Attained age NC with TUC

[HeppeBunnie]

Has anyone made sense of this formula?
Why is it not (By-Bx)Ny/(Nx-Ny)?
That's what I get when I "(allocate) the excess of the APV of benefits over the (AAL)"

[BuckyBadger]

If you have the time to worry about one of the Attained age pension forumlas, I suspect you just need to review what you already know up to the exam. They are not going to ask a math question on AA or EAN (I could see TUC, PUC, Aggregate, or maybe FIL, however, but even those are pretty low on the possible math question list).

[Badger484]

If you have the time to worry about one of the Attained age pension forumlas, I suspect you just need to review what you already know up to the exam. They are not going to ask a math question on AA or EAN (I could see TUC, PUC, Aggregate, or maybe FIL, however, but even those are pretty low on the possible math question list).

That's exactly my perspective on the whole pension formula section.

[confused]

The original formula is correct. The NC under the TUC method only looks at the benefit accrued in the last year.

Has anyone made sense of this formula?
Why is it not (By-Bx)Ny/(Nx-Ny)?
That's what I get when I "(allocate) the excess of the APV of benefits over the (AAL)"

[regan842967]

Just wanted to throw in my agreement with the badgers.

[HeppeBunnie]

The original formula is correct. The NC under the TUC method only looks at the benefit accrued in the last year.

That's what I told myself before yesterday, but then I read the text description in that section again, and it doesn't match up... besides, going with what you're suggesting, shouldn't it be (B(x+1)-Bx)Ny/(Nx-Ny)?

Oh yeah, what's the difference between a bucky badger and a regular one? This isn't the first time you two have agreed with each other...
Anyway, aside from the fact that the point of these exams isn't for candidates to learn just what they need to pass, I'd like to cover my bases.

[ambushed]

It looks to me like the pension formulas are in the syllabus because of FAS 106. It even says that the amount of FAS 106 cost attributed to a financial accounting period is based on the projected unit credit actuarial cost method, then refers to chapter 9 for the method. It would be possible to test the obscure pension formulas, but I do not see it as likely. The attained age formula you mentioned is not even derived in the text, so the only thing you could do with it is memorize the formula anyway.

[regan842967]

Anyway, aside from the fact that the point of these exams isn't for candidates to learn just what they need to pass, I'd like to cover my bases.

Let me know how that works for you on exam day. j/k

It's not like anybody is suggesting for you to just sit around and watch tv all next week, but rather to focus on your weak points to maximize your chances to pass. If this topic is the most glaring weakness you have left, then by all means spend some time on it, but otherwise you should probably go memorize more DFCA lists or the nuances of discrimination testing or something.

[Julietn528]

This is the one pension formula I don't understand. I'm going to memorize this the morning of.

[MortalityMan]

dont know about you guys, but i'm not really remember any formulas or notation for these cost accrual methods, but just how the method works. example - for TUC, the NC is equal to the benefit earned over the year, such as a $10/month deferred annuity.

Anybody else agree?

[HeppeBunnie]

Let me know how that works for you on exam day. j/k

It's not like anybody is suggesting for you to just sit around and watch tv all next week, but rather to focus on your weak points to maximize your chances to pass. If this topic is the most glaring weakness you have left, then by all means spend some time on it, but otherwise you should probably go memorize more DFCA lists or the nuances of discrimination testing or something.

Oh come on, how much time do you think I've spent on this? All I've done is put the question out there in case anybody knows the answer (I'm pretty convinced the text description is inconsistent with the formula). Looks like nobody does. I'll ask some pension people instead.

I agree that this topic is unlikely to come up since this is moving into the pensions area, but I don't see anything stopping them from asking something on it because it's not going very deep into pensions at all. Plus, it bugs the heck out of me that I can't understand it... if I did, it would mean one less formula to memorize.

[HeppeBunnie]

dont know about you guys, but i'm not really remember any formulas or notation for these cost accrual methods, but just how the method works. example - for TUC, the NC is equal to the benefit earned over the year, such as a $10/month deferred annuity.

Anybody else agree?

That's pretty much what I've done, because it takes about 10 seconds to derive all the (other) formulas for me because I know the descriptions.

[Guy Smiley]

That's pretty much what I've done, because it takes about 10 seconds to derive all the (other) formulas for me because I know the descriptions.

As long as you also know what they mean when they give you the commutation functions instead of v, px, etc. Maybe it's just a problem for me because commutation functions never appeared on any of my exams. Nothing too hard about them, but nevertheless...

[MortalityMan]

i dont really understand the commutation functions, i guess i should check it out.

does anybody else not really understand what's up with the entry-age method? is the entry age method the same as the projected unit method if the projected unit method is used since the penioner's entry age?

[The Head Detective]

I don't think the book does a good job of explaining these formulas. I have another book (from Course 5 or 6) that makes them much clearer.

Anyway, Entry Age Normal is actually the easiest (IMO). You just set the NC so that at time e, PV(Future Normal Costs) = PV(Benefits). Notice that in EAN, NCx does not depend on x. It's the same for all time periods.

I agree with others that it's probably not worth spending much time on these beyond the Unit Credit and EAN formulas. Although I probably will spend a little bit of time with them so I can try to salvage some points if they come up.

[Guy Smiley]

I don't think the book does a good job of explaining these formulas. I have another book (from Course 5 or 6) that makes them much clearer.

Anyway, Entry Age Normal is actually the easiest (IMO). You just set the NC so that at time e, PV(Future Normal Costs) = PV(Benefits). Notice that in EAN, NCx does not depend on x. It's the same for all time periods.

I agree with others that it's probably not worth spending much time on these beyond the Unit Credit and EAN formulas. Although I probably will spend a little bit of time with them so I can try to salvage some points if they come up.

I could be wrong, but isn't it:

PV(Future Normal Costs) + AV(Past Normal Costs) = PV(Benefits)

[MortalityMan]

i thought NC for EAN was a level percentage of compensation? or is that what you're saying? Isn't that the same as the PUC method, if the denominator in the NC calculation is compensation? or is that the deal, the denominator is years of service?

[The Head Detective]

I could be wrong, but isn't it:

PV(Future Normal Costs) + AV(Past Normal Costs) = PV(Benefits)

Yeah, I think that's correct (I think. Looks correct, at least). But at time e (age of entry) AV(Past Normal Costs) = 0.

[BuckyBadger]

Oh yeah, what's the difference between a bucky badger and a regular one? This isn't the first time you two have agreed with each other...

If you are suggesting we might be the same person, I can assure you we are not. It is pretty eerie we posted 1 minute apart I will admit. I do hope to meet this Badger at FAC this year. But actually, unlike most actuarial badgers, I didn't even go to school at Madison....

[The Head Detective]

i thought NC for EAN was a level percentage of compensation? or is that what you're saying? Isn't that the same as the PUC method, if the denominator in the NC calculation is compensation? or is that the deal, the denominator is years of service?

Actually, it can be either. I was just thinking of the level dollar. That's the easy one. I forgot they're both called EAN.

Obviously if it's a level % of salary, then NCx depends on x. But I think it's the same general idea. At age e, PV(future NC) = PV(benefits). In the level dollar method, you get PV(future NC) by multiplying NC by some level annuity. In the level % method, you get PV(future NC) by multiplying NCe by an increasing annuity.