Benefit Formulas
(In the pension modes, see also Benefit Formula.)
Entering the Gross Benefit Definition or a Participant Contribution in ProVal is a combination of filling in parameters and free-form programming. Each definition 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 simple addition to specialized date arithmetic.
There are separate expression boxes for the Gross Benefit Definition and the Participant Contribution towards the cost of the benefit. ProVal will develop a net benefit cost by subtracting the participant contribution expression from the gross benefit expression. Alternatively, the net benefit can be defined under the Gross Benefit Definition and no Participant Contribution defined. The latter alternative may be preferable when an annual limit, or “cap”, is placed on the employer cost of benefit payments, to ensure that the “cap” is properly applied.
Aside from LTD valuations, the Gross Benefit Definition and the Participant Contribution should be entered as an annual amount. Because LTD valuations utilize monthly calculations, the Gross Benefit Definition and Participant Contribution should be entered as a monthly amount. To assist with LTD's monthly calculation, the calendar year operators #EQCY, #GECY, #GTCY, #LECY, #LTCY, and #NECY will accept fractional arguments. For example, specify #LTCY 2016.5 to return 1 if the calculation date is less than 7/1/2016. Additionally, #DECYEAR and #PMTYEAR will return fractional values. To exactly represent a date that contains a repeating decimal, such as 2/1/2016, enter (2016 + 1/12) as the parameter's argument (e.g. #EQCY (2016 + 1/12))
In general, both the Gross Benefit Definition and Participant Contribution will be valued according to the selected Payment Form (e.g., both valued as a life annuity to the member). However, if the payment form is “Life Insurance on Member’s Life” or “Life Insurance on Spouse’s Life”, then only the Gross Benefit Definition uses the payment form; the Participant Contribution is valued as if the payment form were “Life Annuity to Member” or “Life Annuity to Spouse”, with the same commencement date and temporary period as the life insurance.
Here are some keys to creating benefit formulas for either a gross benefit or a participant contribution:
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.
Use Benefit Component Tables for all age-related benefits. For post-retirement benefit plans, this type of Benefit Formula Component is suitable for entering values of expected medical care claims and aging adjustment factors, life insurance face amounts or participant contributions that vary by age, service, or both.
Let accrual definitions do the work for you when benefits or participant contributions are related to service or points (age + service), or, much less commonly, to age by a rate pattern that does not fit easily into a tabular form. A typical example of use of accrual definitions for service-related benefits is a severance pay plan; accrual definitions might be used as well to model employer subsidies that increase with service.
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.
Remember that benefit formulas contain 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 Gross Benefit Definition or Participant Contribution expression box, a useful list of database fields, codes and labels, operators, etc. is only a keystroke away.
Clicking the Component Library button leads to the Benefit Formula Component Library dialog box, through which you can create, unhide and edit Benefit Formula Components.