pensionproject

Description of Files

• Report: contains report report.pdf
• Slides: contains presentation slides slides.pdf
• R: contains R code used in analysis. Most of the analysis was done in Excel. See Analysis.xlsx

The Project Description is Below...

You are the new actuary of a small pension plan. You won the client from another actuarial firm and now are performing the valuation as at December 31, 2013. The previous valuation was performed as at December 31, 2012.

Task

Create a spreadsheet to perform all the calcuations to determine:

2012

• The actuarial liability on going-concern basis at December 31, 2012
• The fudning position on going-concern basis at December 31, 2012
• The normal cost for 2013
• The actuarial liability on solvency basis at December 13, 2012
• The funding position on solvency basis at December 31, 2012
• The minimum contribution requirements for 2013

2013

• The actuarial liabilitiy on going-concern basis at December 31, 2013
• The funding position on going-concern basis at Decemer 31, 2013
• The normal cost for 2014
• Reconciliation of going-concern funding position at December 31, 2013 with going-concern funding position at December 31, 2013, identifying gain and loss elements by source
• The actuarial liability on solvency basis at December 31, 2013
• The funding position on solvency basis at December 13, 2013
• The minimum contribution requirements for 2014

Prepare a written actuarial report summariziing the results, data, methods and assumptions. Make a presentation of your results, with an emphasis on the reasons for the changes in the going-concern funding position and the impact on each of the changes in actuarial assumptions.

Plan provisions

2012

• Pension formula: 1.3% of FAE5 up to FAYMPE5 + 2.0% of FAE5 in excess of FAYMPE5 per year of service
• Early retirement age: 55
• Normal retirement age: 65
• Normal form: Single life pension
• Early retirement reduction: Actuarial equivalent to age 65
• Termination benefit: 100% APV of pension accrued to date of termination of employment
• Death benefit: 100% APV of pension accrued to date of death

2013

Same as 2012 with the following changes

• Pension formula: 1.3% of FAE3 up to FAYMPE3 + 2.0% of FAE3 in excess of FAYMPE3 per year of service
• Early retirement reduction: 3% per year to age 65

Going-concern methods and assumptions

2012

• Cost method: PUC
• Asset valuation method: Market value
• Interest rate: 5.00%
• Salary increase: 4.25%
• YMPE increase: 3.00%
• Mortality rates: UP94 projected to 2015
• Retirement age (active): Age 65
• Retirement age (deferred): Age 60

2013

Same as 2012 with the following changes

• Interest rate: 4.75%
• Salary increase: 4.00%
• Mortality rates: UP94 projected to 2020
• Retirement age (active): Age 60
• Retirement age (deferred): Age 60

Solvency methods and assumptions

2012

• Cost method: TUC
• Interest rates: 2.50% for CV, 3.00% for AP
• Election of CV: 70% of active members if not eligible to retire, 50% of active members if eligible to retire at valuation date
• Election of AP: All other members
• Mortality rates: UP94 projected to 2015
• Retirement age: Age 55 if not eligible to retire; Immediate if eligible to retire at valuation date
• Wind-up expense: $300,000

2013

Same as 2012 with the following changes

• Interest rates: 3.25% for CV, 3.50% for AP
• Mortality rates: UP94 Projected to 2020
• Wind-up expense: $325,000

Asset informatiion

• Market value of assets as at December 31, 2013: $9,571,300
• 2013 employer current service cost contributions: $188,600
• 2013 special payments: $1,739,500
• 2013 lump sum payments: ($414,200)
• 2013 pension payments: ($185,500)
• 2013 investment returns: ($188,400)
• Market value of assets as at December 31, 2013: $10,711,300

No special payment exists as at December 31, 2013 since the Company paid the full amount during 2012 to fund the deficiency as at December 31, 2012. Assume all cash flows are middle of year.