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Valuation Sets

See also Valuation Set Output.

A Valuation Set brings together the assets and liabilities of a plan by combining one or more Valuations with one Asset & Funding Policy to calculate plan contributions, accounting expense and (by means of a roll forward to year end) accounting disclosure. In addition, Valuation Sets can be used to examine the effects of alternative and sequential events, such as assumption, benefit and methodology changes.

In the simplest case, a Valuation Set would consist of one Valuation and one Asset & Funding Policy; however, it is not uncommon to involve several Valuations (along with one Asset & Funding Policy). An example would be a plan that has several funding Valuations (e.g., a combination of hourly plans with different benefit levels) plus several accounting Valuations.

Note that the number of funding and accounting Valuations in the Valuation Set need not be the same if, for example, the accounting Valuations can be performed properly with fewer census divisions than the funding Valuation. The following Valuation Set, for example, has four funding Valuations and two accounting Valuations. For each category, the Valuations represent a complete valuation of the plan's benefits and census (even though one category may involve a fewer number of Valuations). For example, a Valuation Set may comprise the following Valuations:

Funding Accounting
Hourly #1 All Hourly
Hourly #2 All Salary
Salary #1  
Salary #2  

If you include more than one Valuation in the Valuation Set, please be sure that the parameter settings are consistent among the Valuations with respect to (in particular): Valuation Date, liability methods (including timing of employee contributions), funding valuation interest rates, accounting valuation interest rates and, in the U.S. qualified pension mode, applicable law. Thus, for example, if you include (pension mode) accounting Valuations with different ABO interest rates or (U.S.) PPA funding Valuations with different valuation interest rates (such as spot rates for one Valuation and segment rates for another one), the Valuation Set run will abort.

In the U.S. qualified mode, ProVal requires substantially different parameterization of Valuation Sets in order to calculate costs for a single-employer plan under the Pension Protection Act of 2006 (PPA) from what it requires for a multiemployer plan or under pre-PPA law:

For example, in the U.S. qualified mode, a Valuation Set might contain the following two Additional Events:

  1. If the actuarial cost method selected under the Contribution Policy topic is of the immediate gain recognition type, the first change is (always) the one pertaining to the experience gain or loss (and ProVal will produce it automatically when it executes the Valuation Set). This “event” normally is based on the current year's census data and specifications and the prior year's Plan Benefit Definition(s) and set(s) of Funding Assumptions; the relevant Valuation(s) should be specified in the field Valuations Included in the Baseline Gain or Loss Event at the top of the dialog box. When ProVal evaluates contributions and expense for this set of Valuations, it will assume that any unfunded liability unaccounted for by the Asset & Funding Policy amortization bases is attributable to an actuarial gain or loss and will amortize it accordingly. That is, in the U.S. qualified mode, under PPA, its results will be aggregated with those of all other changes in Funding Shortfall and amortized; under multiemployer or pre-PPA law, its results will be isolated and amortized over the applicable amortization period.

  2. The second event might be a plan change to increase benefits. In this case, an Event would be created and the appropriate Valuation(s) referenced. Similar to a gain or loss base above, the increases in liability and costs would be carried out under applicable law and included in the contribution.

Any number of other Additional Events might be added if desired, such as to reflect, in the current year, assumption and methodology changes from the prior year.

The items requested in the Valuation Set dialog box are as follows:

Name is a text field for describing the Valuation Set currently being defined. The name will be displayed in the Valuation Set Library, so you are encouraged to use a name that will readily allow you or a colleague to understand the underlying nature of the Valuation Set.

The Valuations Included in Baseline Gain or Loss Event (in U.K. mode, Ongoing Valuations Included in Baseline Gain or Loss Event) parameter summarizes all of the Valuations included in the "baseline" scenario, such as the Valuations based on the prior year assumptions and benefits. Additional Valuations can be added to this list by clicking the Add / Omit button and selecting from the available, and not previously referenced, Valuation library entries. Valuations can be deleted from the list by clicking the Add / Omit button and removing the check marks from one or more Valuations in the list of included Valuations. Note that the List of Valuations displayed in the Add/ Omit Valuations dialog box can include, at your option, “All” Valuations defined in the current Project or just “Completed Valuations” (“Completed Ongoing Valuations” in U.K. mode), that is, Valuations that have already been run and saved.

In all modes except OPEB, U.S. public pension and German pension, the Overrides button provides a way to replace the values of certain liabilities and costs calculated in the baseline Valuation(s) with liability and cost values calculated by other Valuations. The options for overriding variable output values are:

As an example, to override all PBGC liabilities (U.S. qualified mode) generated by the Valuation(s) specified in the Baseline Gain or Loss Event, click the Overrides button, click “PBGC (incl. PPA)…” and select the Valuation(s) that contain the values you wish to use for the PBGC variable rate premium liability. For both PPA and prior law, all PBGC variable rate premium liabilities, whether on the at-risk or the not-at-risk basis, will be overridden for all plan participants and replaced with the aggregate PBGC variable rate premium liability produced by the alternate Valuation(s) selected under the Overrides button. Although the total number of Valuations required to override the specified liability may vary from the total number of Valuations included in the Baseline Gain or Loss Event, the total population represented should remain constant; otherwise, ProVal will generate a warning that the demographics are not consistent between the set of baseline Valuations indicated by the Valuations Included in Baseline Gain or Loss Event parameter and the set of override Valuations indicated by selections under the Overrides button.  In the special case that there are no records mapped to the ProVal active status, or no records mapped to a ProVal inactive status, in the baseline Valuation(s) but there are such records in the override Valuation(s), ProVal will issue a warning and will not process active liability overrides, or inactive liability overrides, respectively (and thus there will be no active, or inactive, records, respectively, reflected in the Valuation Set results).   

