Pension Valuation Flashcards
7 cards from real Actuary Certification practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Pension Valuation flashcards as text
Under PPA 2006, what is the consequence if a single-employer plan's funding shortfall triggers the 'at-risk' status?
Answer: Higher minimum required contributions using at-risk actuarial assumptions apply
At-risk plans must use prescribed at-risk assumptions that increase the funding target and potentially the minimum required contribution.
For GASB 67/68 reporting, the discount rate used to measure the total pension liability is:
Answer: A blend of expected return on funded benefits and a bond rate for unfunded benefits
GASB 67/68 uses a blended discount rate—the long-term return for projected funded benefits and a municipal bond rate for the unfunded portion.
An actuarial gain occurs in a pension plan when:
Answer: Actual experience is more favorable than assumed experience
An actuarial gain results when actual experience (mortality, turnover, salary, investment returns) is more favorable than what the actuarial assumptions predicted.
Which of the following best describes the 'spot rate' approach for determining pension liability discount rates under ASC 715?
Answer: Applying individual zero-coupon bond rates matched to each expected benefit payment period
The spot rate approach applies individual zero-coupon yield curve rates to each period's expected benefit payment rather than a single composite rate.
In a traditional defined benefit plan valuation, the selection of a lower discount rate will generally:
Answer: Increase the actuarial accrued liability
A lower discount rate increases the present value of future benefit payments, thereby increasing the actuarial accrued liability.
The 'funded ratio' of a pension plan is defined as:
Answer: Market value of assets divided by actuarial accrued liability
The funded ratio equals plan assets (market or actuarial value) divided by the actuarial accrued liability, expressed as a percentage.
Under ERISA Section 4044, when a defined benefit plan terminates in a distress termination, which category of benefits receives priority in asset allocation?
Answer: Participant voluntary contributions with interest
ERISA Section 4044 Priority Category 1 covers participant voluntary contributions plus interest, which receive the highest priority in asset allocation.