SOCIETY OF ACTUARIES

AMERICAN SOCIETY OF PENSION ACTUARIES

JOINT BOARD FOR THE ENROLLMENT OF ACTUARIES

# ENROLLED ACTUARIES PENSION EXAMINATION, SEGMENT A

**NOVEMBER 2001 EA-2, SEGMENT A, EXAMINATION**

**E2A-10-01 Printed in U.S.A.**

# 

# [Data for Question 1]{.underline} (2 points)

Actuarial cost method: Unit credit.

Valuation interest rate: 7% per year.

Selected valuation results:

> [1/1/2000]{.underline} [1/1/2001]{.underline}

Actuarial (market) value of assets \$400,000 \$500,000

Accrued liability 800,000 950,000

Normal cost 50,000

Contribution for 2000: \$54,000 paid 12/31/2000.

Benefit payments during 2000: \$13,000 paid on 12/31/2000.

# [Question 1]{.underline}

In what range is the absolute value of the experience (gain)/loss during
2000 as of 1/1/2001?

(A) Less than \$25,000

(B) \$25,000 but less than \$45,000

(C) \$45,000 but less than \$65,000

(D) \$65,000 but less than \$85,000

\(E\) \$85,000 or more

[Data for Question 2]{.underline} (4 points)

Actuarial cost method: Unit credit.

Valuation interest rate: 7% per year.

Selected valuation results as of 1/1/2001:

Accrued liability \$1,700,000

Actuarial (market) value of assets 1,600,000

Amortization charges and (credits) for all bases in funding standard
account as of 1/1/2001:

Change in funding method effective 1/1/1999 \$20,000

Actuarial (gain)/loss during 1999 plan year 5,000

Actuarial (gain)/loss during 2000 plan year (4,000)

Total reconciliation account balance as of 1/1/2000: \$0.

Interest charge due to late quarterly payments for 2000 plan year:
\$4,200.

[Question 2]{.underline}

In what range is the credit balance as of 1/1/2001?

(A) Less than \$24,000

(B) \$24,000 but less than \$25,500

(C) \$25,500 but less than \$27,000

(D) \$27,000 but less than \$28,500

(E) \$28,500 or more

[Data for Question 3]{.underline} (4 points)

Valuation interest rate: 7% per year.

Credit balance as of 12/31/1999: \$0.

Minimum contribution for 2000 as of 12/31/2000: \$120,000.

Credit balance as of 12/31/2000: \$0.

Market value of assets as of 3/31/2001: \$420,000.

Selected valuation results as of 1/1/2001:

  ------------------------------------------------------ ----------------
  Current liability                                      \$900,000

  Actuarial (market) value of assets                     400,000

  Minimum contribution for 2001 as of 1/1/2001           125,000
  ------------------------------------------------------ ----------------

Distributions paid from trust:

+------------------+-----------+-----------+-----------+-------------+
|                  | Periodic  | ### [Lump | Value of  | Adm         |
|                  | [Pay      |  Sums]{.u | Annuities | inistrative |
|                  | ments]{.u | nderline} | [Purc     |             |
|                  | nderline} |           | hased]{.u | ###         |
|                  |           |           | nderline} | [Expenses]{ |
|                  |           |           |           | .underline} |
+------------------+-----------+-----------+-----------+-------------+
| 4/1/1998 --      | \$175,000 | \$25,000  | \$0       | \$10,000    |
| 3/31/1999        |           |           |           |             |
+------------------+-----------+-----------+-----------+-------------+
| 4/1/1999 --      | 160,000   | 0         | 75,000    | 10,000      |
| 3/31/2000        |           |           |           |             |
+------------------+-----------+-----------+-----------+-------------+
| 4/1/2000 --      | 150,000   | 25,000    | 10,000    | 10,000      |
| 3/31/2001        |           |           |           |             |
+------------------+-----------+-----------+-----------+-------------+

All assets are "liquid assets" as defined in IRC section 412(m).

The plan is subject to the liquidity requirement of IRC section
412(m)(5).

[Question 3]{.underline}

In what range is the quarterly contribution payable 4/15/2001, including
liquidity shortfall payment?

(A) Less than \$90,000

(B) \$90,000 but less than \$110,000

(C) \$110,000 but less than \$130,000

(D) \$130,000 but less than \$150,000

(E) \$150,000 or more

[Data for Question 4]{.underline} (3 points)

Plan effective date: 1/1/1995.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

Credit balance as of 12/31/2000: \$150,000.

Selected valuation results as of 1/1/2001:

Actuarial (market) value of assets \$1,750,000

Present value of future benefits 8,500,000

Present value of future compensation 30,000,000

Expected compensation for 2001 1,500,000

IRC section 412 amortization charge

for the initial unfunded liability 100,000

# [Question 4]{.underline}

In what range is the deductible limit for 2001?

(A) Less than \$400,000

(B) \$400,000 but less than \$430,000

(C) \$430,000 but less than \$460,000

(D) \$460,000 but less than \$490,000

(E) \$490,000 or more

[Data for Question 5]{.underline} (4 points)

Plan effective date: 1/1/1990.

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

Plan A is split into Plans B and C effective 12/31/2000. The sponsors of
Plans B and C are members of the same controlled group of corporations.

Selected valuation results as of 1/1/2001:

  -------------- ------------- ---------- -- ---------------- ---------------- ----------------
                                             [Plan            [Plan            [Plan
                                             A]{.underline}   B]{.underline}   C]{.underline}

  Entry age                                  \$600,000        \$250,000        \$350,000
  normal accrued                                                               
  liability                                                                    

  Current                                    330,000          130,000          200,000
  liability                                                                    

  Present value                              480,000          160,000          320,000
  of accrued                                                                   
  benefits on                                                                  
  plan                                                                         
  termination                                                                  
  basis                                                                        

  Funding                                    20,000           8,300            11,700
  standard                                                                     
  account credit                                                               
  balance                                                                      

  Allocation of                              385,000          128,000          257,000
  actuarial                                                                    
  (market) value                                                               
  of assets                                                                    
  reduced by                                                                   
  credit balance                                                               

                                                                               

  Outstanding                                                                  
  amortization                                                                 
  bases as of                                                                  
  1/1/2001:                                                                    

  Initial                                    \$150,000                         
  unfunded                                                                     
  liability                                                                    

  Increase due                               60,000                            
  to 1/1/1995                                                                  
  assumption                                                                   
  change                                                                       
  -------------- ------------- ---------- -- ---------------- ---------------- ----------------

###### Question 5

In what range is the total amortization payment for 2001 allocated to
Plan C as of 1/1/2001?

\(A\) Less than \$11,700

\(B\) \$11,700 but less than \$13,000

\(C\) \$13,000 but less than \$14,300

\(D\) \$14,300 but less than \$15,600

\(E\) \$15,600 or more

# [Data for Question 6]{.underline} (2 points)

Consider the following descriptions for determining the actuarial value
of assets of a pension plan. For each description, the actuarial value
of assets is adjusted when necessary to be between 80% and 120% of
current fair market value.

