statements, but the reason is NOT a correct explanation of the assertion.

(D) The assertion is a false statement, but the reason is a true statement.

(E) Both the assertion and the reason are false statements.

Question 14 (4 points)

Plan effective date: 1/1/1990.

Normal retirement benefit: 1% of highest three-year average compensation times years of service.

Actuarial cost method: Aggregate.

Selected actuarial assumptions:

Valuation interest rate 7% per year

Compensation increases 4% per year

Pre-retirement decrements None

Data for sole participant as of 1/1/2002:

Date of birth 1/1/1952

Date of hire 1/1/1995

2002 Compensation $30,000

Credit balance in funding standard account as of 12/31/2001: $500.

Actuarial (market) value of assets as of 1/1/2002: $10,000.

Selected annuity factor:

=9.24

The full funding limitation does not apply.

In what range is the minimum required contribution for 2002 as of 1/1/2002?

(A) Less than $1,675

(B) $1,675 but less than $1,800

(D) $1,925 but less than $2,050

(E) $2,050 or more

Question 15 (4 points)

Plan effective date: 1/1/1998.

Normal retirement benefit:

Effective 1/1/1998 1.00% times final average earnings times years of service

Effective 1/1/2002 1.15% times final average earnings times years of service

Actuarial cost method: Unit credit.

Valuation interest rate: 7% per year.

Information relating to all amortization bases in funding standard account as of 1/1/2001:

Net outstanding balance $250,000

Net amortization charge 25,000

Selected valuation results as of 1/1/2002, reflecting plan amendment:

Accrued liability $1,025,000

Actuarial (market) value of assets 710,000

Contribution for 2001: Amount equal to the minimum required contribution for 2001 paid on 12/31/2001.

All participants were active employees as of 1/1/2002.

In what range is the absolute value of the experience (gain)/loss during 2001 as of 1/1/2002?

(A) Less than $40,000

(B) $40,000 but less than $55,000

(D) $70,000 but less than $85,000

(E) $85,000 or more

Question 16 (4 points)

Plan effective date: 1/1/1996.

Actuarial cost method:

Before 2002 Unit credit

After 2001 Entry age normal

Valuation interest rate: 7% per year.

Initial accrued liability: $150,000.

There were no experience gains or losses before 1/1/2001.

Credit balance in funding standard account as of 12/31/2001: $0.

Selected valuation results as of 1/1/2002:

Accrued liability, unit credit method $540,000

Normal cost, entry age normal method 75,000

Accrued liability, entry age normal method 600,000

Actuarial (market) value of assets 380,000

In what range is the minimum required contribution for 2002 as of 12/31/2002?

(A) Less than $101,000

(B) $101,000 but less than $103,000

(D) $105,000 but less than $107,000

(E) $107,000 or more

Question 17 (5 points)

Plan effective date: 1/1/2001.

Actuarial cost method: Entry age normal.

Valuation interest rate: 7% per year.

175% Federal mid-term rate for 2002: 7.92% per year.

Selected valuation results as of:

1/1/2001 1/1/2002

Normal cost $ 400,000 $500,000

Accrued liability 5,200,000

Credit balance as of 12/31/2001: $403,099.

Contribution for 2001: Paid by 12/31/2001.

Contribution for 2002: Deductible limit, paid on 12/31/2002.

There were no gains or losses during the 2001 plan year.

The plan is not exempt from quarterly contribution requirements for 2002.

In what range is the additional charge in the 2002 funding standard account for interest on late quarterly contributions?

(A) $0

(B) $1 but less than $400

(D) $1,800 but less than $3,200

(E) $3,200 or more

Question 18 (5 points)

Plan effective date: 1/1/2001.

Normal retirement benefit:

Before 1/1/2002 $50 per month for each year of service

After 12/31/2001 $60 per month for each year of service

Actuarial cost method: Individual level premium.

Selected actuarial assumptions:

Valuation interest rate 7% per year

Pre-retirement decrements None

Data for sole participant as of 1/1/2002:

Date of birth 1/1/1950

Date of hire 1/1/1998

Credit balance in funding standard account as of 12/31/2001: $0.

Actuarial (market) value of assets as of 1/1/2002: $1,800.

Selected annuity factor:

=10.00

In what range is the minimum required contribution for 2002 as of 12/31/2002?

(A) Less than $4,000

(B) $4,000 but less than $5,000

(D) $6,000 but less than $7,000

(E) $7,000 or more

Question 19 (3 points)

Plan effective date: 1/1/1980.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

150% of Federal mid-term rate for 2002: 6.77% per year.

