Accounting, Assets, Funding

Accounting 1 - Liabilities

100

Two types of Accounting Valuations, and their purposes.

What are Expense valuation and disclosure valuation? Purpose is calculate benefit cost for the year (NPBC), and to get info for year-end financial statements, respectively?

200

Formula for liability roll forward, and what type of accounting valuation it's used for.

BONUS 100: What's One Stop?

What is AL(boy) + SC - BP + Interest = AL(eoy)?

Roll forwards are used in the Disclosure Valuation?

One Stop: setting next year's expense based on the disclosure roll-forward.

300

Formula for Funded Status and Formula for AOCI?

Funded Status = (PBO) + FVA

AOCI = Net Transition Obligation + PSC + Net (G)/L

400

Describe in terms of service, pay, and unit credit method:

-PVFB

-ABO

-PBO

In what type of Valuation are these figures used?

PVFB: Project both service and pay, no unit credit method.

ABO: Use current service and pay. Uses the UC method (aka TUC)

PBO: Projects pay but uses current service. Uses the PUC method.

These are used in Accounting Valuations.

500

Describe Normal Cost and the difference between ABO NC and PBO NC in regards to pay and service.

Normal Cost is the portion of the benefit that will be earned during the next year. ABO NC must increase service and pay by 1 year, while PBO NC only increases service by 1 year since pay is already projected.

Accounting 2 - Balance Sheet

100

What is the measure of the expense of a Pension plan for a year?

Net Periodic Benefit Cost

200

What is (gain)/loss amortized over?

AFWL - Average Future Working Lifetime

300

Explain (accrued)/prepaid benefit cost.

(A)/P Benefit cost is the cumulative contributions to the plan offset by the cumulative NPBCs. If you contribute more than more your expense one year, you will have a "prepaid" benefit cost, which carries over from year to year.

(A)/P Benefit Cost BOY - NPBC + Contributions = (A)/P Benefit Cost EOY

400

TO EXCELLLL!!!!

CONGRATS YOU GOT IT! (or did you?)

500

To EXCEL!!!

DID YOU GET IT???

Accounting 3 - NPBC

100

Is Expected Return on Assets a Positive or Negative number when used for calculating NPBC and why?

Negative because anything increasing assets is decreasing our expense :)

200

If my Net Unrecognized (Gain)/Loss is 100, the MAX(PBO,MRVA) = 12000, and AFWL is 10 what is the (Gain)/Loss Amortization?

0!!!!

If your unrecognized (g)/l is within 10% of the max of PBO and MRVA, you don't have to recognize it.

300

EXCELLL

NICE!

400

Formula for NPBC

Service Cost + Interest Cost - Expected Return on Assets + Amortization of Transition Obligation + Amortization of Prior Service Cost + Amortization of (Gain)/Loss = NPBC

500

To the Excel Workbook!!!

WOW!

Assets

100

Describe what an asset gain/(loss) is. Yes, it's really that easy.

Asset gain/(loss) occurs when the actual value of assets at the end of the year is different than what you expected it to be. If actual > expected, you have a gain, but if actual < expected, you have a loss.

200

What is the formula for FVA in regards to the Book Value of assets?

FVA = BV + unrealized gain/(loss)

Bonus for 100!: Why does this not include recognized gain/(loss)?

300

Used in Accounting or Funding? And do any of them use smoothing?

MVA

AVA

FVA

MRVA

BONUS (extra 300): Difference between FVA and MVA?

MVA - Funding

AVA - Funding (Smoothed over 2 years)

FVA - Accounting

MRVA - Accounting (Smoothed over 5 years)

MVA includes the discounted values of all future contributions that will be made for that plan year (contributions receivable). In other words, MVA values all contributions for that plan year, even if they haven't been made yet, while FVA only values contributions made only during that fiscal year.

400

To EXCEL!!!!!!!!!!!!!

DID YOU GET IT???

500

TO THE EXCEL WORKBOOK!!!!!!

DID YOU GET IT????

Funding

100

Formula for calculating FTAP (multiple answers), and what does it stand for?

FTAP is simply = Assets/Liabilities

There are dozens of FTAPs, and they're all calculated by using different amounts for Assets and Liabilities

FTAP = (AVA - FSCB - PFB)/FT

FTAP = (AVA - PFB)/FT

FTAP = AVA/FT

FTAP stands for Funding Target Attainment Percentage

200

Formula for calculating Minimum Required Contribution.

MRC = TNC + sum of SAC - Excess Assets - Funding Balances

300

What do PFB and FSCB stand for? And what are they? Bonus opportunity of 300 if you get into serious detail.

Pre-Funding Balance and Funding Standard Carryover Balance. They are credit balance accounts that are accumulated over time by any contributions made over the minimum required contribution. Note that they are already included in your assets, so that is why we often subtract them out when doing certain calculations (to avoid double counting). PFB is any excess contribution over MRC made post 2006 (after PPA), while FSCB is any excess contribution over MRC made pre 2007 (before PPA). FSCB must be depleted before PFB can be used or forfeited.

400

Benefit restrictions are based off of what measure? What is the forumula? and give one example or a benefit restriction and the the associated threshold.

Based off of AFTAP

AFTAP = (AVA-FSCB-PFB+NHCEannuity purchases)/(FT + NHCE annuity purchases)

Note that if AVA/FT >=100%, then no need to subtract the credit balance to get AFTAP.

If AFTAP, 80%, no benefit increases (except for some flat dollar plans), and 50% limit on giving out lump sums.

IF AFTAP<60%, freeze plan, not allowed to give out lump sums.

500

The two exemption tests for Funding Shortfall, and the outcome if you are exempt from each of them.

1. (AVA-PFB)/FT >= 100%

If you pass this you are exempt from creating a new shortfall amortization for this year, but old bases still exist.

2. (AVA-PFB-FSCB)/FT >=100%

If you pass this you are exempt from creating a new shortfall amortization base this year, and all old bases are wiped out. (yay)