CPC CPC Actuarial Concepts & Funding Methods

Question 1

Which actuarial cost method spreads the present value of future benefits as a level percentage of projected future compensation?

Accepted Answer

Entry Age Normal

Answer

Unit Credit

Answer

Aggregate

Answer

Frozen Initial Liability

Question 2

What is the minimum required contribution for a single-employer defined benefit plan under IRC Section 430?

Accepted Answer

The greater of the target normal cost or the shortfall amortization charge

Answer

The funding shortfall amortized over 7 years

Answer

10% of plan assets

Answer

The unit credit normal cost only

Question 3

A plan's 'funding target' under PPA 2006 is measured using what interest rate?

Accepted Answer

24-month average segment rates based on corporate bond yields

Answer

The plan's assumed investment return

Answer

The 30-year Treasury rate

Answer

The Federal short-term rate plus 3%

Question 4

Which of the following best describes the 'at-risk' liability used in defined benefit funding calculations?

Accepted Answer

Liability assuming maximum lump-sum elections and early retirement

Answer

Liability assuming all participants retire at the earliest possible date

Answer

Liability using the highest possible discount rate

Answer

Liability calculated without mortality assumptions

Question 5

A plan sponsor must obtain a waiver of minimum funding requirements from the IRS when?

Accepted Answer

Making the minimum required contribution would impose a substantial business hardship

Answer

The plan is overfunded by more than 10%

Answer

The plan has fewer than 100 participants

Answer

Investment losses exceed 20% in a single year

Question 6

What is the purpose of the 'credit balance' in a defined benefit plan's funding standard account?

Accepted Answer

To track excess contributions that can offset future minimum required contributions

Answer

To record investment gains for distribution to participants

Answer

To reduce the plan's vested benefit obligation

Answer

To satisfy PBGC variable-rate premium obligations