Initial unfunded liability: $400,000.

A funding waiver was granted for 2001 in the amount of $47,800 which was the amount necessary to avoid a funding deficiency at the end of the plan year.

Normal cost for 2002 as of 1/1/2002: $45,000.

In what range is the minimum required contribution for 2002 as of 12/31/2002?

(A) Less than $85,000

(B) $85,000 but less than $88,500

(D) $92,000 but less than $95,500

(E) $95,500 or more

Question 20 (4 points)

Mandatory employee contributions: 1% of compensation.

Actuarial cost method: Aggregate.

Valuation interest rate: 7% per year.

Selected valuation results as of 1/1/2002:

Present value of projected benefits provided by employer

contributions $1,280,000

Present value of projected benefits provided by mandatory

employee contributions 100,000

Actuarial (market) value of assets excluding accumulated

employee contributions 195,000

Accumulated employee contributions 30,000

Present value of future compensation 5,400,000

2002 compensation 600,000

Credit balance in funding standard account as of 12/31/2001: $0.

In what range is the minimum required employer contribution for 2002 as of 12/31/2002?

(A) Less than $124,000

(B) $124,000 but less than $129,000

(D) $134,000 but less than $139,000

(E) $139,000 or more

Question 21 (4 points)

Plan effective date: 1/1/1980.

Valuation interest rate: 7% per year.

Actuarial value of assets:

Prior to 2002 Fair market value

After 2001 Smoothed market value (without phase-in) with a 3-year smoothing period as defined in Revenue Procedure 2000-40 (smoothing of difference between expected and actual market value of assets)

Reconciliation of market value of assets:

2000 2001

Market value of assets, 1/1 $6,900,000 $6,900,000

Contributions 250,000 150,000

Benefit payments 250,000 350,000

Investment return 0 (900,000)

Market value of assets, 12/31 $6,900,000 $5,800,000

Contributions and benefit payments are evenly distributed during each plan year.

All administrative expenses are paid directly by plan sponsor.

In what range is the actuarial value of assets as of 1/1/2002?

(A) Less than $5,900,000

(B) $5,900,000 but less than $6,200,000

(D) $6,500,000 but less than $6,800,000

(E) $6,800,000 or more

Question 22 (4 points)

Normal retirement benefit: 50% of final compensation.

Actuarial cost method: Aggregate.

Selected actuarial assumptions:

Valuation interest rate 7% per year

Compensation increases 4% per year

Pre-retirement decrements None

Data for only participants in the plan as of 1/1/2002:

Smith Jones

Date of birth 1/1/1933 1/1/1947

Status Retired Active

2001 compensation $28,500

Monthly benefit (life annuity) $1,000

Actuarial (market) value of assets as of 1/1/2002: $95,000.

Credit balance in the funding standard account as of 12/31/2001: $1,500.

Selected annuity values:

= 9.70

= 7.83

In what range is the minimum required contribution for 2002 as of 12/31/2002?

(A) Less than $10,900

(B) $10,900 but less than $11,500

(D) $12,100 but less than $12,700

(E) $12,700 or more

Question 23 (5 points)

Effective date: 1/1/1995.

Normal retirement benefit: 1% of final 5-year average compensation for each year of service.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

Assumed compensation increases: 4% per year.

Selected valuation results as of:

1/1/2001 1/1/2002

Present value of benefits $ 2,000,000

Present value of future compensation 20,000,000

2001 compensation 2,000,000

Expected benefit payments 0

Unfunded liability 615,000

Actuarial (market) value of assets 1,335,000

Credit balance in funding standard account as of 12/31/2001: $0.

During 2001, actual compensation increases were 2%. There were no other gains or losses during the year.

All participants are active and under age 60. There were no new entrants or terminations during 2001.

In what range is the 2002 normal cost as of 1/1/2002?

(A) Less than $15,500

(B) $15,500 but less than $16,000

(D) $16,500 but less than $17,000

(E) $17,000 or more

Question 24 (5 points)

Plan effective date: 1/1/1980.

Actuarial cost method: Frozen initial liability.

Valuation interest rate:

Before 2002 8.50% per year

After 2001 6.75% per year

All amortization charges in funding standard account as of 1/1/2001:

Initial unfunded actuarial accrued liability $50,000

Plan amendment effective 1/1/1999 8,500

Credit balance in funding standard account as of 12/31/2001: $0.

