Actuarial Outpost > SoA EA-2F 2018 ASM #81
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#1
07-26-2018, 08:13 PM
 HundoP-Yodo SOA AAA Join Date: Nov 2017 Location: Oregon College: UF Go Gators! Favorite beer: On Nitro Posts: 23
EA-2F 2018 ASM #81

Hi,

I have a question on a 436 problem in the EA-2F ASM manual.

The question is about amendments increasing the funding target.

The AFTAP pre-amendment is 78%, so I thought the additional contribution would be based on the increase in the funding target, but the solution is calculating the contribution in order to get the 'adjusted' AFTAP to 80%.

The only difference I can see between this problem and previous problems (e.g. 79) is that the contribution is for the previous plan year, but I'm not sure if I'm missing something.

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#2
07-27-2018, 01:43 PM
 davefarber Member Join Date: Nov 2001 Posts: 1,094

Quote:
 Originally Posted by HundoP-Yodo Hi, I have a question on a 436 problem in the EA-2F ASM manual. The question is about amendments increasing the funding target. The AFTAP pre-amendment is 78%, so I thought the additional contribution would be based on the increase in the funding target, but the solution is calculating the contribution in order to get the 'adjusted' AFTAP to 80%. The only difference I can see between this problem and previous problems (e.g. 79) is that the contribution is for the previous plan year, but I'm not sure if I'm missing something. Let me know if you need more info. Thank you!
You are correct that this question has a different solution from question 79 because it is asking for an additional contribution for the PRIOR year, not the current year. If you look at page 215 of the outline, In the second section that deals with making an additional contribution to allow the amendment to take effect, that section only applies to contributions for the CURRENT year (not the prior year), and has the two options for when the AFTAP is at leat 80% or less than 80%. When an additional contribution is made for the current year, that does not change the AFTAP for the current year, because the additional contribution is not a receivable added to the AVA. But that second section does not apply in question 81 because the contribution is for the prior year, and therefore becomes a receivable for the AVA, and effectively changing the AFTAP. In that case the amendment cannot take effect (as described in the first section on page 215) if either the AFTAP is less than 80% OR if the AFTAP is at least 80% but the ration would be less than 80% if the additional liability due to the amendment is added to the denominator of the ratio. So in this case, both of those conditions need to be satisfied in order to allow the amendment to take effect, so you can go straight to condition number (2) -- if you satisfy that one, then you satisfy both conditions. Hopefully this helps you to see the logic of the two different approaches to questions 79 and 81.
#3
07-27-2018, 08:57 PM
 HundoP-Yodo SOA AAA Join Date: Nov 2017 Location: Oregon College: UF Go Gators! Favorite beer: On Nitro Posts: 23

Quote:
 Originally Posted by davefarber You are correct that this question has a different solution from question 79 because it is asking for an additional contribution for the PRIOR year, not the current year. If you look at page 215 of the outline, In the second section that deals with making an additional contribution to allow the amendment to take effect, that section only applies to contributions for the CURRENT year (not the prior year), and has the two options for when the AFTAP is at leat 80% or less than 80%. When an additional contribution is made for the current year, that does not change the AFTAP for the current year, because the additional contribution is not a receivable added to the AVA. But that second section does not apply in question 81 because the contribution is for the prior year, and therefore becomes a receivable for the AVA, and effectively changing the AFTAP. In that case the amendment cannot take effect (as described in the first section on page 215) if either the AFTAP is less than 80% OR if the AFTAP is at least 80% but the ration would be less than 80% if the additional liability due to the amendment is added to the denominator of the ratio. So in this case, both of those conditions need to be satisfied in order to allow the amendment to take effect, so you can go straight to condition number (2) -- if you satisfy that one, then you satisfy both conditions. Hopefully this helps you to see the logic of the two different approaches to questions 79 and 81.
It definitely helped, I appreciate the detailed response, Dave!