I. 60% of the current year fair market value plus 40% of the previous
year actuarial value, adjusted for contributions and payments from the
plan during the previous year.

II. The fair market value of the assets at the prior valuation date plus
    contributions less disbursements of the prior year, adjusted for
    interest at the valuation interest rate.

III\. The current year fair market value of assets less 2/3 of the prior
year capital appreciation and less 1/3 of the capital appreciation in
the year before the prior year.

# [Question 6]{.underline}

Which, if any, of the above asset valuation methods are considered
reasonable pursuant to IRC section 412 and regulations thereunder?

(A) None

(B) I and II only

(C) I and III only

\(D\) II and III only\
\
(E) The correct answer is not given by (A), (B), (C), or (D) above.

#  

# [Data for Question 7]{.underline} (5 points) 

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

Actuarial cost method: Unit credit.

Actuarial (market) value of assets as of 1/1/2000: \$225,000.

Actuarial (market) value of assets as of 1/1/2001: \$226,000.

Actuarial assumptions:

  --------------------------------------------- -------------------------
  Valuation interest rate                       7% per year

  Retirement age                                65

  Annual compensation increases                 6% per year

  Pre-retirement decrements                     None
  --------------------------------------------- -------------------------

Data for only participants in the plan:

+----------------------------------------+--------------+--------------+
|                                        | ### [Smith]  | ### [Jones]  |
|                                        | {.underline} | {.underline} |
+----------------------------------------+--------------+--------------+
| Participant status as of 1/1/2000      | Active       | Retired      |
|                                        |              |              |
| and 1/1/2001                           |              |              |
+----------------------------------------+--------------+--------------+
| Age as of 1/1/2000                     | 56           | 65           |
+----------------------------------------+--------------+--------------+
| Service as of 1/1/2000                 | 20           |              |
+----------------------------------------+--------------+--------------+
| Expected compensation for 2000         | \$75,000     |              |
+----------------------------------------+--------------+--------------+
| Annual retirement benefit              |              | \$20,000     |
+----------------------------------------+--------------+--------------+
| Accrued liability as of 1/1/2001       | 119,500      | 164,000      |
+----------------------------------------+--------------+--------------+

Retirement benefits are paid annually on the first day of the plan year.

Contribution for 2000: \$8,000 paid on 12/31/2000.

Selected annuity value: $ä_{\text{65}}$ = 8.578.

[Question 7]{.underline}

Rank, from smallest to largest, the absolute value of experience
(gains)/losses during 2000 due to compensation increases, mortality, and
assets.

(A) Assets, compensation, mortality

(B) Mortality, assets, compensation

(C) Assets, mortality, compensation

(D) Compensation, assets, mortality

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

# [Data for Question 8]{.underline} (3 points) 

Plan effective date: 1/1/1993.

Valuation interest rate: 7% per year.

Actuarial cost method:

> Before 2001 Aggregate
>
> After 2000 Frozen initial liability

Credit balance in the funding standard account as of 12/31/2000:
\$5,000.

Selected valuation results as of 1/1/2001:

Present value of benefits \$241,000

Entry age normal accrued liability 202,000

Actuarial (market) value of assets 123,000

Present value of future compensation 494,000

2001 compensation 60,000

# 

# 

# [Question 8]{.underline}

In what range is the minimum required contribution for 2001 as of
12/31/2001?

(A) Less than \$8,500

(B) \$8,500 but less than \$11,500

(C) \$11,500 but less than \$14,500

(D) \$14,500 but less than \$17,500

(E) \$17,500 or more

[Data for Question 9]{.underline} (3 points)

Plan effective date: 1/1/1990.

Accrued benefit: \$40 per month times years of service.

Vesting: 100% vested in accrued benefit after five years of service;
benefit commences at normal retirement date.

Actuarial cost method: Unit credit.

Selected actuarial assumptions:

Valuation interest rate 7% per year

Withdrawal (assumed to occur at the beginning of each year):

Before age 41 5% per year

Age 41 and later None

Retirement age 65

Preretirement decrements

other than withdrawal None

Selected annuity value: $ä_{\text{65}}^{(\text{12})}$ = 10.00

On 1/1/2000 there are 200 participants, all active, age 40 with 10 years
of service.

Three participants terminated employment on 1/2/2000, there were no
benefits paid and there were no new participants.

[Question 9]{.underline}

In what range is the absolute value of the experience (gain)/loss
associated with withdrawal during 2000 as of 1/1/2001?

(A) Less than \$5,000

(B) \$5,000 but less than \$15,000

(C) \$15,000 but less than \$25,000

(D) \$25,000 but less than \$35,000

(E) \$35,000 or more

# [Data for Question 10]{.underline} (3 points)

Plan effective date (all plans): 1/1/1990.

Selected valuation results as of 1/1/2001 for the following plans
maintained by the same employer:

+----------------------------+---------+----------+---------+--------+
|                            | [Plan   | [Plan    | [Plan   | [Plan  |
|                            | A]{.und | B]{.un   | C]{.und | D]     |
|                            | erline} | derline} | erline} | {.unde |
|                            |         |          |         | rline} |
+----------------------------+---------+----------+---------+--------+
| Number of participants on  | 110     | 110      | 110     | 9      |
| each                       |         |          |         |        |
|                            |         |          |         |        |
| day of the plan year       |         |          |         |        |
+----------------------------+---------+----------+---------+--------+
| Current liability using    | \$1,    | \$1      | \$1,    | \$1    |
| maximum                    | 000,000 | ,000,000 | 040,000 | 00,000 |
|                            |         |          |         |        |
| permitted interest rate    |         |          |         |        |
+----------------------------+---------+----------+---------+--------+
| Current liability using    | 1,      | 1        | 1,      | 1      |
| rate                       | 020,000 | ,000,000 | 075,000 | 02,000 |
|                            |         |          |         |        |
| selected for the valuation |         |          |         |        |
+----------------------------+---------+----------+---------+--------+
| Actuarial value of assets  | 790,000 | 890,000  | 850,000 | 74,000 |
+----------------------------+---------+----------+---------+--------+
| Market value of assets     | 830,000 | 930,000  | 810,000 | 77,000 |
+----------------------------+---------+----------+---------+--------+
| Credit balance in funding  | 0       | 0        | 30,000  | 0      |
|                            |         |          |         |        |
| standard account as of     |         |          |         |        |
| 12/31/2000                 |         |          |         |        |
+----------------------------+---------+----------+---------+--------+

Selected funded current liability percentages from gateway test for past
valuations:

  ------------------- ---------------- ---------------- ---------------- ----------------
  [Valuation          [Plan            [Plan            [Plan            [Plan
  date]{.underline}   A]{.underline}   B]{.underline}   C]{.underline}   D]{.underline}

  1/1/2000            93%              93%              78%              95%

  1/1/1999            92%              88%              92%              91%

  1/1/1998            88%              92%              93%              93%
  ------------------- ---------------- ---------------- ---------------- ----------------

[Question 10]{.underline}

How many of these plans are exempt from the requirement to calculate an
additional funding charge for 2001?

