QUESTION: My plan's benefit is $50 per month times years of service. Service for any given year is defined as follows:

Hours	Service Credit
>=1801	1
>=1701	0.94286
>=1601	0.9
>=1501	0.84286
>=1401	0.8
>=1301	0.74286
>=1201	0.7
>=1101	0.64286
>=1001	0.6
>=901	0.54286
>=320	0.5

In my database, I have a complete history of hours worked up to the valuation date. I am assuming that any employee’s future hours worked will be the same as the hours worked during the most recent year in the history. How can I code this benefit in ProVal?

ANSWER:

First, calculate the accrued service as of the valuation date and put it in a database field, e.g. SERVICE.

Next, create a Service Definition in which the field referenced for Current service on the valuation date is SERVICE and the field referenced for fractional Service accruals contains the most recent hours worked. Check the box to transform this data to service and input the relevant conversion table:

From	To	Service
0	320	0
320	900	0.5
900	1000	0.54286
…	…	…
1800	--	1.0

Then use the final average (basis x cumulative rates) format and the following coding:

Accrual Rates: Constant rate of 1;

Benefit Service (for benefit accrual): use the Service Definition created above;

Accrual Basis Expression: 50 * 12.

NOTE: This solution estimates benefits prior to the valuation date, instead of computing the history exactly.

ALTERNATIVE:

The following method precisely calculates accrued benefits for past years (relevant only for entry age normal calculations) but encumbers the valuation and/or projection with a great deal of calculations. Note that this alternative solution produces the same accrued benefit as the solution above, so Projected Unit Credit and Pure Unit Credit calculations will not be affected.

The following solution uses a Career Average format with a trick. The trick is to replace what would normally be a salary history with an hours history. Thus we use #salary, because we've coded hours in the salary fields.

1. Define a field, e.g. YRSWORKED, to hold the number of years worked, counting any partial years as 1. To do this, you might use the following expression in Define Field by Expression:

#CEILING (VALDATE #YEARDIF DOH),

where DOH is the data field containing the date of hire and VALDATE is the data field containing the current valuation date.

2. Create a Census Specification that defines current and historical "salaries" as the fields containing the hours history.

3. Create Valuation Assumptions using no salary scale. This reflects the assumption that future hours worked are the same as current hours worked, i.e., the current "salary".

4. Define an Accrual Definition type of Benefit Formula Component, e.g. BENEFIT, with a Career Average (cumulative basis x rate) format and the following coding:

Accrual Rates:  600

Benefit service field: YRSWORKED

Accrual Basis Expression:  

(#salary >= 320 * .5) + (#salary >=901 * .04286)

+ (#salary >=1001 * .05714) + (#salary >=1101 * .04286)

+ (#salary >=1201 * .05714) + (#salary >=1301 * .04286)

+ (#salary >=1401 * .05714) + (#salary >=1501 * .04286)

+ (#salary >=1601 * .05714) + (#salary >=1701 * .04286)

+ (#salary >=1801 * .05714)

Accrued Benefit: Expected value. This tells ProVal to recreate the accrued benefit from the supplied basis and rates.

(Alternatively, the accrual basis expression may include multiplication by 600 (50 * 12) and the accrual rates may be coded as 1.)

Also, in the U.S. qualified mode, because we used the Valuation Salary Definition for hours worked, we need to code the "Highest 3 year average salary limitation" parameter of the Regulatory Data topic of Valuation Assumptions (behind the U.S. Maximum Benefits button) as "Not applicable" or to select an Alternative Salary Definition.