week1 - PENSION MATHEMATICS ACT 470H1 Lorne F. Cohen...

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PENSION MATHEMATICS ACT 470H1 Lorne F. Cohen January 8, 2007
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2 Course Readings Pension Mathematics for Actuaries (Second Edition), by A.W. Anderson, Chapters 1-7. Problem-Solving Approach to Pension Funding and Valuation, (Second Edition), by William H. Aitken. SOA Study Note N 8R-202-00 (formerly 462-28-93) – Pension Projections by David A. Lorisz Grading Outline Assignments (3x5) 15% Mid-term Exam 35% Final Exam 50% Total 100 % PENSION MATHEMATICS (ACT 470H1)
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3 PENSION MATHEMATICS (ACT 470H1) Course Outline Date Week# Description Assignment (Given) (Due) January 8 1 Intro to Pensions/Anderson ch. 1,2.1 January 15 2 Anderson ch. 2.2-2.6 #1 January 22 3 Anderson ch. 2.7-2.11 January 29 4 Anderson ch. 3.1-3.5 #2 #1 February 5 5 Anderson ch. 3.6, 4.1-4.4 February 12 6 Anderson ch. 4.5-4.8 #2 February 19 Reading Week February 26 7 Mid-term Exam March 5 8 Anderson ch. 5 #3 March 12 9 Anderson ch.6 March 19 10 Anderson ch.7 #3 March 26 11 SOA SN 8R-202-00 (formerly 462-28-93) – Pension Projections by David A. Lorisz April 2 12 Actuarial Valuation Report/Review April 9 13 Review
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4 INTRODUCTION TO PENSIONS WHAT IS A PENSION PLAN · an arrangement under which an employee is promised an income (a pension) when he or she retires · primary purpose is to provide retirement income but also provides certain ancillary benefits on termination, death and disability · employer sponsored vs statutory · formal vs informal · registered vs non-registered
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5 COMPONENTS OF A PENSION PLAN Two Principal Components · Pension Plan Rules (“plan text”) - terms and conditions of the pension promise that define the employer's liability arising from its commitment · Pension Fund - the arrangement established to finance the employer's liability for the benefits - financial liability for the pension promise determined by an actuarial valuation
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6 TYPES OF EMPLOYER SPONSORED PENSION PLANS · defined benefit · defined contribution · profit sharing · combination or hybrid arrangements
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7 DEFINED BENEFIT PLANS · Characteristics - specifies the amount of BENEFIT - determined by formula - usually based on years of service or plan membership - employer bears investment risk · Type of Benefit - Flat Dollar Plan $15 per month x service - Final Average Earnings Plan (FAE) a % of average earnings close to retirement x service - Career Average Earnings Plan (CAE) a % of average earnings throughout career x service · Incidence - 46% of plans (24% FAE, 15% CAE, 7% flat $) covering 85% of members (61% FAE, 7% CAE, 17% flat $)
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8 DEFINED CONTRIBUTION PLANS · Characteristics - specifies the amount of CONTRIBUTIONS (employee and employer) - investment risk borne by employees · Type of Benefit - contributions held in each employee's account - accumulated with interest - pension is whatever the accumulation will provide or purchase (hence alternate name - money purchase plans) · Incidence - 54% of plans covering 15% of members
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9 PROFIT SHARING PENSION PLANS · A form of defined contribution plan · Distinguishing Feature - employer's contribution determined by reference to company profits
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This note was uploaded on 09/27/2009 for the course ACT 472 taught by Professor Unknown during the Winter '07 term at University of Toronto- Toronto.

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week1 - PENSION MATHEMATICS ACT 470H1 Lorne F. Cohen...

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