Additional Plan Amendments
The Additional Plan Amendments topic is used to enter incremental experience COLAs (pension increases in UK mode) for inactive members and "quick-and-dirty" plan amendments for active members. The incremental experience COLA (pension increase) parameter applies to both initial inactives and emerging inactives. The plan amendment parameter applies to both initial actives (who may become emerging inactives) and new entrants. Thus the experience of records with an inactive initial status can be affected only by the COLA (or pension increase) parameter, whereas the experience of records with an active initial status, including new entrant records, can be affected by both the COLA (or pension increase) parameter (once a decrement from active status occurs) and the plan amendment parameter (before a decrement occurs).
Separate values may be specified for each forecast year, starting with the baseline year (which begins at the baseline valuation date and ends at the first forecast valuation date), denoted as Year 1. (The year beginning at the first forecast valuation date, also known as the first forecast year, is denoted as Year 2, and so forth.)
Incremental Cost-of-Living Adjustments (COLA) for Inactive Members (all modes except U.K.)
All sensitivities run under the Core Projection(s) referenced by the Deterministic Forecast use the COLA parameters specified in Valuation Assumptions and under the Increase & Crediting Rates topic of Projection Assumptions (subject to the limits specified in active & inactive benefit definitions). Therefore, the underlying COLA assumptions are already present in the liabilities generated by the Core Projection(s). The remainder of this discussion is applicable only if you want to apply experience COLAs in addition to those present in Projection Assumptions.
Any additional experience COLA specified by the Incremental COLA for Inactives parameter applies to all Benefit Definitions included in the Plan Definition and to all Inactive Benefits included in the Census Specifications, regardless of whether there is a check in the Apply COLAs from assumptions box of the Inactive Benefit or the active Benefit Definition. The Incremental COLA for Inactives parameter does not apply, however, to lump sum factor Benefit Formula Components, even if the Use valuation/projection assumption COLAs box of the component is checked.
Whether an Incremental COLA for Inactives is applied only during the payment period of an Inactive Benefit or active Benefit Definition, not during the deferral period, is determined by the option selected for the Experience COLAs Applied to parameter of the Forecast Analysis topic of the Asset & Funding Policy. If All inactive benefits has been selected under the Forecast Analysis topic, then the incremental experience COLA is applied during both the payment and deferral periods. If Benefits in pay status has been selected, then the incremental COLA is applied only during the payment period. ProVal distinguishes the payment period from the deferral period according to the Benefit commences parameter of the Inactive Payment Form associated with the Inactive Benefit or the Payment Form associated with the active Benefit Definition (for emerging inactives).
Enter as an Incremental COLA for inactives any ad hoc or automatic COLA, if any, in addition to the COLAs specified in Projection Assumptions; this “incremental” COLA is applied to all Inactive Benefits and active Benefit Definitions, with possible restriction to the payment period only as mentioned in the preceding paragraph. For example, if the Projection Assumptions payment period COLA is 3%, an incremental COLA of 0.01 entered here results in a net COLA for the year of 4% in actual benefit payments. Similarly, if the COLA is 3% and an incremental COLA of -0.01 is entered here, the result is a net COLA in actual benefit payments of 2% for the year. (Note that if the Projection Assumptions specify zero COLA, then the incremental COLA specified in this set of Deterministic Assumptions will be the entire COLA applied for experience.) If the Projection Assumptions also include, for example, a deferral period COLA of 3%, then, if the Forecast Analysis topic of the Asset & Funding Policy indicates that additional COLAs apply to all inactive benefits, an incremental COLA of 0.01 entered here will result in a net COLA for the year of 4% in benefits not yet in payment status, i.e., an incremental experience COLA will be applied during the deferral period.
Any change in the plan’s unfunded accrued liability because of an incremental COLA for inactives is amortized according to the specification for the Experience COLAs Amortized as parameter of the Forecast Analysis topic of the Asset & Funding Policy. If the Plan change option has been selected, then the change in unfunded accrued liability is amortized as a plan amendment, whereas if the Gain/loss option has been selected, the liability change is amortized as an experience gain or loss.
