Archive

Archive for August, 2007

2006 EA Exam 2A – Solutions finished

August 31st, 2007

I have finished typing in the solutions to last year’s exam. After cleaning up typos and formatting errors, I’ll send these out via email.

The cost methods problems are applicable to this year’s exam. Most of the 404 and 412 material on the last year’s exam syllabus has changed, and wil only be relevant tfor multiemployer questions on the 2007 exam.

Updates

IRS issues proposed regulations – Section 436

August 30th, 2007

Just in case you need to know …
http://www.treas.gov/press/releases/reports/reg11389107.pdf

Remember, this stuff is NOT on the exam!

Uncategorized

Separated at Birth?

August 27th, 2007

Someone noticed that the Funding target in the 430(h) example problem #2 seemed a little on the high side: 4,000,000 for one person! Maybe they are one of those PowerBall winners … no … don’t think so.

I forgot to add one of those statements they often put in exam questions:
“All participants have the same birth date and hire date”

Uncategorized

Correction – page ME-66

August 25th, 2007

There was a typographical error on page ME-66 (Section T – IRC 404 for Multiemployer plans). The definition of the Unfunded current liability was incorrect.

I have revised the discussion for that page.

Uncategorized

IRC 414(l) and IRC 416 – Solutions posted

August 25th, 2007

The solutions to the prior exam problems for Sections Q and U are now available.

Updates

Yield Curve – solutions posted

August 24th, 2007

I created three simple example problems for Section H – Yield curves and segment rates. The probems and solutions have been posted.

Updates

Back from COPA Annual meeting

August 21st, 2007

I was in Chicago form Thursday through Sunday. I learned some good stuff, including the fact that the IRS really does plan to issue some regulations on PPA 2006 in the next two months (Gosh!).

I’m starting to make up some example problems (for the seminar) based on the new law materials. I plan to record the solutions to the first few problems on Wednesday.

PENSION HUMOR (NOT on the exam)

On another note, I was on a couple of panels with Larry Deutsch (Penguin Consulting) and Jim Holland (of IRS fame). One item of discussion was the changes proposed to the DB/DC limit for 2007 in the PPA 2006 Technical Corrections bill. It basically reverses the unpopular IRS interpretation  in Q&A 9 of Notice 2007-28.

Larry said “well, when we actuaries make a mistake, we have to fix it and tell the client the bad news. But when (Jim) makes a mistake, it takes an Act of Congress to fix it”.

Updates

Cost methods – Exam problem solutions

August 15th, 2007

I finished recording the solutions to the Cost methods exam problems that we discuss during the seminar. The Unit Credit and Entry Age Normal problems have been uploaded to the web site. The rest should appear by Friday.

Updates

Section 415 revisions

August 10th, 2007

After reviewing the final EA-2A exam syllabus, I realized I made a newbie error when updating the overheads for the new 415 regulation. I forgot to allow for the interaction between exam condition #12 and the regulation.

In 2006, exam condition #12 said:
“12. Qualified joint and survivor annuities and qualified preretirement survivor annuities are provided in such manner that they result in no cost to the employer.”

In 2007, exam condition #12 no longer refers to the QPSA. Strangely, this condition is NOT marked with an asterisk, which usually means that the exam condition is unchanged versus the prior year:
“12. Qualified joint and survivor annuities any other specified form of payment are provided in such manner that they result in no cost to the employer.”

Based on exam condition #12, you should assume the plan DOES charge participants for the cost of the QPSA. That way there is no cost to the plan to provide the QPSA death benefit.

Here are the pertinent sections in the 415 regulation regarding treatment of mortality for adjusting the 415 dollar limits before age 62 (or after age 65):

1.415(b)-1(d)(2)(i)
1.415(b)-1(e)(3)(i)
“To the extent that a forfeiture does not occur upon the participant’s death before the annuity starting date, no adjustment is made to reflect the probability of the participant’s death”

1.415(b)-1(d)(2)(ii)
1.415(b)-1(e)(3)(ii)
“a plan is permitted to treat no forfeiture as occurring upon a participant’s death if the plan does not charge participants for providing a qualified preretirement survivor annuity (QPSA) (as defined in section 417(c)) on the participant’s death”

Now think of this in the context of an exam problem. There are three possible definitions of the death benefit

CASE 1
Problem says nothing at all about the pre-retirement death benefit

You can safely assume the normal form is a QJ&S, and the death benefit is a 50% QPSA. Based on exam condition #12, you should assume the plan DOES charge participants for the cost of the QPSA.

That means that you DO have a forfeiture upon death, so you DO have to make an adjustment to reflect the probability of the participant’s death.

CASE 2
Problem says there is NO death benefit at all

That means that you DO have a forfeiture upon death, so you DO have to make an adjustment to reflect the probability of the participant’s death.

CASE 3
Problem says the pre-retirement death benefit equals 100% of the present value of the accrued benefit

That means that you have NO forfeiture upon death, so you do NOT have to make an adjustment to reflect the probability of the participant’s death.

I have created new overhead pages 14A and 18A, and revised overhead pages 18, 19 and 20. The revised overheads now follow the same logic that they did prior to the release of the new 415 regulation. I think that is a GOOD thing!

I have revised the presentations for the changed pages. They should be uploaded to the Infinite Actuary web site by Monday.

Updates

Updates posted – final exam syllabus

August 8th, 2007

The latest revisions have been posted to the web site. The discussion of IRC 436 was moved up near the top of the lessons – remember that IRC 436 is NOT on the EA-2A syllabus.

The discussion of IRC 417(e) has been inserted before IRC 415. Now the discussion of lump sum calculations in IRC 415 will make more sense.

Here is the new ordering of the topics, reflecting the removal of IRC 436 and the addition of IRC 417(e):

M. IRC 412 – Waivers
N. IRC 404 – Maximum Deductible Limit
O. Section 417(e) – Cash-out restrictions

I updated the screen shots of the lessons in this July 31st blog post.

New Lessons, Updates