Contribution Definitions
A Contribution Definitions library entry is typically used to define the employee contributions and associated refund of employee contributions that are included in a pension plan. It may also be used to define Contribution Policy Data in the Plan Definition that can be referenced as part of the Contribution Policy for a Valuation Set or forecast. Any number of distinct Contribution Definitions may be included in a Plan Definition. For details of how ProVal derives the employee contribution normal cost from the year's employee contributions, see Employee contribution methodology.
Name is a text field in which to enter a description of the contribution. This may be any descriptive phrase, including spaces.
Contributions for each year are determined under one of two approaches. The first approach is Using accrual basis components, which is the most straightforward and can be used to handle most cases. For example, if employee contributions are 2% of pay each year, the formula would be #SALARY * 0.02. Accrual Basis Components and Custom Operators, rather than just ordinals and accrual basis operators, can be used for more complex situations such as contributions that vary based on service or location or that use a custom Salary Definition.
If the contribution is determined As the difference in cumulative amounts defined by benefit formula components, click the Formula button to enter an expression using Benefit Formula Components (typically career average format accrual definitions). Each year's contribution is equal to the change in the projected amount of the contribution formula between one valuation date anniversary and the next anniversary.
While most cases can be handled using Accrual Basis Components and generally equivalent results can be obtained from the two methods, it should be noted that when using an entry age normal liability method, the two methods may produce different results for employee contributions. The difference occurs in the calculation of employee contributions for years prior to the valuation year. When Using accrual basis components, the employee contributions prior to the Valuation Date are always determined based on the formula specified (e.g., 2% times the salary applicable to each past year). However, if employee contributions are the difference in cumulative amounts defined by benefit formula components and the Benefit Formula Component referenced is an accrual definition with career average as the accrual format, the parameterization of the Accrued Benefit topic of that Benefit Formula Component will have an effect. For example, if the accrued benefit is defined as zero, the historical contributions will be 0. If the accrued benefit is defined to be a database field containing the employee contributions as of the Valuation Date, the historical contributions will be prorated so that, when accumulated, they will equal the balance on the Valuation Date. If the accrued benefit is defined as the expected value, then the employee contributions prior to the valuation date will simply reflect the accrual rates applied to historical salaries (i.e., this will generally produce the same results as using Accrual Basis Components assuming the accrual patterns are the same).
Check the box Refund employee contributions when not eligible for any plan benefit to indicate that ProVal should assume that the accumulated employee contributions with interest will be paid immediately as a lump sum at decrement if the participant becomes disabled, dies or terminates and is not eligible for any other plan benefit. For example, consider a plan which pays a benefit upon disability or termination with at least 5 years of service, and upon death with no service requirement. If this box is checked, a refund will be paid if the participant becomes disabled or terminates during the first 5 years of employment. No refund would be payable under the death decrement as the participant is immediately eligible for a plan benefit. If a death benefit is payable to the beneficiary of a married participant who dies with one year of service and another death benefit is payable to the beneficiary of any participant with at least 5 years of service, a refund would be payable for married participants who die with less than one year of service and for single participants who die with less than five years. Note that checking this box will NOT ensure that plan benefits are at least as great as a refund of employee contributions. This comparison must be done within the Benefit Definition.
If a refund is payable, you must enter the Employee contributions accumulated with interest. Select either "<zero>", "<expected value>" or a database field name from the list of numeric fields unhidden in the current Project. If you select a field name, the field should contain the value of the contributions accumulated with interest to the Valuation Date. For purposes of projecting the accumulated contributions with interest into the future, ProVal assumes that interest and accruals are compounded annually. The liability associated with a refund of employee contributions will always be included in any vested liability calculation.
In Canadian mode, check the box to include in calculation of excess contributions if you would like this contribution definition to be included in ProVal's automatic calculation of excess contributions. See the technical reference article Canadian excess contributions for more details. This box may only be checked if you have checked the box to refund employee contributions when not eligible for any plan benefit.
Note that the parameters above related to refunds of employee contributions are not applicable (i.e., not reflected in any calculations) when used as part of Contribution Policy Data. If you create or edit the Contribution library entry within the Plan Definition Contribution Policy Data dialog box, the parameters will not appear on the screen.
If some active records (e.g., a plant location or division) are ineligible for the Contribution Definition, enter a Selection Expression (i.e., a database expression that selects records according to the values in a database field or fields) to specify for which records this Contributions library entry is applicable. Alternatively, you may retrieve a Selection Expression previously saved under the Selection Expression command of the Database menu. Only records that meet the selection criteria of the database expression will have contributions calculated under this formula. If the Selection Expression is blank, all records are considered eligible for this contribution.