Accrual Rates are required for accrual definitions whose format is not "Basis only". The use of accrual rates depends on the type of accrual definition. For the final average type, the rates are accumulated over service before being multiplied by the basis; for the career average and cash balance types, rates are multiplied by the basis before being summed.

Service Definition Set selects the Service Definition Set from the Library that defines service for purposes of benefit accrual. If <Base Service Set> is selected, the Service Definition Set specified in the Census Specifications is used.  Especially for cash balance type components, it is strongly recommended that the referenced Service Definition Set be parameterized to change service only at decrement and end of the interest crediting period to avoid benefit and interest accruals at miscellaneous calculation dates.

The three options for the structure of accrual rates, or Rate Type, are described below.

Constant

The simplest structure is a constant rate for each year of service. Enter the constant rate or a Plan Constant, entering a percentage as its decimal equivalent (e.g., enter 0.015 for 1.5%).

Varies

This rate structure allows for a rate that Varies by “years of service” or “age” or “points (age + service)”, including service caps (i.e., the rate becomes zero after a maximum number of years; for age and points, the service cap must be controlled in the benefit service Service Definition Set). As discussed in more detail below, the Varies by option also allows access to rate schedules that vary by effective date (with new rates as of).

If rates vary by service, the breakpoints for service are defined by the specified Service Definition Set. If rates vary by age, the Age… button (discussed below) becomes unghosted to allow refinement of the age determination. Type values only in the From and Rate columns of the spreadsheet; the Up to column will be filled in automatically. Enter percentages as their decimal equivalents (e.g., enter 0.015 for 1.5%) numeric value or a Plan Constant. If you are entering additional rate schedules that start at different effective dates, then the schedule on the main accrual rates screen should reflect the original plan provisions before any changes.

Whether you are using service, age, or points, the benefit service specified by the Service Definition Set for the accrual definition impacts how the rates are calculated/adjusted:

• If no service is earned in an interest crediting period, then the rate for that period is zero

• If a rate changes in a plan year (or in an interest crediting period, if cash balance) then the service-weighted average of the accrual rates is multiplied by the basis for the period.

The with new rates as of section lists the dates of any subsequent changes to the rates. To modify an existing schedule of rates effective as of a particular date, click the date. To add a new schedule of rates, click the New… button.

Each new accrual rate table will have the same structure as the first one – varies by years of service, age or points (age+service). The Effective date for each new rate table is the date on which rates begin to follow the new schedule. The breakpoints and rates are entered in the table in the same manner as on the main accrual rates screen and the Service Definition Set from the main screen applies to all accrual rate tables. For example, if, effective 7/1/2006, the benefit accrues at a rate of $120 per year for up to 10 years and at a rate of $150 per year in excess of 10 years, the accrual rate will change from $120 to $150 when (i) total service, including service prior to 7/1/2006, is at least 10 years and (ii) 7/1/2006 has been reached or passed.

You may Apply rates to just the Years after the effective date of the rate change (future accruals only) or to All years (both past and future accruals). Choose All years if the new rate schedule is used for the active member’s entire accrual period on or after the effective date. If you are editing a final average accrual format, your accrual rates vary by years of service, and your new rates are 0% after a period of service, the options are named slightly differently and there is a third option:  you may Apply rates to All years or Years after the effective date, evaluating service either Forward from hire (as with all other component types) or Backward from each calculation date. 

The option to apply rates Backward from each calculation date allows members who have exceeded the service limit to have their benefits increase per plan amendments for service after the effective date of the amendment by, essentially, replacing an old rate with a new rate for each year of service after the effective date of the amendment. For this calculation:

(1) If the accumulated rates would otherwise decrease, a minimum is applied to prevent the decrease. If a minimum is applied, a footnote is generated in the calculation results for the affected FAS accrual definition(s).

(2) If the most recent tier of accrual rates has a service limit less than that of a prior tier, the maximum service accrual allowed will reflect the current maximum limit (although the accrued benefit will not decrease). The second example below illustrates this calculation.

(3) If the accrual rates within a prior tier of rates vary by years of service prior to the service cap (i.e., 5% for 10 years, 7% for the next 10 years and 0% thereafter), and the accrual is being re-evaluated backward from the hire date so the recognized service, in this example, is reduced from 20 to 19, the accrual is evaluated as if the participant had earned 19 years of service, not as if they earned 20 years of service and then subtracted one year of accruals. In other words, the old rate that is "removed" comes from the last year of service in the tier of rates, not the first year. The second example below illustrates this calculation.