(A) 0

(B) 1

(C) 2

(D) 3

(E) 4

# [Data for Question 11]{.underline} (2 points)

Actuarial cost method: Aggregate.

Valuation interest rate: 7% per year.

Actuarial (market) value of assets as of 1/1/2000: \$385,000.

Contribution for 2000: \$3,000 paid on 1/1/2000.

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

Actual investment return during 2000: 4%.

Selected valuation results as of 1/1/2001:

Present value of future benefits \$1,400,000

Present value of future compensation 12,000,000

Expected compensation for 2001 1,000,000

There were no benefit payments during 2000.

# [Question 11]{.underline}

In what range is the increase in the 2001 minimum contribution as of
12/31/2001 due to the experience loss on investments?

(A) Less than \$1,000

(B) \$1,000 but less than \$2,000

(C) \$2,000 but less than \$3,000

(D) \$3,000 but less than \$4,000

\(E\) \$4,000 or more

[Data for Question 12]{.underline} (4 points)

Plan effective date: 1/1/1985.

Normal retirement benefit: \$50 per month per year of service.

Actuarial cost method: Aggregate.

Actuarial assumptions:

Valuation interest rate 7% per year

Retirement age 65

Pre-retirement decrements None

Data for sole participant:

Date of birth: 1/1/1947

Date of hire: 1/1/1985

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

Selected valuation results and other data as of 1/1/2001:

  ------------------------------------------------------- ----------------
  Market value of assets                                  \$57,000

  Actuarial value of assets                               60,000

  OBRA '87 current liability projected to 12/31           72,000

  RPA '94 current liability projected to 12/31            75,000
  ------------------------------------------------------- ----------------

Selected annuity value:

$ä_{\text{65}}^{(\text{12})}$ = 10.00

[Question 12]{.underline}

In what range is the full funding limitation for 2001 as of 12/31/2001?

(A) Less than \$1,700

(B) \$1,700 but less than \$3,200

(C) \$3,200 but less than \$4,700

(D) \$4,700 but less than \$6,200

(E) \$6,200 or more

[Data for Question 13]{.underline} (5 points)

Plan effective date: 1/1/1996.

Normal retirement benefit before amendment: \$50 per month for each year
of service.

Actuarial cost method: Attained age normal.

Valuation interest rate: 7% per year.

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

Selected valuation results as of 1/1/2001 under the above benefit
formula:

  ----------------------------------------------------- -----------------
  Present value of all future benefits                  \$7,000,000

  Present value of accrued benefits                     5,000,000

  Entry age normal accrued liability                    6,800,000

  Actuarial (market) value of plan assets               4,950,000

  Amortization payment for initial unfunded liability   16,000

                                                        

  Present value of future service                       2,500 years
  ----------------------------------------------------- -----------------

The plan sponsor has requested the actuary to prepare a cost study for
the following proposals so that the 2001 minimum required contribution
for "A" and "B" are equal:

Normal retirement benefit, formula "A": \$65 per month for each year of
service

Normal retirement benefit, formula "B": \$50 per month for each year of
service prior to 2001, plus

> \$X per month for each year of service after 2000.

As of 1/1/2001 there were 300 active participants, all under age 64, and
no inactive participants.

###### Question 13

In what range is \$X?

\(A\) Less than \$86.00

\(B\) \$86.00 but less than \$90.00

\(C\) \$90.00 but less than \$94.00

\(D\) \$94.00 but less than \$98.00

\(E\) \$98.00 or more

[Data for Question 14]{.underline} (5 points)

Plan effective date: 1/1/1982.

Valuation interest rate: 7% per year.

# Current liability interest rate for 1/1/2001: 6.1% per year.

Credit balance in funding standard account as of 12/31/2000: \$25,000.

Reconciliation account balance as of 12/31/2000: \$50,500.

Selected valuation results and funding standard account items as of
1/1/2001:

+------------------------------------------------------+---------------+
| Normal cost                                          | \$45,000      |
|                                                      |               |
| Net amortization charges                             | 50,400        |
|                                                      |               |
| Actuarial value of assets                            | 975,000       |
|                                                      |               |
| Market value of assets                               | 925,000       |
|                                                      |               |
| Current liability                                    | 1,300,000     |
|                                                      |               |
| Expected increase in current liability               | 60,000        |
|                                                      |               |
| Current liability at maximum interest rate           | 1,250,000     |
|                                                      |               |
| Benefits expected to be paid during 2001             | 0             |
|                                                      |               |
| Unfunded new liability                               | 240,000       |
+------------------------------------------------------+---------------+

Additional interest charge for late quarterly contributions for 2001:
\$800.

There have always been 140 participants in the plan.

## [Question 14]{.underline}

# In what range is the reconciliation account balance as of 1/1/2002?

(A) Less than \$79,000

(B) \$79,000 but less than \$86,000

(C) \$86,000 but less than \$93,000

(D) \$93,000 but less than \$100,000

(E) \$100,000 or more

[Data for Question 15]{.underline} (5 points)

Plan effective date: 1/1/1990.

Actuarial cost method: Unit credit.

Valuation interest rate: 7% per year.

There were no actuarial gains or losses from any source prior to
1/1/2000.

Credit balance in funding standard account as of 12/31/1999: \$0.

The minimum required contribution for 2000 was made on 12/31/2000.

Effective 1/1/2001, the plan sponsor retained a new enrolled actuary
from another firm. The new enrolled actuary uses the same assumptions
and substantially the same methods as the prior actuary. The deemed
change in funding method resulting from the change in enrolled actuary
is made pursuant to Rev. Proc. 2000-40.

+----------------------------+-------------+-------+----+------------+
| Selected valuation         | ########    | ###   |    |            |
| results:                   |             | ####  |    |            |
+----------------------------+-------------+-------+----+------------+
|                            | > Prior     | > New |    |            |
|                            | >           | >     |    |            |
|                            | > Actuary   | > Ac  |    |            |
|                            |             | tuary |    |            |
+----------------------------+-------------+-------+----+------------+
|                            |             |       |    |            |
+----------------------------+-------------+-------+----+------------+
| Valuation date             | [1/1/2000]{ | [1    |    | [1         |
|                            | .underline} | /1/20 |    | /1/2001]{. |
|                            |             | 00]{. |    | underline} |
|                            |             | under |    |            |
|                            |             | line} |    |            |
+----------------------------+-------------+-------+----+------------+
| Actuarial accrued          | \$2,400,000 | \     |    | \          |
| liability                  |             | $2,37 |    | $2,650,000 |
|                            |             | 5,000 |    |            |
+----------------------------+-------------+-------+----+------------+
| Actuarial value of assets  | 1,500,000   | 1,50  |    | 1,850,000  |
|                            |             | 0,000 |    |            |
+----------------------------+-------------+-------+----+------------+
| Normal cost                | 162,000     | 16    |    | 177,000    |
|                            |             | 5,000 |    |            |
+----------------------------+-------------+-------+----+------------+

###### Question 15

In what range is the minimum required contribution for 2001 as of
12/31/2001?

