SOA RET DARetirement Benefits — Design & Accounting (U.S.)

Under projected unit credit, the normal cost as a percentage of pay for a final-average-pay plan generally:

PBO 500, assets 420, unrecognised net loss 70, average remaining service 10 years. Minimum corridor amortisation of the loss is:

Which design shifts investment risk to participants while retaining a sponsor-guaranteed interest credit?

A buy-in differs from a buy-out primarily because a buy-in:

At 1 Jan: PBO 1,000, assets 900, discount rate 5%, expected return 6%, service cost 40, benefits paid 60 (year-end), actual return 8%, unrecognised loss 120 (prior), average remaining service 12 years, no prior service cost. Compute net periodic pension cost for the year and the year-end funded status, and explain how IAS 19 would differ.

A manufacturer with an ageing workforce and volatile earnings wants to replace its final-average-pay DB plan. Compare converting to a cash balance plan versus freezing DB and enhancing the 401(k), from the perspectives of the sponsor, older employees and younger employees. Recommend one.

Design a de-risking glide path for a 90%-funded frozen DB plan with 60% equities. Include triggers, asset changes, liability actions and the accounting and cash implications of each step.

A defined benefit plan sponsor is considering closing the plan to new entrants and moving new hires to a defined contribution plan. Discuss the effect on the plan's duration and investment strategy over time.