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
(C)
$430,000
but less than $480,000
(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
(C)
$75,000
but less than $95,000
(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
(C)
$142,000
but less than $152,000
(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
(C)
$97,800
but less than $103,800
(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
(C)
$75,000
but less than $90,000
(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
(C)
$69,300
but less than $72,100
(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
(C) $850 but less than $940
(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
(C)
$191,500
but less than $198,500
(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
(C)
$14,000
but less than $17,000
(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
(C)
II
only
(D)
III
only
(E)
The
correct answer is not given by (A), (B), (C), or (D) above.
Ques