8. (10 points) On January 1, 2005, NOC purchased non-participating annuity contracts for
all inactive participants in the Full-Time Hourly Union Pension Plan for $95,000,000.
The Normal Retirement Benefit rate was subsequently increased from $75 to $80
effective January 1, 2005.
You are given:
ABO as of December 31, 2004:
• Inactive participants: $ 105,600,000
• Active participants: $ 500,433,000
ABO as of December 31, 2005: $ 476,500,000
Contribution on July 1, 2005: $ 100,000,000
Benefit payments in 2005: $ 225,000
Market Value of Assets as of December 31, 2005: $ 295,000,000
(a) Determine the 2005 pension expense.
(b) Develop the change in benefit obligation, change in plan assets, and reconciliation
of the funded status, and amounts recognized and not recognized in the statement
of financial position as required by SFAS 132R for NOC’s financial statements as
of December 31, 2005.
9. (9 points) In Vosne, multiemployer retiree medical plan benefits may be prefunded at the
discretion of the board of trustees. The contributions to the fund are tax deductible.
You are the actuary for a multiemployer retiree medical plan in Vosne. The plan
provisions are identical to the NOC plan. The plan is contracted to be funded on a cents
per hour basis.
A recent medical breakthrough will increase life expectancy by 10 years. As a result, the
plan is no longer fully funded.
Analyze the impact on the plan as it relates to funding, design and participation.
**END OF EXAMINATION**
AFTERNOON SESSION