| SOA真题November2004Course8RC |
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COURSE 8: Fall 2004 - 1 - GO TO NEXT PAGE
Retirement Benefits,
Comprehensive Segment - Canada
Morning Session
**BEGINNING OF EXAMINATION 8**
COMPREHENSIVE SEGMENT - CANADA
MORNING SESSION
1. (9 points) A pension committee member at your Canadian based client believes that the
interest rate for the defined benefit plan valuations is too low. He supports his view by
stating that a higher interest rate would lower the cost of the plan. A second committee
member argued against raising the assumption.
The chairman of the pension committee has asked you to lead a discussion at the next
pension committee meeting regarding the interest rate assumptions for funding purposes
and for accounting purposes, and their effect on the interested parties.
Outline your discussion.
COURSE 8: Fall 2004 - 2 - GO TO NEXT PAGE
Retirement Benefits,
Comprehensive Segment - Canada
Morning Session
Questions 2 – 6 pertain to the Case Study
2. (12 points) The CFO of NOC has decided to take a more active role in managing NOC’s
pension plan assets. In reviewing the performance of the National Oil Full-Time Hourly
Union Pension Plan, he is disturbed by the recent absolute performance. He proposes
that the assets should be moved to 100% domestic fixed income because that asset class
has outperformed the other asset classes in 2 of the last 3 years.
You are given:
Calendar Year Rf Rm β
2003 4% 21% 0.9
2002 5% -5% 0.85
2001 4% 1% 0.8
Additional Information for 2003
Target Portfolio Mix
for 2003 Benchmark Return in
2003
Domestic Large Cap
Equities
35% 30%
Domestic Small Cap
Equities
25% 47%
Domestic Fixed Income 25% 4%
International Equities 10% 39%
Real Estate 5% 9%
Cash 0% 1%
(a) Describe the features in a Statement of Investment Policies and Procedures that
could help the CFO in his evaluation of the Plan’s performance.
(b) Calculate the 2001, 2002 %26amp; 2003 Risk Adjusted Rate of Return for the fund.
(c) Calculate the 2001, 2002 %26amp; 2003 Treynor Measure for the fund.
(d) Evaluate the investment performance of the fund during 2003.
(e) Critique the CFO’s proposal.
COURSE 8: Fall 2004 - 3 - GO TO NEXT PAGE
Retirement Benefits,
Comprehensive Segment - Canada
Morning Session
Questions 2 – 6 pertain to the Case Study
3. (8 points) The government of Gevrey is concerned that workers are harmed by switching
companies periodically throughout their careers. The government has asked for your
assistance in understanding this issue.
(a) Describe the implications of switching employers on workers’ retirement benefits.
(b) Suggest policies that could be adopted by the government of Gevrey to improve
the portability of private retirement benefits.
(c) Describe how these policies address the issues identified in (a).
(d) Describe the impact of these policies on NOC.
4. (10 points) Auditors in Gevrey have criticized its current pension accounting standards
as being misleading to readers of financial statements and contrary to the teachings of
financial economics.
The Department of Accounting Standards is considering changes to the current
accounting rules to achieve the following goals:
%26#8226; Increased transparency;
%26#8226; Improved consistency with how financial economics measures “risk”; and
%26#8226; More practical and usable information for financial statement readers.
(a) Critique the current accounting rules in light of the Department’s goals.
(b) Recommend changes to the accounting rules to meet the Department’s goals.
COURSE 8: Fall 2004 - 4 - GO TO NEXT PAGE
Retirement Benefits,
Comprehensive Segment - Canada
Morning Session
Questions 2 – 6 pertain to the Case Study
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).
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:
%26#8226; Pat, a senior executive of NOC, will retire with an annual pension under the SRP
of $100,000.
%26#8226; The before-tax discount rate used by NOC to calculate lump sum benefits is 10%.
%26#8226; 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
%26#8226; The cost of buying Pat’s annuity at retirement is $10 for every $1 of annual
benefit purchased.
Gevrey’s tax rules for single premium annuity contracts are:
%26#8226; The employer obtains a deduction for any premiums it pays;
%26#8226; The executive is immediately taxed on the full purchase price of the annuity;
%26#8226; 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 - Canada
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:
%26#8226; Effective January 1, 2004, the program will be closed to new employees;
%26#8226; 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
%26#8226; 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:
%26#8226; 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;
%26#8226; Group B – the salaried employees other than those in Group A who are no longer
eligible to receive benefits under the program;
%26#8226; Group C – the salaried employees who are eligible, under current assumptions, to
receive reduced benefits under the program; and
%26#8226; 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 - Canada
Afternoon Session
**BEGINNING OF EXAMINATION 8**
COMPREHENSIVE SEGMENT - CANADA
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):
Accrued 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 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 - Canada
Afternoon Session
Questions 7 – 9 pertain to the Case Study
8. (12 points) NOC’s Vice-President of Human Resources has asked you to propose
changes to NOC’s Full-Time Salaried Pension Plan in order to reduce cost. She believes
that the pension plan is too generous for participants who retire before age 60, and she
wants plan participants to retire later in the future.
(a) Describe the process you would undertake in performing a plan design project.
(b) Recommend possible plan design changes to meet the goals of the Vice-President
of Human Resources. Provide support for your recommendation.
(c) The government of Gevrey is proposing introducing a pension adjustment system
similar to that defined by the Canadian Income Tax Act. Describe how your
response to (b) would change as a result of this proposal.
COURSE 8: Fall 2004 - 8 - STOP
Retirement Benefits,
Comprehensive Segment - Canada
Afternoon Session
Questions 7 – 9 pertain to the Case Study
9. (10 points) Gevrey is proposing the introdu[1] [2] 下一页 |
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