Selected valuation results as of 1/1/2002: 8.50% 6.75%

Entry age normal actuarial accrued liability $900,000 $1,100,000

Actuarial (market) value of assets 400,000 400,000

Frozen initial liability normal cost 60,000

In what range is the minimum required contribution for 2002 as of 12/31/2002?

(A) Less than $138,500

(B) $138,500 but less than $146,500

(D) $154,500 but less than $162,500

(E) $162,500 or more

Question 25 (3 points)

Type of plan: Multiemployer.

Plan effective date: 1/1/1990.
Actuarial cost method: Unit credit.
Valuation interest rate: 7% per year.

Credit balance in funding standard account as of 12/31/2000: $0.

Selected valuation results:

1/1/2001 1/1/2002

Normal cost $5,000,000 $7,000,000

Accrued liability 196,000,000 209,000,000

Actuarial (market) value of assets 202,000,000 205,000,000

ERISA and RPA’94 override full funding limitation for 2000 and 2001: $0.

Contribution for 2001: $0.

In what range is the minimum required contribution for 2002 as of 12/31/2002?

(A) Less than $8,000,000

(B) $8,000,000 but less than $8,200,000

(D) $8,400,000 but less than $8,600,000

(E) $8,600,000 or more

Question 26 (5 points)

Valuation date: 12/31/2002.

Actuarial cost method: Aggregate.

Valuation interest rate: 7% per year.

Credit balance in funding standard account as of 12/31/2001: $0.

Selected valuation results as of 12/31/2002:

Present value of projected benefits $2,000,000

Actuarial value of assets 880,000

Market value of assets 850,000

Compensation for 2002 140,000

Present value of future compensation 1,400,000

Entry age normal accrued liability (including normal cost for 2002) 950,000

OBRA ’87 current liability (including expected increase for 2002

due to benefits accruing during the plan year) 1,025,000

RPA ’94 current liability (including expected increase for 2002

due to benefits accruing during the plan year) 1,000,000

In what range is the deductible limit for 2002?

(A) Less than $93,000

(B) $93,000 but less than $113,000

(D) $133,000 but less than $153,000

(E) $153,000 or more

Question 27 (5 points)

Normal retirement benefit: 1% times final salary for each year of service.

Actuarial cost method: Aggregate.

Selected actuarial assumptions:

Valuation interest rate 7% per year

Compensation increases 4% per year

Pre-retirement decrements None

Credit balance in funding standard account as of 12/31/2000: $20,000.

Selected valuation results as of 1/1/2001:

Present value of future benefits $ 500,000

Actuarial (market) value of assets 350,000

Present value of future compensation 2,000,000

Expected compensation for 2001 300,000

Expected benefit payments for 2001 0

Contribution for 2001: $7,000 paid on 12/31/2001.

Plan experience for 2001:

Actual investment returns 8.5% per year

Actual compensation increases 8.0% per year

All other experience was as expected

All participants are active and there were no retirements or new entrants during 2001 or 2002.

In what range is the minimum required contribution for 2002 as of 12/31/2002?

(A) Less than $24,900

(B) $24,900 but less than $27,900

(D) $30,900 but less than $33,900

(E) $33,900 or more

Question 28 (4 points)

Plan year: 1/1 – 12/31.

Plan sponsor’s tax year: 10/1 – 9/30.

Actuarial cost method: Aggregate.

Valuation interest rate: 7% per year.

Credit balance in the funding standard account as of 12/31/2001: $75,000.

Selected valuation results under IRC section 412, as of 1/1/2002:

Present value of future benefits $4,000,000

Actuarial (market) value of assets 750,000

Present value of future compensation 3,000,000

Expected compensation for 2002 250,000

The deductible limit for any tax year is based upon the valuation for the plan year beginning in that tax year.

Of the contribution for the 2002 plan year, $50,000 was paid on 6/15/2002 and deducted for the tax year ending 9/30/2001.

In what range is the deductible limit for the tax year ending 9/30/2002?

(A) Less than $280,000

(B) $280,000 but less than $284,000

(D) $288,000 but less than $292,000

(E) $292,000 or more

Question 29 (4 points)

Selected valuation results as of 1/1/2002:

Current liability $800,000

Actuarial (market) value of assets 275,000

Selected information on plan assets:

12/31/2001 3/31/2002

Value of marketable securities $245,000 $250,000

2001 2002

Monthly annuity payments from plan $7,000 $7,100

Monthly expense payments from plan 50 100

3/01/2001 3/01/2002

Single sum distributions $9,000 $8,000

Quarterly contribution due 4/15/2002 without regard to liquidity requirement: $5,000.

The plan has always had 250 participants.

