CPC CPC Actuarial Concepts & Funding Methods 2

Question 1

Under the Unit Credit actuarial cost method, how is the normal cost determined?

Accepted Answer

As the present value of the benefit earned during the current year

Answer

The Unit Credit method defines the normal cost as the present value of the benefit unit earned by each participant during the current plan year.

Question 2

A plan's adjusted funding target attainment percentage (AFTAP) falls below 60%. What benefit restriction is triggered?

Accepted Answer

All benefit accruals must cease immediately

Answer

When AFTAP falls below 60%, the plan must cease all future benefit accruals until the percentage is restored above the threshold.

Question 3

Which segment rate is used to discount liabilities for benefit payments expected more than 20 years from the valuation date?

Accepted Answer

Third segment rate

Answer

The third segment rate, reflecting longer-maturity corporate bond yields, applies to benefit payments due more than 20 years after the valuation date.

Question 4

What is the maximum period over which a funding shortfall amortization charge can be spread under IRC Section 430?

Accepted Answer

7 years

Answer

Under IRC Section 430, shortfall amortization bases are amortized over 7 years from the year they are established.

Question 5

A consulting actuary uses the Aggregate funding method. Which statement is true?

Accepted Answer

The method produces no separate past service liability; gains and losses are recognized immediately

Answer

The Aggregate method spreads all costs (including past service) over future working lifetimes as a level amount or percentage, producing no separate past service liability.

(CPC) Certified Pension Consultant Practice Test

(CPC) Certified Pension Consultant Practice Test

CPC CPC Actuarial Concepts & Funding Methods 2