Under the Scaling Factors command, you can establish scaling factors to apply to the calculated results of a Valuation or Core Projection, either by entering such factors manually or by having ProVal calculate the factors, which is done by comparing the results of two saved (ProVal) Valuations.

For example, if you run a valuation using seriatim data and then run the valuation using grouped data, you may want to scale the grouped results to (match) the seriatim results. Alternatively, if you want to precisely match the results from another valuation system, you can scale (multiply) ProVal results by factors that bring about this conformity. To associate a set of scaling factors with a Valuation, first create the scaling factors, then go to the Valuation Library and edit the associated Valuation. You will find a dropdown list of scaling factor library entries; select the correct entry and then Replace the Valuation library entry. It will be saved with the associated set of scaling factors. Scaling factors can be associated with Core Projections in the same manner. Note that scaling factors may be created and applied to Valuations and Core Projections after they have already been run – it is not necessary to actually execute these runs with a set of scaling factors specified.

By default, scaling factors associated with a Valuation will apply to Valuation Sets that reference the Valuation. Similarly, scaling factors associated with a Core Projection will apply to Deterministic Forecasts and Stochastic Forecasts that reference the Core Projection. However, the referenced scaling factors don’t have to be applied. Under the Valuation Set or forecast command, you can choose whether to apply the scaling factors.

Note: Scaling factors are not applied in a Gain/Loss Analysis.

Select a topic to edit contains entries for each category of information (topic) found under the Scaling Factors command. The available categories of scaling factors are:

• Legislated Liabilities (U.S. qualified mode)

• Funding Liabilities (all modes except German)

• Tax / Funding Liabilities (German mode)

• Accounting Liabilities

• Other Scaling Factors

In general, the scaling factors are self-explanatory. However, the following points are worth noting:

1. Factors are separate for active and inactive liabilities and, for each cost method (e.g., projected unit credit, unit credit) and specialized liability (e.g., current liability, solvency liability), the accrued liability and normal cost have distinct scaling factors. Thus, for example, Projected Benefit Obligation and Service Cost have separate scaling factors.

2. It is not possible to scale benefits (Benefit Definitions) separately or to scale inactive liability separately by status. To do so, you must create a separate Valuation or Core Projection that includes only the benefits or statuses you wish to scale.

3. The factor for Benefit payments & liabilities for emerging inactives (under the Other Scaling Factors topic) is used only for core projections, not valuations. This factor is necessary because the active scaling factors do not carry forward once a participant becomes inactive. Thus, if you scale the active liabilities by 5%, you would also want to scale the liabilities for new inactives by 5% to avoid a de facto actuarial loss of 5% when a participant becomes inactive.

4. The Employee Contribution Offset to Normal Cost allows you to specify a separate scaling factor for the employee contribution offset when calculating the employer normal cost.  The default is to use the same scaling factor for the employee contribution offset that is used for the other components of normal cost.  Note that if you specify a scaling factor for the employee contributions, the same factor will be used for all normal costs (you cannot specify a separate scaling factor for each normal cost calculated, such as separate factors for ABO & PBO normal costs).

5. Projected Benefit Payments are adjusted by the same scaling factor as the liability to which they discount.  Because there are separate scaling factors for active, emerging inactive, and initial inactive liabilities, each of these is applied separately to the corresponding category of projected benefit payments
   
   

As an alternative to entering the scaling factors by hand, you can use the Calculate button to select a source Valuation and a target Valuation and have ProVal automatically produce the scaling factors. The scaling factors are the ratios of values produced by the Valuation with target results (numerator) to the values produced by the Valuation to be adjusted (denominator). For example, to scale the results of a grouped Valuation to those of a seriatim Valuation, the grouped Valuation is your source and the seriatim Valuation (whose results you wish to match) is your target. Scaling factors for accounting and funding output variables are calculated separately. There is no Calculate button for the Other Scaling Factors topic, but the values of output variables found under the Other Scaling Factors topic are always scaled along with funding scaling factors. The Calculate button for the liabilities topics provides an option to scale only the variable output values of that particular topic or all available variable output values as well.