The following are excerpts from the 20201 Actuarial Valuation Report for a defined benefit pension plan for Western Cedar and Byproducts Inc. Summary: Valuation Results for Western Cedar and Byproducts Inc. Assumptions Used in Valuation versus Actual Results II. Investment Return - The actuarial value of assets earmed 3.4% per annum during the period, lower than the assumed return of 6.50% per annum. III. Salary Increases - Members' salary increases during the period were higher than the assumed increase rates. Average salaries increased by 2.8% over the period versus an assumed rate of increase of 1.7%. Answer the following questions. Ensure to draw upon the course reading materials to help you understand and explain these concepts. 1. Calculate the four missing amounts in the valuation results, and indicate if the plan is in deficit or surplus in each case. 2. Explain in general terms why the results might be different in 2020 between the going concern and solvency valuation. 3. Explain, in your own words, what happened to investment returns during the period of the valuation, compared to what was expected. Who bears the risk associated with this result? Explain clearly how this differs from a defined contribution plan. 4. Answer the following for each of the two assumptions in the valuation: a. Which component of the Asset/Liability (assets or liabilities) ratio is impacted by the assumption? Explain why. b. If Western Cedar expected to have a surplus based on their assumption, what impact might the "actual" result have on their expected surplus? Explain clearly. The following are excerpts from the 20201 Actuarial Valuation Report for a defined benefit pension plan for Western Cedar and Byproducts Inc. Summary: Valuation Results for Western Cedar and Byproducts Inc. Assumptions Used in Valuation versus Actual Results II. Investment Return - The actuarial value of assets earmed 3.4% per annum during the period, lower than the assumed return of 6.50% per annum. III. Salary Increases - Members' salary increases during the period were higher than the assumed increase rates. Average salaries increased by 2.8% over the period versus an assumed rate of increase of 1.7%. Answer the following questions. Ensure to draw upon the course reading materials to help you understand and explain these concepts. 1. Calculate the four missing amounts in the valuation results, and indicate if the plan is in deficit or surplus in each case. 2. Explain in general terms why the results might be different in 2020 between the going concern and solvency valuation. 3. Explain, in your own words, what happened to investment returns during the period of the valuation, compared to what was expected. Who bears the risk associated with this result? Explain clearly how this differs from a defined contribution plan. 4. Answer the following for each of the two assumptions in the valuation: a. Which component of the Asset/Liability (assets or liabilities) ratio is impacted by the assumption? Explain why. b. If Western Cedar expected to have a surplus based on their assumption, what impact might the "actual" result have on their expected surplus? Explain clearly
