CGFO Pension Administration 4

Question 1

A government pension plan's 'experience study' is conducted to:

Accepted Answer

Review and update actuarial assumptions based on actual plan experience

Answer

An experience study compares actual demographic and economic outcomes (mortality, turnover, salary growth) to prior assumptions so they can be updated for future valuations.

Question 2

The 'mortality table' used in pension valuations primarily affects the calculation of:

Accepted Answer

The present value of lifetime benefit payments

Answer

Mortality tables determine how long retirees are expected to live and thus how many benefit payments must be funded, directly affecting the liability calculation.

Question 3

Which of the following best describes a 'DROP' program (Deferred Retirement Option Plan) in public pensions?

Accepted Answer

A program allowing employees to retire while continuing to work and accumulating a lump-sum benefit

Answer

A DROP allows eligible employees to retire (and stop accruing new benefits) while continuing to work, with pension payments accumulating in an account paid out upon actual separation.

Question 4

Under GASB 67, a pension plan that is a 'cost-sharing multiple-employer' plan means:

Accepted Answer

Multiple employers pool their assets and obligations so risks and costs are shared

Answer

In a cost-sharing multiple-employer plan, participating employers pool assets and liabilities, sharing actuarial risks and reducing volatility for individual employers.

Question 5

The 'normal cost' component of a government pension plan's annual required contribution represents:

Accepted Answer

The present value of pension benefits employees earn during the current year

Answer

Normal cost is the actuarial value of the retirement benefits earned (accrued) by active employees during the current fiscal year.

(CGFO) Certified Government Finance Officer Practice Test

(CGFO) Certified Government Finance Officer Practice Test

CGFO Pension Administration 4