Incremental Pension Increases for Inactive Members (U.K. mode)
All sensitivities run under the Core Projection(s) referenced by the Deterministic Forecast use the Pension Increase parameters specified in the Valuation Assumptions along with the CPI and RPI increase rates specified in the Projection Assumptions . Therefore, the underlying pension increase assumptions are already present in the liabilities generated by the Core Projection(s). The remainder of this discussion is applicable only if you want to apply experience pension increases in addition to those inherently present in Projection Assumptions.
Any economic experience pension increase specified by the Incremental Pension Increase for Inactives parameter applies to all Benefit Definitions included in the Plan Definition and to all Inactive Benefits included in the Census Specifications; it does not apply, however, to lump sum factor Benefit Formula Components.
Whether an Incremental Pension Increase for Inactives is applied only during the payment period of an Inactive Benefit or active Benefit Definition, not during the deferral period, is determined by the option selected for the Additional pension increases Applied to parameter of the Forecast Analysis topic of the Asset & Funding Policy. If All inactive benefits has been selected under the Forecast Analysis topic, then the incremental experience pension increase is applied during both the payment and deferral periods. If Benefits in pay status has been selected, then the incremental pension increase is applied only during the payment period. ProVal distinguishes the payment period from the deferral period according to the Benefit commences parameter of the Inactive Payment Form associated with the Inactive Benefit or the Payment Form associated with the active Benefit Definition (for emerging inactives).
Enter as an Incremental Pension Increase for Inactives any ad hoc or automatic pension increase, if any, in addition to the pension increases specified in Valuation Assumptions; this “incremental” pension increase is applied to all Inactive Benefits and active Benefit Definitions, with possible restriction to the payment period only as mentioned in the preceding paragraph. For example, if the Projection Assumptions payment period pension increase is 3%, an incremental increase of 0.01 entered here results in a net increase for the year of 4% in actual benefit payments. Similarly, if the valuation increase is 3% and an incremental increase of -0.01 is entered here, the result is a net COLA in actual benefit payments of 2% for the year. If the Projection Assumptions also include, for example, a deferral period increase of 3%, then, if the Forecast Analysis topic of the Asset & Funding Policy indicates that additional pension increases apply to all inactive benefits, an incremental increase of 0.01 entered here will result in – besides the payment period increase – a net increase for the year of 4% in benefits not yet in payment status, i.e., an incremental experience pension increase will be applied during the deferral period.
Any change in the scheme’s unfunded accrued liability because of an experience incremental pension increase for inactives is amortized according to the specification for the Experience pension increases Amortized as parameter of the Forecast Analysis topic of the Asset & Funding Policy. If the Plan change option has been selected, then the change in unfunded accrued liability is amortized as a plan amendment (a change in the scheme), whereas if the Gain/loss option has been selected, the liability change is amortized as an experience gain or loss.
Benefit Increases for Active Members
By "quick-and-dirty" plan amendments for active members, we mean that – in lieu of coding the Plan Amendments topic of Projection Assumptions (a more refined approach to plan amendments) – you may enter an overall equivalent rate of Benefit Increase for Actives, which will be applied to all Benefit Definitions included in the Plan Definition. Thus this is a simplified approach, under which all active benefits are increased across-the-board. If an increase of 0.02, for example, is entered, all liabilities and normal costs will be increased uniformly by 2%. Thus this parameter is useful for modeling a flat benefit change (i.e., a benefit increase that applies to the entire benefit amount, regardless of the year of service in which the benefit was accrued). Because the specified benefit increase applies to all active Benefit Definitions, this parameter is useful also for modeling a benefit change that applies to all active members regardless of cause of decrement (i.e., for all Contingencies initiating benefits, as specified in the Benefit Definition), plant location, division, hourly/salaried classification, participation date, benefit service date or other demographic characteristics. Note that only benefit increases, not decreases, may be entered here; you may, of course, code benefit decreases by means of the Plan Amendments topic of Projection Assumptions.
Any change in the plan’s unfunded accrued liability because of a benefit increase for actives is amortized as a plan amendment (not an actuarial experience gain or loss).