In what range is the quarterly contribution due 4/15/2002?

(A) Less than $18,700

(B) $18,700 but less than $21,400

(D) $24,100 but less than $26,800

(E) $26,800 or more

Question 30 (4 points)

Plan effective date: 1/1/1977.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

Current liability interest rate: 6% per year.

Initial accrued liability: $106,000.

Credit balance in funding standard account as of 12/31/2001: $0.

Selected valuation results as of 1/1/2002:

Actuarial value of assets $ 92,500

Market value of assets 94,000

Normal cost 1,660

Entry age normal accrued liability 118,000

Entry age normal normal cost 2,000

Current liability 62,000

Expected increase in current liability

due to benefits accruing during the plan year 4,000

Expected benefit payments 0

In what range is the deductible limit for 2002?

(A) Less than $13,800

(B) $13,800 but less than $14,800

(D) $15,800 but less than $16,800

(E) $16,800 or more

Question 31 (5 points)

Plan effective date: 1/1/1996.

Actuarial cost method: Frozen initial liability.

Assumed interest rates:

Valuation interest rate 7% per year

Current liability interest rate 6% per year

Credit balance in funding standard account as of 12/31/2001: $0.

Selected valuation results and other information as of 1/1/2002:

Actuarial (market) value of assets $1,740,000

Expected benefit payments 0

Normal cost 112,273

Accrued liability under entry age normal

method (including normal cost for 2002) 2,150,000

Current liability (including expected

increase for 2002 due to benefits

accruing during the plan year) 2,180,000

Initial balance of all amortization bases in the funding standard account:

Initial accrued liability $2,100,000

Increase in liability due to 1/1/2000

change in assumed rates of withdrawal 340,000

In what range is the deductible limit for 2002?

(A) Less than $445,000

(B) $445,000 but less than $455,000

(D) $465,000 but less than $475,000

(E) $475,000 or more

Question 32 (4 points)

Normal retirement benefit: $35 per month per year of service.

Early retirement eligibility: Age 60.

Early retirement benefit: Accrued benefit reduced by 6% for each year by which the benefit commencement date precedes the normal retirement date.

Actuarial cost method: Unit credit.

Selected actuarial assumptions:

Valuation interest rate 7% per year

Pre-retirement decrements None

Retirements occur at the beginning of the year based on the following table:

Probability of

Age Retirement

63 0.20

64 0.40

65 1.00

Data for participant Smith as of 1/1/2002:

Date of birth 1/1/1939

Date of hire 1/1/1969

Selected annuity values:

= 9.72 = 9.48 = 9.24

In what range is Smith’s accrued liability as of 1/1/2002?

(A) Less than $115,000

(B) $115,000 but less than $140,000

(D) $165,000 but less than $190,000

(E) $190,000 or more

Question 33 (4 points)

Plan effective date: 1/1/1980.

Actuarial cost method: Aggregate.

Valuation rate of interest: 7% per year.

Credit balance in funding standard account as of 12/31/2001: $0.

Selected valuation results as of 1/1/2002:

Present value of future benefits $ 8,500,000

Actuarial value of assets 6,600,000

Market value of assets 6,500,000

Present value of future compensation 32,500,000

Expected compensation for 2002 2,700,000

Expected benefit payments 0

Selected valuation results projected to 12/31/2002:

Entry age normal accrued liability (including normal cost) $7,275,000

Current liability (including expected increase due to benefits

accruing during the plan year) 4,300,000

In what range is the full funding credit for 2002?

(A) $0

(B) $1 but less than $29,000

(D) $104,000 but less than $179,000

(E) $179,000 or more

Question 34 (3 points)

Normal retirement benefit: 2.5% of final three-year average compensation for each year

of service.

Actuarial cost method: Unit credit.

Selected actuarial assumptions:

Valuation interest rate 7% per year

Compensation increases 5% per year

Selected valuation results as of 1/1/2001:

Unfunded accrued liability $195,000

Actuarial (market) value of assets 225,000

Normal cost 25,000

Actual compensation increases during 2001: 8.75%.

All other actuarial assumptions were exactly realized.

All participants are active and are under age 60, and there are no new entrants as of 1/1/2002.

No distributions were made from the plan during 2001.

In what range is the actuarial loss as of 1/1/2002 due to compensation increases?

(A) Less than $6,500

(B) $6,500 but less than $16,500

(D) $26,500 but less than $36,500

(E) $36,500 or more

Question 35 (5 points)

Plan effective date: 1/1/2002.

Accrued benefit: 1% times final three-year average compensation per year of service.

