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5. (9 points) in order to attract and retain employees in senior positions, noc wants to introduce terminal funding by providing the options of an insured annuity or a lump sum benefit for the national oil full-time salaried supplemental retirement plan (srp).JAa*3+]me( 此_文_来_源_于_我_的_学_习_网 财会考试精算师考试 ]JAa*3+]mehttP://Www.Gzu521.Com the lump sum will be equivalent to the net present value of the after-tax annual srp benefit. the after-tax payment from the insured annuity will be equal to the after-tax annual srp benefit. noc will reimburse the member for any immediate taxes payable under both options. you are given: • pat, a senior executive of noc, will retire with an annual pension under the srp of $100,000. • the before-tax discount rate used by noc to calculate lump sum benefits is 10%. • lump sum annuity factors at pat’s retirement date are: at a discount rate of 10%: 9.5 at a discount rate of 6%: 13.5 • the cost of buying pat’s annuity at retirement is $10 for every $1 of annual benefit purchased. vosne’s tax rules for single premium annuity contracts are: • the employer obtains a deduction for any premiums it pays; • the executive is immediately taxed on the full purchase price of the annuity; • a proportionate part of each annuity payment would be deemed a tax-free return of the premium (“exclusion ratio”) and the balance is taxable at the individual tax rate. for this purpose, a life expectancy of 20 years is used. (a) describe the issues that noc must address in adopting a terminal funding approach. (b) calculate the cost differential between the two terminal funding options. show your work. course 8: fall 2004 - 5 - stop retirement benefits, comprehensive segment – u.s. morning session questions 2 – 6 pertain to the case study 6. (12 points) noc is proposing the following changes to the retiree health benefit program of its salaried employees: • effective january 1, 2004, the program will be closed to new employees; • salaried employees with less than 20 years of service at january 1, 2004 who do not retire before january 1, 2005 will not be eligible for the benefit after that date; and • for all other salaried employees, effective january 1, 2005, the portion of the premium paid by the program will be in accordance with the following schedule: years of service at retirement plan retiree/spouse 20-24 50% 50% 25-29 75% 25% 30+ 100% 0% noc wants an analysis of the proposed changes, in respect of the following groups of employees: • group a – the salaried employees who are currently eligible for the benefits but who lose the benefits if they do not retire in the next year; • group b – the salaried employees other than those in group a who are no longer eligible to receive benefits under the program; • group c – the salaried employees who are eligible, under current assumptions, to receive reduced benefits under the program; and • group d – the salaried employees not affected by the proposed changes. (a) (7 points) based on the age and service distribution of the noc full-time salaried pension plan at january 1, 2004, estimate the number of salaried employees in groups a, b, c and d. identify any assumptions you used in your estimate. (b) (3 points) describe any special accounting treatments that are applicable for groups a, b, c and d. (c) (2 points) describe the consequences to noc of the proposed changes. **end of examination** morning session course 8: fall 2004 - 6 - go to next page retirement benefits, comprehensive segment – u.s. afternoon session **beginning of examination 8** comprehensive segment – u.s. afternoon session questions 7 – 9 pertain to the case study 7. (8 points) your client noc is budgeting for fiscal year 2005 in june of 2004. they have asked you to estimate the fiscal year 2005 pension expense for the national oil full-time hourly union pension plan. you are given (all numbers in $000’s): projected benefit obligation at january 1, 2004 with 6% discount rate = 560,919 service cost at january 1, 2004 with 6% discount rate = 27,169 2005 estimated employer contributions = 38,000 2005 estimated benefit payments = 12,100 (a) describe the considerations for selecting the return on assets during 2004 and the discount rate for 2005 for budgeting purposes. (b) estimate the 2005 pension expense using a discount rate of 6% and 转,贴.自,D.O,C.5,2.1,资.料,分.享,网.财会考试,精算师考试 www.doc521.com assuming no other gains or losses. (c) describe and estimate the effect of a change in the economic environment on each component of your estimate of the 2005 pension expense. course 8: fall 2004 - 7 - go to next page retirement benefits, comprehensive segment – u.s. afternoon session questions 7 – 9 pertain to the case study   |
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