\(A\) Less than \$253,000

\(B\) \$253,000 but less than \$255,000

\(C\) \$255,000 but less than \$257,000

\(D\) \$257,000 but less than \$259,000

\(E\) \$259,000 or more

[Data for Question 16]{.underline} (4 points)

Plan effective date: 1/1/1978.

Normal retirement benefit: 50% of final three-year average compensation.

Accrued benefit: Normal retirement benefit prorated on service to normal
retirement.

Pre-retirement death benefit: Accrued benefit beginning immediately
without reduction for early commencement, payable for the lifetime of
the spouse.

Actuarial cost method: Unit credit.

Assumed compensation increases: 0% per year.

Selected actuarial functions:

+-------------+-------------+-------------+-------------+-------------+
| > n         | > x         | > q ~x~     | > v^n       | > $         |
|             |             |             | ^(~n~p~62~) | $ä_{x}^{(\t |
|             |             |             |             | ext{12})}$$ |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| 0           | 62          | 0.015       | 1.000       | 9.80        |
+-------------+-------------+-------------+-------------+-------------+
| 1           | 63          | 0.017       | 0.928       | 9.64        |
+-------------+-------------+-------------+-------------+-------------+
| 2           | 64          | 0.019       | 0.860       | 9.47        |
+-------------+-------------+-------------+-------------+-------------+

Decrements are applied at the beginning of the plan year.

For funding purposes, the participant and spouse are assumed to be the
same age and 90% of active participants are assumed to be married at the
time of death.

Data for participant Smith:

Date of birth 1/1/1939

#  Date of hire 1/1/1978

Compensation for each of the last three years \$45,000

[Question 16]{.underline}

In what range is the accrued liability as of 1/1/2001 for Smith's death
benefit?

(A) Less than \$8,200

(B) \$8,200 but less than \$8,500

(C) \$8,500 but less than \$8,800

(D) \$8,800 but less than \$9,100

(E) \$9,100 or more

# [Data for Question 17]{.underline} (5 points)

Plan effective date: 1/1/1996.

Valuation date: 12/31.

Actuarial cost method: Aggregate.

Valuation interest rate: 7% per year.

Current liability interest rate for 1/1/2001: 6% per year.

Credit balance in funding standard account as of 12/31/1999: \$0.

Selected valuation results as of 12/31/2001:

Normal cost \$50,000

Actuarial (market) value of assets, excluding

2001 contributions 870,000

Entry age normal accrued liability, including 2001

normal cost 935,000

Current liability, excluding 2001 expected increase in

current liability 1,000,000

2001 expected increase in current liability 40,000

Contributions for 2001: Four quarterly contributions of \$40,000 each,
paid on quarterly contribution due dates.

Gateway funded current liability percentage for prior years:

1998. 91%

1999. 88%

2000. 92%

Number of participants on each day of the 2000 plan year: 200.

# [Question 17]{.underline}

In what range is the credit balance in the funding standard account as
of 12/31/2001, including all contributions for the 2001 plan year?

(A) Less than \$96,000

(B) \$96,000 but less than \$103,000

(C) \$103,000 but less than \$110,000

(D) \$110,000 but less than \$117,000

(E) \$117,000 or more

[Data for Question 18]{.underline} (5 points)

Normal retirement benefit: 1% of final three-year average pay for each
year of service.

Actuarial cost method: Aggregate.

Actuarial assumptions:

Valuation interest rate 7% per year

Retirement age 65

Compensation increases 5% per year

Pre-retirement decrements None

Data for the sole participants Smith and Jones:

  -------------------- ---------------------------- ------------------------ ------------------------
                       2001                         Age on                   Years of Service on
                       [Compensation]{.underline}   [1/1/2001]{.underline}   [1/1/2001]{.underline}

  Smith                \$30,000                     35                       5

  Jones                100,000                      55                       20
  -------------------- ---------------------------- ------------------------ ------------------------

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

Actuarial (market) value of assets as of 1/1/2001: \$50,000.

Selected annuity value:

$ä_{\text{65}}^{(\text{12})}$ = 10.00

Following completion of the 2001 valuation, it was discovered that
Smith's 2001 compensation was \$60,000 and that his age on 1/1/2001 was
45.

IRC section 401(a)(17) limitation for 2001: \$170,000.

[Question 18]{.underline}

In what range is the absolute value of the change in the minimum
required contribution for 2001 as of 12/31/2001 that results from
correcting Smith's data?

(A) Less than \$3,700

(B) \$3,700 but less than \$3,900

(C) \$3,900 but less than \$4,100

(D) \$4,100 but less than \$4,300

(E) \$4,300 or more

[Data for Question 19]{.underline} (4 points)

# Plan effective date: 1/1/2000.

# 

# Actuarial cost method: Frozen initial liability.

Actuarial assumptions:

Valuation interest rate:

After 2000 7% per year

> Before 2001 6% per year

Compensation increases 4% per year

Pre-retirement decrements None

Selected valuation results as of 1/1/2000:

Initial unfunded liability \$84,000

> Normal cost 6,000

Contribution for 2000: \$18,000 paid on 12/31/2000.

Selected valuation results as of 1/1/2001:

> [6%]{.underline} [7%]{.underline}

Present value of benefits \$155,000 \$136,000

Present value of accrued benefits 61,000 57,000

Entry age normal accrued liability 93,000 85,000

Present value of future compensation 260,000 250,000

Current compensation 56,000 56,000

The limit adjustment for 1/1/2001 is calculated using the fresh start
alternative.

The contribution for 2000 was less than the unfunded current liability
for that year.

## [Question 19]{.underline}

In what range is the deductible limit for 2001?

(A) Less than \$21,000

(B) \$21,000 but less than \$21,500

(C) \$21,500 but less than \$22,000

(D) \$22,000 but less than \$22,500

(E) \$22,500 or more.

[Data for Question 20]{.underline} (4 points)

Plan effective date: 1/1/1990.

# Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

150% Federal mid-term rate:

1/1/2000 9.43% per year

1/1/2001 8.47% per year

Initial accrued liability: \$600,000.

Minimum required contribution for 1999 as of 12/31/1999: \$100,000.

Credit balance in funding standard account as of 12/31/1999: \$0.

Normal cost as of 1/1/2000: \$100,000.

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

The minimum required contributions for 1999 and 2000 were waived to the
maximum extent allowable under IRC section 412. There were no other
funding waivers granted.