Termination benefit: Accrued benefit, payable at age 65.

Actuarial cost method: Unit credit.

Valuation interest: 7% per year.

Assumed compensation increases: 3% per year.

Assumed probabilities of death, termination and retirement:

Probability of Probability of Probability of

Age Death Termination Retirement

Prior to age 63 0.00 0.00 0.00

63 0.00 0.10 0.00

64 0.00 0.15 0.00

65 0.00 0.00 1.00

Decrements are assumed to apply at the beginning of the plan year.

Data for sole participant:

Date of birth 1/1/1952

Date of hire 1/1/1982

2001 compensation $60,000

Selected annuity value:

= 10.0

In what range is the normal cost for 2002 as of 1/1/2002?

(A) Less than $3,275

(B) $3,275 but less than $3,500

(D) $3,725 but less than $3,950

(E) $3,950 or more

Question 36 (3 points)

Normal retirement benefit: $1,500 per month.

Normal form of payment: Life annuity.

Optional form of payment: Joint & survivor benefit paying:

(1) a reduced benefit to the participant for life, plus

(2) 66 2/3% of the participant’s reduced benefit to the beneficiary for his/her remaining lifetime after the participant’s death.

Reduction factor to adjust life annuity to the optional form of payment: 90%.

Data for participant Smith as of 1/1/2002:

Date of birth 1/1/1937

Spouse’s date of birth 1/1/1942

Date of retirement 1/1/2002

Selected annuity values:

= 9.815 = 8.736 = 11.117

For valuation purposes, the actuary assumes all participants will take the life annuity form of payment. However, Smith elects the optional form of payment upon retirement.

In what range is the absolute value of the (gain)/loss in the total present value of benefits due to Smith’s election of the only optional form of payment?

(A) Less than $1,000

(B) $1,000 but less than $9,500

(D) $18,000 but less than $26,500

(E) $26,500 or more

Question 37 (5 points)

Plan effective date: 1/1/1996.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

Initial accrued liability: $250,000.

Credit balance in funding standard account as of 12/31/2000: $0.

Normal cost as of:

1/1/2001 $40,000

1/1/2002 35,000

Contribution for 2001 plan year: $40,000 paid on 8/1/2001.

Change in entry age normal accrued liability due to 1/1/2002 plan amendment: ($30,000).

Contributions for 2002 plan year are paid after 12/31/2002.

In what range is the deductible limit for 2002?

(A) Less than $70,000

(B) $70,000 but less than $73,000

(D) $76,000 but less than $79,000

(E) $79,000 or more

Question 38 (4 points)

Normal retirement benefit: $30 per month for each year of service.

Normal retirement age:

Before 2002 65

After 2001 64

Actuarial cost method: Aggregate.

Valuation interest rate: 7% per year.

Assumed retirement age is equal to the normal retirement age.

No pre-retirement decrements are assumed.

Data for sole participant:

Date of birth 1/1/1947

Date of hire 1/1/1972

Credit balance in the funding standard account as of 12/31/2001: $0.

Actuarial (market) value of assets as of 1/1/2002: $45,000.

Selected annuity values: = 9.48 = 9.24

In what range is the increase in normal cost for 2002 as of 1/1/2002 due to the change in normal retirement age?

(A) Less than $200

(B) $200 but less than $500

(D) $800 but less than $1,100

(E) $1,100 or more

Question 39 (3 points)

Plan effective date: 1/1/1995.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

Selected valuation results as of 1/1/2002:

Present value of benefits $1,500,000

Actuarial (market) value of assets 250,000

Present value of future compensation 1,800,000

Expected compensation for 2002 180,000

Normal cost 55,000

Credit balance in funding standard account as of 12/31/2001: $7,500.

In what range is the 2002 minimum required contribution as of 12/31/2002?

(A) Less than $106,000

(B) $106,000 but less than $113,000

(D) $120,000 but less than $127,000

(E) $127,000 or more

Question 40 (3 points)

Normal retirement benefit: 2% of final 3-year average compensation for each year of service.

Actuarial cost method: Unit credit.

Selected actuarial assumptions:

Valuation interest rate 7% per year

Compensation increases 6% per year

Pre-retirement decrements None

Data for sole participant in the plan as of 1/1/2002:

Date of birth 1/1/1942

Date of hire 1/1/1982

2002 compensation $35,000

Selected annuity value:

= 9.70

In what range is the normal cost as of 1/1/2002?

(A) Less than $5,450

(B) $5,450 but less than $5,750

(D) $6,050 but less than $6,350

(E) $6,350 or more