Note that the List of Valuations displayed in the Add/ Omit Valuations dialog box can include, at your option, “All” Valuations defined in the current Project or just “Completed Valuations” (that is, Valuations that have already been run and saved).

A check mark on the Overrides button indicates that an override Valuation has been selected for at least one type of liability. Note that, with the exception of the special case already mentioned (no active participants, or no inactive participants, in the baseline runs), ProVal overrides all liabilities of that type contained in the baseline runs; final results for that liability type thus will match the Override Valuation(s) results (again, with that one exception) and not “carry over” any liability values from the baseline runs. Therefore, be sure that you have included in your Override Valuation(s) all records you wish to process and all benefits you wish to value, regardless of whether the coding and/or participant data have changed between a baseline run and the corresponding override run. For example, if a participant status mapped to the ProVal “Vested” status is present on records in the database(s) used for the baseline Valuation(s) but a status mapped to ProVal’s “Vested valued through active” status is used on these participants’ records in the database(s) for the Override Valuation(s), ProVal’s final liability values for these participants will be for the “Vested valued through active” status only.  Similarly, if you wish to replace baseline liabilities only for actives and terminated vested participants, you still must process override liabilities for retired participants and survivor beneficiaries, although no change is intended for their liabilities.

The Additional Events parameter summarizes any additional events, such as plan changes, assumptions changes, etc., that have been included in the Valuation Set. Additional events can be added to this list by clicking the Add Event button and defining the desired events, i.e., select the type of event (e.g., a plan change) and complete the parameters (specific to each Additional Event type) in the next dialog box. The order in which the Additional Events follow the baseline Event can be changed by clicking the Reorder button. Note that, in the U.S. qualified mode, under a multiemployer or pre-PPA law selection, reordering usually will change the amount of liability base and amortization payment associated with each Additional Event.

Events are changes to valuation assumptions, methodology or benefits. Under the U.S. qualified mode “Multiemployer” or “Pre-PPA” law selections, these changes generally require the initialization of amortization bases on a funding and/or accounting basis. If you specify Events, ProVal will calculate Valuation Set results reflecting the impact of all specified Events in the order in which they were entered. In addition, you can view the intermediate contribution and expense results by running Valuation Set Exhibits and indicating that you want to view results by Event.

Clicking the Add Event button in the Valuation Set dialog box accesses a menu of Event types; selecting a type accesses the Event Definition dialog box. The following types of Event are available (note that not all choices are available in every mode):  

Type of Event Information you must specify  
 •  Gain or Loss  valuation(s) that measure the event   
 •  Assumption Change   valuation(s) that measure the event 
 •  Plan Change  valuation(s) that measure the event 
 •  Funding Method Change   new funding method; select from list of methods supported by baseline valuation(s)
 •  Funding Asset Valuation Method Change  new asset valuation method and associated parameters
 •  Accounting Asset Valuation Method Change  new asset valuation method and associated parameters
 •  Accounting Expected Return on Assets Change
  new expected return on assets (enter 0.05 for 5.00%)
 •  GASB Gain or Loss  valuation(s) that measure the event; actual end of year asset value (Public, OPEB modes) 

 
 
 
 
 
 
 
 

By repeating this procedure of adding Events, you can define a complete Valuation Set.

Asset & Funding Policy is a multi-choice field that displays the library of Asset & Funding Policies. Select the appropriate Asset & Funding Policy for the Valuation Set or click the image/backdoor_button.gif button to create a new library entry.

In Public Mode if the Asset & Funding Policy varies by group, click the Groups button to select which Groups to run. Note that if the Asset & Funding Policy varies by group, each referenced Valuation must be subtotaled by the same coded field.

If the Apply Scaling Factors checkbox is selected, the scaling factors specified in the Valuation dialog box will be applied to the valuation results prior to their being used to determine plan contributions and expense.

If the underlying Valuations from the baseline gain or loss event, overrides and additional events are run with consistent interest rate sensitivities, the Assumption Sensitivity parameters for Funding and / or Accounting are accessible. Select whether to use “Baseline”, “+%” or “-%” valuation assumption sensitivity results from the Valuation(s) when executing the Valuation Set. (Note: the percentage amounts displayed in the “+” and “-”options reflect Valuation selections.)

The Run button first checks for completeness in all of the specified valuation set parameters. Then, if no errors are found, it executes the valuation set. An indication of what steps are being performed (validating input, processing) and the elapsed time, will show on the screen during execution.

When the valuation set is complete, a message will appear describing how long it took to run, warning messages, etc. These "processing messages" can be printed or viewed at any later time through the View button.

 

Viewing Output

The View button displays summary output, along with inputs and processing messages. Click the Options button to:

Alternatively, you can create customized output and view exhibits (e.g., contribution development) by using the Output pane (on the right side of ProVal’s main window).