## [Question 20]{.underline}

# In what range is the portion of the accumulated reconciliation account due to waived funding deficiencies as of 1/1/2002?

(A) Less than \$2,300

(B) \$2,300 but less than \$4,300

(C) \$4,300 but less than \$6,300

(D) \$6,300 but less than \$8,300

\(E\) \$8,300 or more

# [Data for Question 21]{.underline} (4 points)

Plan effective date: 1/1/1996.

Actuarial cost method: Frozen initial liability.

Valuation interest rate:

Before 2001 8% per year

After 2000 7% per year

Credit balance in funding standard account as of 12/31/1999: \$10,000.

Selected valuation results as of 1/1/2000:

Normal cost \$90,000

Amortization charge due to initial

accrued liability 39,000

Amortization charge due to plan

amendment effective 1/1/1998 11,000

Contribution for 2000: \$150,000 paid on 7/1/2000.

Selected valuation results as of 1/1/2001:

Normal cost after assumption change \$100,000

Increase in entry age normal accrued liability

due to assumption change 60,000

# [Question 21]{.underline} 

In what range is the 2001 minimum required contribution as of
12/31/2001?

(A) Less than \$142,000

(B) \$142,000 but less than \$149,000

(C) \$149,000 but less than \$156,000

(D) \$156,000 but less than \$163,000

(E) \$163,000 or more

# [Data for Question 22]{.underline} (4 points)

Plan effective date: 1/1/1975.

Accrued benefit: 3% of final compensation per year of service, up to 25
years.

Early retirement eligibility: Age 55.

Early retirement benefit: Accrued benefit reduced by 5% for each year
that benefit commencement date precedes normal retirement. Unreduced
benefits are available if participant's age plus service total at least
80.

Actuarial cost method: Unit credit.

+-------------------------------------------+------------+------------+
| Selected actuarial assumptions:           | 7% per     |            |
|                                           | year       |            |
| Interest rate                             |            |            |
|                                           | 0% per     |            |
| Compensation increases                    | year       |            |
|                                           |            |            |
| Pre-retirement decrements                 | None       |            |
|                                           |            |            |
| Retirement age                            | 65         |            |
+-------------------------------------------+------------+------------+
| Data for selected participants:           | [Smith]{.  | [Jones]{.  |
|                                           | underline} | underline} |
| Date of birth                             |            |            |
|                                           | 1/1/1939   | 1/1/1939   |
| Date of hire                              |            |            |
|                                           | 1/1/1975   | 1/1/1985   |
| Date of retirement                        |            |            |
|                                           | 1/1/2001   | 1/1/2001   |
+-------------------------------------------+------------+------------+
| Projected normal retirement benefit       | \$30,000   | \$30,000   |
+-------------------------------------------+------------+------------+
| Compensation for Smith and Jones has not  |            |            |
| increased since 1999.                     |            |            |
+-------------------------------------------+------------+------------+

Selected annuity values:

$ä_{\text{62}}^{(\text{12})}$ = 8.84

$ä_{\text{65}}^{(\text{12})}$ = 8.12

Effective 1/1/2001, both Smith and Jones elected to retire early and
start receiving benefits immediately.

## [Question 22]{.underline}

In what range is the absolute value of the actuarial (gain)/loss
resulting from the early retirement of Smith and Jones as of 1/1/2001?

(A) Less than \$25,000

(B) \$25,000 but less than \$55,000

(C) \$55,000 but less than \$85,000

(D) \$85,000 but less than \$115,000

(E) \$115,000 or more

[Data for Question 23]{.underline} (3 points)

Plan effective date: 1/1/1999.

Actuarial cost method: Unit credit.

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

Actuarial assumptions:

Valuation interest rate 7% per year

Retirement age 65

Compensation increases 4% per year

Pre-retirement decrements None

Data for sole participant as of 1/1/2000:

Date of birth 1/1/1946

Date of participation 1/1/1999

1997 compensation \$42,000

1998 compensation 50,000

1999 compensation 52,000

Selected annuity value:

$ä_{\text{65}}^{(\text{12})}$ = 9.24

# At 1/1/2001, the participant's 2000 compensation was reported as \$56,000.

# [Question 23]{.underline}

In what range is the absolute value of the liability (gain)/loss for
2000 as of 1/1/2001?

(A) Less than \$500

(B) \$500 but less than \$650

(C) \$650 but less than \$800

(D) \$800 but less than \$950

(E) \$950 or more

[Data for Question 24]{.underline} (4 points)

### Type of plan: Collectively bargained single employer plan with annual bargaining agreements commencing January 1 of each year.

Plan effective date: 1/1/2000.

# Actuarial cost method: Entry age normal with shortfall.

Valuation interest rate: 7% per year.

Selected valuation results as of:

[1/1/2000]{.underline} [1/1/2001]{.underline}

Normal cost \$30,000 \$36,000

Unfunded actuarial liability 300,000 315,000

Estimated base units 10,000 12,000

Actual base units in 2000 and 2001: 10,000 each year.

Credit balance in the funding standard account as of 12/31/2000:
\$3,600.

## [Question 24]{.underline}

# In what range is the 2001 shortfall loss as of 12/31/2001?

(A) Less than \$10,400

(B) \$10,400 but less than \$10,700

(C) \$10,700 but less than \$11,000

(D) \$11,000 but less than \$11,300

(E) \$11,300 or more

[Data for Question 25]{.underline} (5 points)

Type of plan: Cash balance.

Plan provisions: The cash balance account is equal to the accumulation
of compensation credits and interest credits.

> Compensation credits are credited at end of year based on compensation
> at beginning of year.
>
> Interest credits are credited at end of year.
>
> Compensation credit rate: 4% per year
>
> Interest credit rate: Applicable 30-year Treasury rate
>
> Termination benefit: Cash balance account
>
> Vesting: 100% immediately

Actuarial assumptions:

> Valuation interest rate: 7% per year
>
> Applicable 30-year Treasury rate: 6% per year
>
> Retirement age: 65
>
> Compensation increases: 3% per year

Probability of withdrawal:

+--------------------------------------+-------------------------------+
| ![](media/image1.wmf)                | ![](media/image2.wmf)         |
+--------------------------------------+-------------------------------+
| 30                                   | 30%                           |
|                                      |                               |
| 31                                   | 20%                           |
|                                      |                               |
| 32                                   | 10%                           |
|                                      |                               |
| 33 and over                          | 0%                            |
+--------------------------------------+-------------------------------+

Pre-retirement decrements other

than withdrawal: None

Termination/withdrawal assumed to occur on first day of plan year.

Termination benefit: Paid as lump-sum on date of termination.

Data for participant Smith as of 1/1/2001:

Age 30

Date of hire 1/1/2001

Compensation \$30,000

[Question 25]{.underline}

In what range is the present value of Smith's projected withdrawal
benefits as of 1/1/2001?

