Corrections and Additions to EA-2F Course Outline and Problems
Fall, 2013
(as of 11/4/2013)
The final Joint Board syllabus for this exam made the following changes:
· IRC sections 401(a)(17), 415 and 416 have been removed from the syllabus. As a result, pages 420 – 424, 425 – 463, and 468 – 495 are not supposed to be tested directly on this exam (they are still part of the EA-2L syllabus, knowledge of these topics is assumed for the EA-2F exam). Question 167 is a good example of how the limitations of IRC section 415 could be tested in a funding question, and question 181 is a good example of how the top heavy minimum benefit could be applied to a funding question.
· The rules regarding cash-outs under IRC section 417(e) is no longer a syllabus item, but the Code section and regulation are still on the recommended reading list. This inconsistency makes it a little unclear whether this will be directly tested, although it is directly tested on the EA-2L exam.
· The effect of spin-offs and mergers on minimum funding has been removed from the syllabus. However, IRC section 414(l) and regulation 1.414(l)-1 are still on the recommended reading list, so it is possible that this topic could still be tested (not likely, though).
· The following Revenue Rulings, Announcements and Notices have been removed from the recommended reading list: Revenue Ruling 2003-11, Revenue Notice 87-37, Revenue Notice 2001-56, Revenue Notice 2010-15, Revenue Announcement 96-26
Page 68: The statement in question 17 “There have been no funding shortfalls prior to 2011” should read “There have been no shortfall amortization bases prior to 2011.” This change is necessary because if the funding shortfall had been zero, then the waived deficiency base would have been fully amortized. The lack of prior shortfall amortization bases could be due to an exemption from creating a new base, even though there is a positive funding shortfall.
Page 71: There should be a statement in the question that deaths are assumed to occur on the first day of the year.
Page 72: The first paragraph in the solution to question 18 should read as follows:
Treasury regulation 1.430(d)-1(c)(1)(ii)(D) provides rules with regard to the allocation of benefits that are not earned based upon years of service, such as the preretirement death benefit in this question. The regulation says that "the portion of a participant's benefit that is taken into account in determining the funding target for a plan year is equal to the total benefit multiplied by the ratio of the participant's years of service as of the first day of the plan year to the years of service the participant will have at the time of the event that causes the benefit to be payable." Specifically, the death benefit to the extent it is not reflected in the plan accrued benefit is allocated based on proportional years of service with the employer. For purposes of the funding target, Smith has 12 years of past service, which is the amount of service that Smith would have if he died at age 64, his current age. Therefore, Smith must be allocated 12/12 of the present value of the death benefit as the funding target associated with that death benefit.
This changes the calculations in this solution as follows:
Allocation of excess death benefit to the funding target = $2,800 × (12/12) = $2,800
Total death benefit for purposes of funding target = $7,200 + $2,800 = $10,000
$X = $10,000 × 0.01 × v5% = $95.24
Page 80: The last sentence of the first paragraph should be deleted.
Page 277: The first formula should read:
NC = (PVFB – Actuarial assets – Unfunded liability) ÷ (PV future salary/salary)
Page 310: The references in the questions (parts a, b, and c) to the years of the loss are off by one year. In part a, the question is asking about the 2010 experience loss, in part b the 2011 experience loss, and in part c the 2012 experience loss.
Page 311: The reference to 2011 at the beginning of the solution to part “a” should be 2010. The reference to 2012 at the beginning of the solution to part “b” should be 2011. The reference to 2013 at the beginning of the solution to part “c” should be 2012. At the end of the third line in the solution to part “b”, “67” should read “26.”