For example, before 1/1/2010, the accrual rate was 1% for 20 years, 0% thereafter; after 12/31/2009, the accrual rate is 1.1% for 20 years, 0% thereafter. If a participant has 15 years of accrual service at 12/31/2009, the accumulated accrual is 15% [=15 * 0.010], and if they have 20 years of accrual service at 12/31/14, the accumulated accrual is 20.5% [=(15 * 0.01) + (5*0.011)]. If at 12/31/15, they have 21 years of accrual service, the accumulated accrual is still 20.5% if service is evaluated forward from hire because the service was earned after the limit. However, if service is evaluated backward from each calculation date, the accumulated accrual would be 20.6% [=(14 * 0.01) + (6 * 0.011)]. If a total of 20 years of accrual service is earned after the effective date (i.e., 35 years of service earned from hire: 15 years of service by 12/31/2009, and additional 20 years of service earned after 12/31/2009), then the accumulated accrual would grow to 22% [=20*0.011].

Now suppose you have tiered accrual rates: before 1/1/2010, the accrual rate was 1% for 10 years, 2% for 10 years, 0% thereafter; after 12/31/2009, the accrual rate is 1.1% for 10 years, 2.1% for 5 years, 0% thereafter. If a participant has 14 years of accrual service at 12/31/2009, the accumulated accrual is 18% [=(10 * 0.01) + (4 * 0.02)], and if they have 15 years of accrual service at 12/31/10, the accumulated accrual is 20.1% [=(10 * 0.01) +  (4 * 0.02) + (1 * 0.021)]. If they have 16 years of accrual service at 12/31/2011, the accumulated accrual is still 20.1% if service is evaluated forward from hire because the service was earned after the limit. However, if service is evaluated backward from each calculation date, the accumulated accrual would be 20.2% [=(10 * 0.01) +  (3 * 0.02) + (2 * 0.021)]. Note that:
(1) the total accrual service used towards the accumulated accruals after 12/31/2009 is 15 years (or less) because the rates effective 1/1/2010 stop accruals after 15 years, and
(2) when the service before 1/1/2010 is reduced to 13 years (or less) of service, the 13 years is used to re-evaluate the rates as if the participant had only earned 13 years of service at 12/31/2009, not as if they earned 14 years of service and then subtracted one year of accruals.

The Reflect new rates after decrement checkbox is available (unghosted) when using a table with new rates as of a specified date for Final average or Career average type benefit formula components.  If the box is checked, any rates from the specified new rates table that become effective after a member's decrement will be reflected in benefit amounts. If not checked, the accrual definition is frozen at decrement.

Project & Prorate

The Project & prorate rate structure accrues a projected benefit ratably over service; it is appropriate for "fractional accrual rule" plans. The Ultimate accrual indicates the eventual accumulation of rates if age and service requirements are fulfilled. The Project to parameter specifies the earliest age when the ultimate benefit is fully earned. Select either a constant Age for all participants, or choose Date field to specify a scalar date field from the database when the age varies by participant (e.g., U.S. Social Security Normal Retirement Age). For example, if the benefit is projected to the normal retirement age, where normal retirement eligibility is attainment of age 65 and completion of five years of service, then code the projection age as 65 (although the projection age can be as late as age 70 for some members). The projected benefit is reduced proportionately for projected service less than the Service required for ultimate accrual.

The formula used to calculate the accrued benefit with these parameters is

The product of the first two factors represents the benefit at the projection age; the third factor spreads the accrual of this projected benefit over service.

Consider a benefit of 50% of final average salary for all employees with 25 years of service, accrued over service to age 65. This benefit would be parameterized as a final average accrual definition:

Basis: final average salary
Rates:

Ultimate accrual: .50
Projection age: 65
Service required for ultimate accrual: 25

Check the Apply rounding rule box if the prorated accrual rates should be rounded. The value entered for the Amount controls the rounding precision. For example, to round the rates to 4 decimal places, enter 0.0001 into the Amount parameter. An Amount entered as 0.0025 indicates that rates should be rounded to 25 basis points. Direction indicates whether the rate should be Up, Down, or to the Nearest multiple of the Amount.

If the Apply annualized rate to career average /cash balance basis formulas box is checked, the plan year accrual rate, which is first determined as the change in the cumulative accrual rate, is annualized by dividing by the service earned during the plan year per the Service Definition Set. This annualized rate is applied to the Basis to determine the year's cash balance or career average accrual. If the box is not checked, service will not be a factor in the determination of the accrual rate.

If you have a Rate type which Varies by “age” or “points (age + service)”, the Age… button becomes available. Click the Age… button to control how age is calculated for determining the accrual rates. The Age for determining the accrual rate is defined as age last birthday in parameter permits age to be calculated either in completed years or years and completed months (blended rate). If the latter is selected and the appropriate crediting rate differs from the beginning to the end of the crediting period, a weighted average accrual rate is used. For example, if the rate changes from 3% to 4% at age 40 and the member is age 40.75 on an annual crediting date, a 3.75% crediting rate is used for that period.

The age can be calculated at the calculation/crediting date or the beginning of the plan year. If the age is based on completed years and months (blended rate), the only available option for when this age is determined is at the calculation/crediting date. The result of this selection will provide an interpolated accrual rate for the period in which the breakpoint is attained.