Benefit Formula
In U.K. mode, see also Benefit Tranches. (In OPEB mode, see also Benefit Formulas.)
This section of the Benefit Definition provides the formula for computing the amount of projected benefit as of each decrement date, for a benefit initiated by decrement from active status, and as of each valuation date anniversary while in active status, for a benefit initiated by the “In-Service” Contingency (described below). (Note that the in-service contingency generates formula benefits payable for years after the year in which the decrement from active status occurs.)
Under entry age normal liability method calculations, computations are performed for decrement dates and valuation date anniversaries before the valuation date as well as decrement dates and valuation date anniversaries on or after the valuation date.
For in-service benefits, the formula computes the amount of projected benefit as of each valuation date anniversary that the plan member is still in active status.
The benefit amount thus computed is assumed paid to the member (or beneficiary for a Benefit Definition initiated by the “Death” Contingency) according to the normal payment form parameter of the Benefit Definition (except for an “employee contribution” benefit, for which there is no payment form parameter).
Entering the formula expression in ProVal is simply a combination of filling in parameters and free-form programming. Each formula is simply a combination of building blocks called Benefit Formula Components. There is no limit to the number of components that you can create and use, and you may name them whatever you wish. These components are linked together by ProVal operators, which range from performing simple addition to doing specialized date arithmetic.
Here are some keys to creating benefit formula expressions:
If you’re a new user, consult the Getting Started with ProVal guide.
Use logical component names and complete descriptions. Clarity is as important as accuracy.
Capture as much of the complexity of the plan as possible within the components, so that the formula itself is clean and easy to understand.
Let accrual definitions do the work for you. For most pension plans, this type of Benefit Formula Component will automatically project service, salary, regulatory items and the like. Using accrual definitions also ensures that your benefits will be attributed correctly for each liability method or cost method.
Be mindful of ProVal’s order of operations. ProVal evaluates expressions from left to right, with no precedence among the operators. For example, ProVal would calculate 1+2*3 to be 9, not 7. You may use parentheses, brackets or braces within your expressions, as required to control the order of operations.
Remember that the expression for a benefit formula contains components, operators and numbers. To refer to an item from your database, first create a component that is a database field or a database expression. Then include the component in your formula.
Press the F1 key when you need help. When your cursor is in the expression box, a useful list of Benefit Formula Components, database field codes and labels, operators, etc. is only a keystroke away.
Clicking the Component Library button leads to the Benefit Formula Component Library dialog box, by means of which you can create, unhide and edit Benefit Formula Components.