Benefit Definitions - OPEB mode

The Benefit Definition determines to whom (active or inactive members, spouses of active or inactive members), why, when, how much, and in what form payments will be made, as well as how the benefit is to be included in the liabilities.

Name is a text field in which to enter a description of the benefit. This may be any descriptive phrase, including spaces.

All other parameters of the Benefit Definition dialog box are grouped into sections that, generally, can be expanded, or compressed, by a click on the arrow (if one is provided) to the left of the section’s heading. (These sections replace the topics that were contained in Benefit Definitions in versions of ProVal prior to 3.06.) The sections, discussed below in separate parts of this article, are:

Status and contingency initiating benefits
Payment forms
Eligibility
Benefit formulas

Note that if you have included a Benefit Definition in a Plan Definition, you may remove it from the Plan Definition by selecting it and clicking the Omit button.

Status and contingency initiating benefits

For active plan members, this section pertains to the nature of, or the cause of, the benefit: a decrement from active status or a benefit paid while active. For inactive plan members, this section defines which inactive records are eligible for this benefit.

You must have separate Benefit Definitions for active and inactive plan members. You must also have separate Benefit Definitions for members and their spouses, unless all parameter settings are identical except for the payment form. Select either Actives, to indicate that this benefit Applies to an active member or his/her spouse, or Inactives, to indicate that this benefit Applies to an inactive member or his/her spouse.

If this benefit applies to Actives, the Contingency parameter indicates the decrement (i.e., event causing a status change) that would trigger payment of this benefit – “Retirement”, “Termination”, “Death” and “Disability” – or “In-Service”, to indicate a benefit payable to a plan member while in active status. If additional events, such as a participation election, need to occur for the benefit to be paid then you may also wish to check the Post-Decrement Probabilities apply box. (See Plan Definitions - OPEB mode for further discussion of post-decrement probabilities.)

For active member benefits, check Post Decrement Probabilities apply if the benefit is not automatically paid out in the event indicated by the contingency initiating the benefit. Consider, for example, a post-retirement medical benefit that has to be elected by the member (such as when the member or spouse pays part of the cost of the benefit). The contingency for the benefit is retirement, but this box would be checked to reflect the additional requirement that the coverage be elected. Checking the box prompts a question in the Valuation Assumptions section of the Input menu; it is there that you specify the related probability as a constant or as a table. Typically, OPEB valuations include a participation assumption for medical benefits: this participation assumption is the related (post-decrement) probability.

Payment forms

This section defines the form upon which the benefit may be paid for the Member and the Spouse. Select from the Payment Forms that you have already defined and unhidden in this Project or create a new one. To modify or create a Payment Form, click the button. If this Benefit Definition describes benefits payable to both the member and the spouse, then select a Payment Form for both the Member and the Spouse parameters. Otherwise, select a Payment Form for only the Member or the Spouse, as applicable, and select “<none>” for the other parameter.

Note: In order to use a single Benefit Definition library entry for benefits payable to both the member and the spouse, the benefits must be identical except for the Payment Form. That is, active eligibility, inactive coverage, post-decrement probabilities (discussed in a preceding paragraph) and attribution must be the same; it is not sufficient merely to have the same formulas for computing the benefit amount and participant contribution amount. In particular, when a Benefit Definition contains both a Member Payment Form and a Spouse Payment Form, it is presumed that coverage has been elected for the spouse whenever coverage has been elected for the member. Therefore, if not all spouses of members with coverage for a benefit also have coverage, separate Benefit Definitions for member and spouse benefits must be defined. For more information, see our Command Reference Help article for the Post-Decrement Probabilities topic of Valuation Assumptions.

Eligibility

This section defines the basic requirements for receipt of the benefit, such as age, service or points for active members and coverage code for inactive members. (Post-decrement probabilities, discussed above, may further restrict receipt of the benefit for active members.) For details about the parameters, see Active Eligibility for active members and Inactive Eligibility for inactive members.

Benefit formulas

This section defines the amounts of the gross benefit, such as medical claims paid, life insurance coverage face amount and premiums paid (either entirely by the employer or the total before reduction by the premium amount paid by the employee, or former employee, for the health or life insurance), and the member’s contribution towards the benefit or premium, if any, as well as how the net benefit is to be included in the liabilities.

See Benefit formulas for details about coding the amount of the Gross Benefit Definition, the amount of the Participant Contribution that the plan member pays (towards the benefit received or the premium for the coverage), as well as the effect of checking the Limit to gross benefit box and use of the Component Library button, which provides access to the Benefit Formula Component Library.

For a benefit payable to active members and/or their spouses, click the Attribution button to define how the benefit is attributed for projected unit credit liability and the accumulated post-retirement benefit obligation (APBO). See Attribution for details about the parameters.