A company designs a defined benefit pension plan. You are given: (i) Retirement benefit is a...

Transcribed Image Text:

A company designs a defined benefit pension plan. You are given: (i) Retirement benefit is a whole life annuity immediate at 65 with annual payments of 4% of career average salary for each year of service. (ii) Early retirement is allowed starting at age 62 and assume to occur in the middle of the year of age. The benefit is reduced by 6% for each year before age 65, prorate for fractional years. (iii) The retirement rate at ages 62 through 64 is k|1962 = 0.04 for k = 0,1,2. (iv) The multiple decrement death rate at ages 62 through 64 is k|1962 = 0.01 for k = 0,1,2. (v) Deaths occur uniformly throughout the year and there is no death benefit. (vi) Annual effective interest rate is 0.05. (vii) Death and retirement are the only decrements. (viii) Salary scale is sx = 1.03* and salary is increased each year at birthday. (ix) a62.5 = 11, 963.5 = 10.6, a64.5=10.2, a65 = 10 Consider a member aged 62 has a current salary of 100,000 and cumulative salary up to but excluding age 62 of 1,500,000. (a) (3 points) Calculate the acturial present value of the normal retirement (age 65) benefit. (b) (4 points) Calculate the acturial present value of the early retirement benefit. (c) (2 points) Calculate the acturial liability under TUC method to the nearest 1000. A company designs a defined benefit pension plan. You are given: (i) Retirement benefit is a whole life annuity immediate at 65 with annual payments of 4% of career average salary for each year of service. (ii) Early retirement is allowed starting at age 62 and assume to occur in the middle of the year of age. The benefit is reduced by 6% for each year before age 65, prorate for fractional years. (iii) The retirement rate at ages 62 through 64 is k|1962 = 0.04 for k = 0,1,2. (iv) The multiple decrement death rate at ages 62 through 64 is k|1962 = 0.01 for k = 0,1,2. (v) Deaths occur uniformly throughout the year and there is no death benefit. (vi) Annual effective interest rate is 0.05. (vii) Death and retirement are the only decrements. (viii) Salary scale is sx = 1.03* and salary is increased each year at birthday. (ix) a62.5 = 11, 963.5 = 10.6, a64.5=10.2, a65 = 10 Consider a member aged 62 has a current salary of 100,000 and cumulative salary up to but excluding age 62 of 1,500,000. (a) (3 points) Calculate the acturial present value of the normal retirement (age 65) benefit. (b) (4 points) Calculate the acturial present value of the early retirement benefit. (c) (2 points) Calculate the acturial liability under TUC method to the nearest 1000.

Answer rating: 100% (QA)

a To calculate the actuarial present value of the normal retirement age 65 benefit we need to determine the present value of the annual payments of 4 ... View the full answer