Enrolled Actuaries Pension Examination, Segment F EA-2

113 Pages·2014·0.5 MB·English

by  Bob Beideman

AMERICAN SOCIETY OF PENSION PROFESSIONALS AND ACTUARIES
JOINT BOARD FOR THE ENROLLMENT OF ACTUARIES
SOCIETY OF ACTUARIES

Enrolled Actuaries Pension Examination, Segment F

EA-2, Segment F

Date: Tuesday, November 4, 2014
Time: 8:30 a.m. – 12:30 p.m.

INSTRUCTIONS TO CANDIDATES

1. Write your candidate number here ____________. Your name
must not appear.
13. Use the blank portions of each page for your scratch work.
2. Do not break the seal of this book until the supervisor tells you Extra blank pages are provided at the back of the examination
to do so. book.

3. Special conditions generally applicable to all questions on this 14. When the supervisor tells you to do so, break the seal on the
examination are found at the front of this book. book and remove the answer sheet.

4. All questions should be answered in accordance with laws, On the front of the answer sheet, space is provided to write and
rules and regulations in effect as of May 31, 2014. code candidate information. Complete the information
requested by printing in the squares and blackening the circles
5. This examination consists of 55 multiple-choice questions of (one in each column) corresponding to the letters or numbers
varying value. The point value for each question is shown in printed. For each empty box blacken the small circle
parentheses at the beginning of each question. Total point immediately above the “A” circle. Fill out the boxes titled:
value is 160.
(a) Name
6. Your score will be based on the point values for the questions (include last name, first name and middle initial)
that you answer correctly. No credit will be given for omitted
answers and no credit will be lost for wrong answers; hence,
(b) Candidate Number
you should answer all questions even those for which you have
(Candidate/Eligibility Number, use leading zeros if
to guess. Answer choices C, D, and E will be considered
incorrect answers on True-False questions. needed to make it a five digit number)

7. A separate answer sheet is inside the front cover of this book. (c) Test Site Code
During the time allotted for this examination, record all your
(the supervisor will supply the number)
answers on side 2 of the answer sheet. NO ADDITIONAL

TIME WILL BE ALLOWED FOR THIS PURPOSE. No
credit will be given for anything indicated in the examination (d) Examination Part
book but not transferred to the answer sheet. Failure to stop (code the examination that you are taking by
writing or coding your answer sheet after time is called will blackening the circle to the left of "Course EA-2,
result in the disqualification of your answer sheet or further Segment F")
disciplinary action.

8. Up to five answer choices are given with each question, each (e) Booklet Number
answer choice being identified by a key letter (A to E). For (booklet number can be found in the upper right-hand
each question, blacken the oval on the answer sheet which corner of this examination book. Use leading zeros if
corresponds to the key letter of the answer choice that you needed to make it a four digit number.)
select.

In box titled “Complete this section only if instructed to do so”,
9. Use a soft-lead pencil to mark the answer sheet. To facilitate
fill in the circle to indicate if you are using a calculator and
correct mechanical scoring, be sure that, for each question, write in the make and model number.
your pencil mark is dark and completely fills only the intended
oval. Make no stray marks on the answer sheet. If you have to In the box titled “Signature and Date” sign your name and write
erase, do so completely. today's date. If the answer sheet is not signed, it will not be
graded.
10. Do not spend too much time on any one question. If a question
seems too difficult, leave it and go on. Leave the boxes titled “Test Code” and “Form Code” blank.

11. While every attempt is made to avoid defective questions, On the back of the answer sheet fill in the Booklet Number in
sometimes they do occur. If you believe a question is defective, the space provided.
the supervisor or proctor cannot give you any guidance beyond
the instructions on the exam booklet. 15. After the examination, the supervisor will collect this book and
the answer sheet separately. DO NOT ENCLOSE THE
12. Clearly indicated answer choices in the test book can be an aid ANSWER SHEET IN THE BOOK. All books and answer
sheets must be returned. THE QUESTIONS ARE
in grading examinations in the unlikely event of a lost answer
CONFIDENTIAL AND MAY NOT BE TAKEN FROM THE
sheet.
EXAMINATION ROOM.

