Actuary Certification Pension Valuation 3

Question 1

Under PPA 2006, what is the consequence if a single-employer plan's funding shortfall triggers the 'at-risk' status?

Accepted Answer

Higher minimum required contributions using at-risk actuarial assumptions apply

Answer

At-risk plans must use prescribed at-risk assumptions that increase the funding target and potentially the minimum required contribution.

Question 2

For GASB 67/68 reporting, the discount rate used to measure the total pension liability is:

Accepted Answer

A blend of expected return on funded benefits and a bond rate for unfunded benefits

Answer

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.

Question 3

An actuarial gain occurs in a pension plan when:

Accepted Answer

Actual experience is more favorable than assumed experience

Answer

An actuarial gain results when actual experience (mortality, turnover, salary, investment returns) is more favorable than what the actuarial assumptions predicted.

Question 4

Which of the following best describes the 'spot rate' approach for determining pension liability discount rates under ASC 715?

Accepted Answer

Applying individual zero-coupon bond rates matched to each expected benefit payment period

Answer

The spot rate approach applies individual zero-coupon yield curve rates to each period's expected benefit payment rather than a single composite rate.

Question 5

In a traditional defined benefit plan valuation, the selection of a lower discount rate will generally:

Accepted Answer

Increase the actuarial accrued liability

Answer

A lower discount rate increases the present value of future benefit payments, thereby increasing the actuarial accrued liability.

Actuary Certification Practice Test

Actuary Certification Practice Test

Actuary Certification Pension Valuation 3