9. (15 points) NOC is purchasing a refinery from ABC Company, and will offer
employment to all of the employees at the refinery. All refinery employees are members
of the ABC Refinery Pension Plan and the ABC Refinery Post-Retirement Medical plan.
There are no other members of these plans.
You are given:
Provisions of the ABC Refinery Plans
The ABC Refinery Pension Plan provisions are as follows:
•Normal Retirement Age: Age 65
•Early Retirement Age: Age 60
•Normal Retirement Benefit: 1.75% of final earnings times years of service
•Early Retirement Reduction: Actuarially equivalent
•Normal Form of Benefit: If married, 50% joint & survivor, without
reduction. If not married, single life annuity
•Post-Retirement Indexing: Lesser of 1% or CPI
•Termination and Pre-Retirement Death Benefits: Lump sum value of the
accrued benefit, excluding indexation.
The ABC Refinery Post-Retirement Medical Plan provisions are exactly the same
as NOC’s.
COURSE 8: Fall 2003 -10- GO TO NEXT PAGE
Retirement Benefits,
Comprehensive Segment – Canada
Afternoon Session
All Questions pertain to the Case Study
9. Continued
January 1, 2003 Membership Data – ABC Refinery Plans
The membership demographics of the refinery’s employees are described in the
following table:
Age <5 years
of service
5-10 years
of service
>10 years
of service
Total
<55 # Participants
Avg Salary
50
40,000
100
42,000
50
46,000
200
42,500
55-65 # Participants
Avg Salary
500
44,000
1,500
48,000
2,500
50,000
4,500
51,444
>65 # Participants
Avg Salary
150
47,000
350
52,000
250
57,000
750
52,667
Total # Participants
Avg Salary
700
44,357
1,950
48,410
2,800
55,018
5,450
51,284
The ABC Refinery Plans have no retirees.
COURSE 8: Fall 2003 -11- GO TO NEXT PAGE
Retirement Benefits,
Comprehensive Segment – Canada
Afternoon Session
All Questions pertain to the Case Study