Exam EA-2, (Segment F)
Answer Key EA-2F Fall 2014
October 22, 2014

Question Answer Question Answer
1 B 31 B
2 C 32 A
3 B 33 D
4 D 34 A
5 D 35 A
6 A 36 B
7 A 37 D
8 B 38 B
9 A 39 B
10 D 40 B
11 D 41 A
12 D 42 B
13 B 43 C
14 B 44 B
15 A 45 A
16 D 46 A
17 C 47 C
18 C 48 D
19 A 49 C
20 B 50 B
21 D 51 B
22 C 52 D
23 B 53 D
24 A 54 C
25 A 55 B
26 C
27 A
28 C
29 D
30 E
**BEGINNING OF EXAMINATION**

Data for Question 1 (4 points)

Valuation date: 1/1/2015.

The plan provides a temporary $1,000 monthly supplement payable from retirement to age 62 to
participants who complete 15 years of service and retire from active employment after attaining
age 60.

Segment rates: {5.0%, 6.0%, 7.0%}.

Selected data for participant Smith:

Gender Male

Date of birth 1/1/1955

Date of hire 1/1/1995

Assumed rates of retirement:

Age Rate
60 35%
61 25%

No preretirement death is assumed.

$X is the portion of the funding target as of 1/1/2015 attributable to Smith’s temporary supplement.

Question 1

In what range is $X?

(A) Less than $9,500

(B) $9,500 but less than $9,750

(C) $9,750 but less than $10,000

(D) $10,000 but less than $10,250

(E) $10,250 or more

Exam EA-2 (Segment F) Fall 2014 - 1 - GO ON TO NEXT PAGE
Pension
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Exam EA-2 (Segment F) Fall 2014 - 2 - GO ON TO NEXT PAGE
Pension
Data for Question 2 (3 points)

Selected information as of 1/1/2015:

Funding standard carryover balance $25,000
Prefunding balance 75,000
Minimum required contribution $100,000
Effective interest rate 6.0%

Actual rate of return on assets during 2015: (5.0%)

No quarterly installments are required for the 2015 plan year.

An election is made on 1/1/2015 to apply $15,000 of the funding balances to the 2015 minimum
required contribution.

A contribution of $115,000 is made on 12/1/2015.

Question 2

In what range is the prefunding balance as of 1/1/2016?

(A) Less than $94,000

(B) $94,000 but less than $95,000

(C) $95,000 but less than $96,000

(D) $96,000 but less than $97,000

(E) $97,000 or more

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Pension
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Exam EA-2 (Segment F) Fall 2014 - 4 - GO ON TO NEXT PAGE
Pension
Data for Question 3 (3 points)

Type of plan: Multiemployer.

Actuarial cost method: Projected unit credit.

Valuation interest rate: 7.0%.

Compensation increase assumption: 3.0% per year.

Benefit formula: 2% of final year’s compensation times years of service, maximum 25 years.

Selected data for participant Smith as of 1/1/2015:

Date of birth 1/1/1975
Date of hire 1/1/2005
Compensation for 2014 plan year $77,000

Selected annuity factor:

a12 = 10.11
65

Question 3

In what range is the normal cost for Smith as of 1/1/2015?

(A) Less than $5,000

(B) $5,000 but less than $7,000

(C) $7,000 but less than $9,000

(D) $9,000 but less than $11,000

(E) $11,000 or more

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Pension
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Exam EA-2 (Segment F) Fall 2014 - 6 - GO ON TO NEXT PAGE
Pension
Data for Question 4 (4 points)

Type of plan: Multiemployer.

Early retirement provisions:
Eligibility Age 55
Benefit amount for retirements:
Before 1/1/2015 Accrued benefit, reduced 5.0% per year by which
benefits commence before age 65
On and after 1/1/2015 Accrued benefit, reduced 3.0% per year by which
benefits commence before age 65

Actuarial cost method: Unit credit.

Credit balance as of 12/31/2014: $15,000.

Selected actuarial assumptions for 1/1/2015 valuation:
Interest rate 7.0%
Retirement 100% at age 62

Selected information (before plan amendment) as of 1/1/2015:
Actuarial (market) value of assets $1,270,000
Accrued liability for all active participants 1,170,000
Accrued liability for all other participants 410,000
Normal cost 240,000
Total amortization charges 140,000
Total amortization credits 60,000

All active participants are under age 60 as of 1/1/2015.

Question 4

In what range is the smallest amount that satisfies the minimum funding standard as of
12/31/2015?

(A) Less than $336,000
(B) $336,000 but less than $342,000
(C) $342,000 but less than $348,000
(D) $348,000 but less than $354,000
(E) $354,000 or more

Exam EA-2 (Segment F) Fall 2014 - 7 - GO ON TO NEXT PAGE
Pension
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Pension