(A) Less than \$300

(B) \$300 but less than \$500

(C) \$500 but less than \$700

(D) \$700 but less than \$900

\(E\) \$900 or more

[Data for Question 26]{.underline} (4 points)

Plan effective date: 1/1/1990.

Actuarial cost method: Unit credit.

Valuation interest rate: 7% per year.

175% of Federal mid-term rate as of 1/1/2001: 9.91% per year.

Selected valuation results and funding standard account entries:

[1/1/2000]{.underline} [1/1/2001]{.underline}

Normal cost \$310,000 \$350,000

Net amortization charges 60,000 45,000

Credit balance as of 12/31/2000: \$50,000.

No contribution was required for 2000.

The minimum required contribution for 2001 is to be paid in its entirety
on 2/15/2002.

Quarterly contributions are required in 2001.

# 

# [Question 26]{.underline}

In what range is the additional interest charge in the 2001 funding
standard account due to late quarterly contributions?

(A) Less than \$3,600

(B) \$3,600 but less than \$6,000

(C) \$6,000 but less than \$8,400

(D) \$8,400 but less than \$10,800

(E) \$10,800 or more

[Data for Question 27]{.underline} (3 points)

Actuarial cost method: Unit credit.

Valuation interest rate: 7% per year.

Selected valuation results:

[1/1/2000]{.underline} [1/1/2001]{.underline}

##  Normal cost \$100,000 \$120,000

Accrued liability 800,000

Actuarial (market) value of assets 600,000

Funded current liability percentage 85% 92%

Net outstanding balance of all amortization bases in funding standard
account as of 1/1/2000: \$205,000.

Net amortization charge as of 1/1/2000 for all amortization bases in
2000 funding standard account: \$25,000.

No bases were fully amortized during 2000.

There were no gains or losses during 2000.

There was no additional funding charge for 2000.

Contribution for 2000: \$125,000 paid on 4/15/2000.

[Question 27]{.underline}

In what range is the quarterly contribution due 4/15/2001?

(A) Less than \$29,500

(B) \$29,500 but less than \$30,500

(C) \$30,500 but less than \$31,500

(D) \$31,500 but less than \$32,500

(E) \$32,500 or more

[Data for Question 28]{.underline} (4 points)

Plan effective date: 1/1/1996.

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

Actuarial cost method:

Prior to 2001 Aggregate

After 2000 Unit credit

Actuarial assumptions:

Valuation interest rate 7% per year

Retirement age 65

Compensation increases 4% per year

Pre-retirement decrements None

Data for sole participant as of 1/1/2001:

Date of birth 1/1/1946

Date of hire 1/1/1996

Annual compensation for 2001 and

for each prior year \$150,000

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

Actuarial (market) value of assets as of 1/1/2001: \$135,000.

Selected annuity value: $ä_{\text{65}}^{(\text{12})}$ ~=~ 9.24.

The change in funding method was made in accordance with Rev. Proc.
2000-40.

IRC section 401(a)(17) limitation for 2001: \$170,000.

IRC section 415(b) limitation for 2001: \$140,000.

[Question 28]{.underline}

In what range is the minimum required contribution for 2001 as of
1/1/2001?

(A) Less than \$36,000

(B) \$36,000 but less than \$46,000

(C) \$46,000 but less than \$56,000

(D) \$56,000 but less than \$66,000

(E) \$66,000 or more

[Data for Question 29]{.underline} (3 points)

Type of plan: Multiemployer plan.

Plan effective date: 1/1/1996.

Actuarial cost method: Entry age normal.

Valuation interest rate: 7% per year.

Credit balance as of 12/31/2000: \$55,000.

Experience (gain)/loss for plan year ending 12/31/2000: (\$20,000).

Actuarial (market) value of assets as of 1/1/2001: \$700,000.

#  

Amortization charges for all amortization bases in the 2000 funding
standard account:

#### 

####  Amortization

#  Effective charge at

####  Nature of base date 1/1/2001

###  Initial accrued liability 1/1/1996 \$90,000

#  Increase due to change in assumptions 1/1/1997 30,000

#  Increase due to plan amendment 1/1/1998 50,000

Actuarial (gain)/loss 1/1/2000 40,000

## [Question 29]{.underline}

# In what range is the accrued liability as of 1/1/2001?

(A) Less than \$2,950,000

(B) \$2,950,000 but less than \$3,050,000

(C) \$3,050,000 but less than \$3,150,000

(D) \$3,150,000 but less than \$3,250,000

(E) \$3,250,000 or more

[Data for Question 30]{.underline} (4 points)

Plan effective date: 1/1/1982.

# Current liability interest rate for 1/1/2001: 6.1% per year.

Funding deficiency in funding standard account as of 12/31/2000:
\$150,000.

Selected data and valuation results as of 1/1/2001:

Actuarial (market) value of assets \$1,475,000

Current liability (including liability for

unpredictable contingent event benefits) 3,000,000

Expected increase in current liability 75,000

Unfunded new liability amount 150,000

Unpredictable contingent event benefits liability

for event that occurred in 2001 325,000

Benefits paid during 2001 due to unpredictable contingent event:
\$65,000.

Transition percentage in 2001 is 100%.

The additional funding charge applies in 2001.

The employer elects not to apply the special first-year rule to
calculate the unpredictable contingent event amount.

## [Question 30]{.underline}

# In what range is the sum of the deficit reduction contribution and the unpredictable contingent event amount as of 1/1/2001?

(A) Less than \$360,000

(B) \$360,000 but less than \$395,000

(C) \$395,000 but less than \$430,000

(D) \$430,000 but less than \$465,000

(E) \$465,000 or more

[Data for Question 31]{.underline} (3 points)

Plan effective date: 1/1/1995.

Normal retirement benefit:

Effective 1/1/1995 \$20 per month for each year of service

Effective 1/1/2001 \$25 per month for each year of service

Actuarial cost method: Individual level premium.

Actuarial assumptions:

Valuation interest rate 7% per year

Retirement age 65

Pre-retirement decrements None

There have been no experience gains or losses since the inception of the
plan.

Data for sole participant:

Date of birth 1/1/1961

Date of hire 1/1/1986

Selected annuity value:

$ä_{\text{65}}^{(\text{12})}$ = 9.873

# [Question 31]{.underline} 

In what range is the 2001 normal cost as of 1/1/2001?

(A) Less than \$675

(B) \$675 but less than \$975

(C) \$975 but less than \$1,275

(D) \$1,275 but less than \$1,575

(E) \$1,575 or more

[Data for Question 32]{.underline} (4 points)

Plan effective date: 1/1/2000.

Normal retirement benefit: \$40 per month per year of service.\
\
Actuarial cost method: Attained age normal.

Actuarial assumptions:

Valuation interest rate 7% per year

Pre-retirement decrements None

Retirement age 65

Actuarial (market) value of assets as of 1/1/2001: \$2,700.

