SOA Exam ALTAM Sample Question 45

Study guide: Exam ALTAM

You are given the following information about D, who is a member of a Career Average Earnings pension plan.

(i) On the valuation date, 1/1/2021, D is 63 years old.
(ii) D joined the pension plan on 1/1/1998.
(iii) On 1/1/2021 D's total past earnings are 2,400,000.
(iv) D's salary in 2021, assuming they stay in employment for the whole year, will be 170,000.
(v) All salaries are set on the 1st of January each year.
(vi) Contributions are paid on the 1st of January each year.
(vii) The accrual rate is 2%.
(viii) The normal pension form is a single life annuity-due payable monthly.
(ix) On death in service, the benefit is a lump sum of 4 times the annual pension that the member would have received had they retired at the time of their death.
(x) There are no other benefits.

The valuation assumptions are:

Decrements from active service follow the Standard Service Table.
Exits before age 65 occur half-way through the year of age.
$i = 0.05$
$\ddot{a}_{63.5}^{(12)} = 13.5139$ ; $\ddot{a}_{64.5}^{(12)} = 13.2312$ ; $\ddot{a}_{65}^{(12)} = 13.0870$
The funding method is Traditional Unit Credit.

Part a (4 points)

(i) Calculate the Actuarial Liability for the age retirement pension for D at 1/1/2021.
(ii) Calculate the Normal Contribution for the age retirement pension for D at 1/1/2021.

(i) Calculate the Actuarial Liability for the death in service benefit for D at 1/1/2021.
(ii) Calculate the Normal Contribution for the death in service benefit for D at 1/1/2021.

(This is Question 5 from the Spring 2021 Written Answer exam.)