Valuation data for sole participant:

## Date of birth 1/1/1954

Date of hire 1/1/1989

The contribution for the 2000 plan year was paid on 1/1/2000 in an
amount equal to the minimum required contribution payable as of that
date.

There were no experience gains or losses during 2000 from any source
other than investments.

Selected annuity value:

$ä_{\text{65}}^{(\text{12})}$ = 8.74

[Question 32]{.underline}

In what range is the normal cost for 2001 as of 1/1/2001?

(A) Less than \$2,000

(B) \$2,000 but less than \$2,400

(C) \$2,400 but less than \$2,800

(D) \$2,800 but less than \$3,200

(E) \$3,200 or more

[Data for Question 33]{.underline} (3 points)

Valuation interest rate: 7% per year.

Selected valuation results as of December 31, 2000:

## 

##  [Plan A]{.underline} [Plan B]{.underline} [Plan C]{.underline}

##  Present value of accrued benefits 

##  on a termination basis \$350,000 \$225,000 \$125,000

##  Liability component of the 

full funding limitation

(including normal cost) 500,000 350,000 150,000

Actuarial (market) value of assets 440,000

Credit balance in funding standard

account 80,000

As of December 31, 2000, Plan A is split into Plans B and C. The plan
sponsor continues to maintain both Plans B and C.

[Question 33]{.underline}

In what range is the market value of assets *minus* the credit balance
for Plan C as of 1/1/2001?

(A) Less than \$107,000

(B) \$107,000 but less than \$117,000

(C) \$117,000 but less than \$127,000

(D) \$127,000 but less than \$137,000

(E) \$137,000 or more

[Data for Question 34]{.underline} (3 points)

Plan effective date: 1/1/1993.

Normal retirement benefit:

> Before 2001 2% times final three-year average salary per year of
> service
>
> After 2000 3% times final three-year average salary per year of
> service

Actuarial cost method: Frozen initial liability.

Valuation interest rate:

Before 2001 7% per year

After 2000 8% per year

Entry age normal accrued liability on 1/1/1993: \$110,000.

Actuarial (market) value of assets as of 1/1/2001: \$170,000.

Entry age normal accrued liability as of 1/1/2001:

Old formula and old assumptions \$202,000

Old formula and new assumptions 180,000

New formula and new assumptions 248,000

The effect of the assumption change is measured before the effect of the
plan amendment.

# 

# 

# [Question 34]{.underline}

In what range is the absolute value of the net amortization charge in
the 2001 funding standard account as of 1/1/2001?

(A) Less than \$11,000

(B) \$11,000 but less than \$11,500

(C) \$11,500 but less than \$12,000

(D) \$12,000 but less than \$12,500

(E) \$12,500 or more

# [Data for Question 35]{.underline} (4 points)

Plan effective date: 1/1/1996.

Actuarial cost method: Entry age normal.

Valuation interest rate: 7% per year.

Selected entries from 2000 Schedule B as of 1/1/2000:

Credit balance in funding standard account \$20,000

Normal cost 9,000

Net amortization charges 8,000

Outstanding amortization balances 95,000

Contribution for 2000: \$12,000 paid on 12/31/2000.

Selected valuation results and other data as of 1/1/2001:

Actuarial value of assets \$420,000

Market value of assets 396,000

Accrued liability 530,000

Normal cost 10,500

# [Question 35]{.underline} 

In what range is the minimum required contribution for 2001 as of
12/31/2001?

(A) Less than \$5,000

(B) \$5,000 but less than \$11,000

(C) \$11,000 but less than \$17,000

(D) \$17,000 but less than \$23,000

(E) \$23,000 or more

# [Data for Question 36]{.underline} (4 points)

Plan effective date: 1/1/1998.

Actuarial cost method: Entry age normal.

Valuation interest rate:

### Before 2000 8% per year

After 1999 7% per year

Initial balance of all amortization bases in 2001 funding standard
account:

Initial accrued liability \$185,000

Experience (gain)/loss during 1998 0

Experience (gain)/loss during 1999 (10,000)

Experience (gain)/loss during 2000 (8,000)

Increase in unfunded accrued liability due to plan

amendment effective 1/1/1999 20,000

Increase in unfunded accrued liability due to

assumption change as of 1/1/2000 15,000

Selected valuation results as of 1/1/2001:

Accrued liability \$375,000

Actuarial (market) value of assets 200,000

[Question 36]{.underline}

In what range is the credit balance in the funding standard account as
of 12/31/2000?

(A) Less than \$21,000

(B) \$21,000 but less than \$21,400

(C) \$21,400 but less than \$21,800

(D) \$21,800 but less than \$22,200

(E) \$22,200 or more

[Data for Question 37]{.underline} (4 points)

# Actuarial cost method: Unit credit.

Valuation date: 1/1/2001.

Normal retirement benefit: \$75 per month for each year of service.

Early retirement benefit: Accrued benefit reduced by 1/30 for each year
by which commencement of payments precedes age 65.

Actuarial assumptions:

Interest rate 7% per year

Retirement age:

#  Before 2001 Age 65

#  After 2000 Age 62

Preretirement decrements None

Data for sole plan participant:

Date of birth 1/1/1940

Date of hire 1/1/1991

Selected annuity values:

$ä_{\text{62}}^{(\text{12})}$ = 10.74

$ä_{\text{65}}^{(\text{12})}$ = 10.10

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

The minimum required contribution for 2001 is not restricted by the full
funding limit.

## [Question 37]{.underline}

# In what range is the increase in the minimum required contribution for 2001 payable 12/31/2001 due to the change in assumed retirement age?

(A) Less than \$1,500

(B) \$1,500 but less than \$2,500

(C) \$2,500 but less than \$3,500

(D) \$3,500 but less than \$4,500

(E) \$4,500 or more

[Data for Question 38]{.underline} (2 points)

Consider the following statements:

> I. The asset valuation method cannot be changed if it has been changed
> in any of the four preceding plan years.

II\. The actuarial value of assets must be within 20% of the market
value of assets.

> III\. Under the procedures for automatic approval of funding method
> changes, the amortization period is ten years for a base established
> due to a change in asset valuation method.

[Question 38]{.underline}

Which, if any, of the above statement(s) is (are) true?

(A) I and II only

(B) I and III only

(C) II and III only

(D) I, II and III

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

[Data for Question 39]{.underline} (5 points)

Types of plans: Defined benefit and profit sharing.

Valuation interest rate, defined benefit plan: 7% per year.

Actuarial cost method: Unit credit.

Selected valuation results for defined benefit plan as of 1/1/2001:

  ------------------------------------------------- ---------------------
  Accrued liability                                 \$900,000

  Normal cost                                       50,000

  Actuarial value of assets                         750,000

  Market value of assets                            825,000

  OBRA '87 current liability projected to 12/31     1,000,000

  RPA '94 current liability projected to 12/31      1,250,000

  Expected benefit payments for the year            0
  ------------------------------------------------- ---------------------

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

Compensation, as defined in IRC section 404, for employees during 2001:

  ----------------------------------------------------- -----------------
  Compensation for employees in defined benefit plan    \$200,000
  only                                                  

  Compensation for employees in profit sharing plan     560,000
  only                                                  

  Compensation for employees in both defined benefit    1,500,000
  and profit sharing plans                              

  Compensation for employees not covered by either plan 1,000,000
  ----------------------------------------------------- -----------------

The defined benefit plan covers more than 100 participants at all times
during 2001.

Defined benefit plan contribution for 2001: Amount equal to the full
funding limitation, paid on 12/31/2001.

The limit adjustment for 2001 is calculated using the fresh start
alternative.

[Question 39]{.underline}

In what range is the deductible limit for the profit sharing plan for
the 2001 tax year?

(A) Less than \$100,000

(B) \$100,000 but less than \$200,000

(C) \$200,000 but less than \$300,000

(D) \$300,000 but less than \$400,000

(E) \$400,000 or more

# [Data for Question 40]{.underline} (3 points)

Actuarial cost method: Entry age normal.

Valuation interest rate: 7% per year.

Current liability interest rate for 1/1/2001: 6% per year.

Selected valuation results as of 1/1/2001:

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

Accrued liability 1,070,000

Normal cost 90,000

Current liability 1,200,000

Expected increase in current liability 130,000

Expected benefit payments 0

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

There are no amortization charges or credits in the funding standard
account as of 1/1/2001.

# [Question 40]{.underline}

In what range is the 2001 minimum required contribution as of
12/31/2001?

(A) Less than \$75,000

(B) \$75,000 but less than \$82,000

(C) \$82,000 but less than \$89,000

(D) \$89,000 but less than \$96,000

(E) \$96,000 or more

# [Data for Question 41]{.underline} (3 points)

Actuarial cost method: Unit credit.

Valuation interest rate: 7% per year.

Current liability interest rate for 1/1/2001: 6.1% per year.

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

Selected valuation results as of 1/1/2001:

  ------------------------------------------------------ ----------------
  Normal cost                                            \$8,000

  Accrued liability                                      95,000

  Current liability                                      57,000

  Expected increase in current liability                 9,000

  Actuarial value of assets                              101,000

  Market value of assets                                 97,000

  Benefits expected to be paid during 2001               0
  ------------------------------------------------------ ----------------

A contribution of \$200 was credited to the 2000 plan year but was not
deducted in the 2000 tax year. This contribution is included in the
above asset values.

[Question 41]{.underline}

In what range is the full funding limitation for 2001 for maximum tax
deductible purposes?

(A) Less than \$2,000

(B) \$2,000 but less than \$3,500

(C) \$3,500 but less than \$5,000

(D) \$5,000 but less than \$6,500

(E) \$6,500 or more

[Data for Question 42]{.underline} (4 points)

Plan effective date: 1/1/2000.

Accrued benefit: \$50 per month per year of service for the first 10
years of service plus \$65 per month per year of service for service
over 10 years.

Actuarial cost method: Unit credit.

Selected actuarial assumptions:

Valuation interest rate 7% per year

Retirement age 65

Pre-retirement decrements None

Accrued liability as of 1/1/2000: \$50,000.

Data for sole participant:

Date of birth 1/1/1939

Date of hire 1/1/1990

Contribution for 2000: Paid 4/1/2000 in an amount equal to the maximum
deductible contribution.

There were no gains or losses during 2000.

[Question 42]{.underline}

In what range is the minimum required contribution for 2001 as of
1/1/2001?

(A) Less than \$5,700

(B) \$5,700 but less than \$6,200

(C) \$6,200 but less than \$6,700

(D) \$6,700 but less than \$7,200

(E) \$7,200 or more

# [Data for Question 43]{.underline} (4 points) 

Actuarial cost method: Frozen initial liability.

Valuation interest rate: 7% per year.

The plan was amended effective 1/1/2001 to improve benefits.

The asset valuation method was changed effective for the 2001 valuation.

Selected valuation results and funding standard account items as of
1/1/2001:

+-----------------------------------+-----------------+-----------------+
|                                   | Before          | After amendment |
|                                   | amendment [and  | [and method     |
|                                   | method          | chang           |
|                                   | chang           | es]{.underline} |
|                                   | es]{.underline} |                 |
+-----------------------------------+-----------------+-----------------+
| Present value of future benefits  | \$1,000,000     | \$1,035,000     |
+-----------------------------------+-----------------+-----------------+
| Entry age normal accrued          | 700,000         | 720,000         |
| liability                         |                 |                 |
+-----------------------------------+-----------------+-----------------+
| Actuarial value of assets         | 610,000         | 620,000         |
+-----------------------------------+-----------------+-----------------+
| Present value of future           | 33,200,000      | 33,200,000      |
| compensation                      |                 |                 |
+-----------------------------------+-----------------+-----------------+
| Expected compensation for 2001    | 4,000,000       | 4,000,000       |
+-----------------------------------+-----------------+-----------------+
| Outstanding balance for all       | 275,000         |                 |
| amortization                      |                 |                 |
|                                   |                 |                 |
| bases in 2000 funding standard    |                 |                 |
| account                           |                 |                 |
+-----------------------------------+-----------------+-----------------+
| Net amortization charge for all   | 21,200          |                 |
| amortization                      |                 |                 |
|                                   |                 |                 |
| bases in 2000 funding standard    |                 |                 |
| account                           |                 |                 |
+-----------------------------------+-----------------+-----------------+
|                                   |                 |                 |
+-----------------------------------+-----------------+-----------------+
| Credit balance in funding         | 0               |                 |
| standard account                  |                 |                 |
|                                   |                 |                 |
| as of 12/31/2000                  |                 |                 |
+-----------------------------------+-----------------+-----------------+

[Question 43]{.underline}

In what range is the absolute value of the change in the 2001 minimum
required contribution payable 12/31/2001 due to the plan amendment and
method change?

(A) Less than \$1,500

(B) \$1,500 but less than \$2,700

(C) \$2,700 but less than \$3,900

(D) \$3,900 but less than \$5,100

(E) \$5,100 or more

NOVEMBER 2001 EA-2, SEGMENT A

# **ANSWER KEY**

1\. A 26. B

2\. B 27. B

3\. C 28. C

4\. E 29. C

5\. B 30. D

6\. E 31. C

7\. D 32. B

8\. C 33. C

9\. B 34. B

10\. B 35. C

11\. B 36. C

12\. D 37. C

13\. B 38. C

14\. D 39. C

15\. C 40. D

16\. A 41. E

17\. dropped 42. D

18\. D 43. B

19\. C

20\. C

21\. B

22\. D

23\. B

24\. B

25\. A

E2A-10-01

9/02