QUESTION: My cash balance plan has monthly employer contributions with monthly interest crediting.  It allows participants to take loans or distributions from their cash balance account. The plan also allows repayments back into the account.  How can I code ProAdmin to reflect the distributions and repayments so that interest cannot accrue on amounts not in the account, such as loans and distributions, and will accrue on repayment amounts starting at the repayment date?

ANSWER: ProAdmin's operator #GETASOF allows distinct amounts (loans, distributions and repayments) to be extracted from array elements at their effective dates. The following example illustrates how to extract the amounts in a basis formula to adjust cash balance values at the effective dates of.

Suppose a cash balance plan has employer contributions of 3% where the account grows with annual interest of 4%, credited monthly.  In this plan, employees are allowed to take small amounts from their cash balance account as a loan. The plan allows employees to pay back or not pay back the amounts with or without interest.  Cash balance accruals, loans or distributions and repayments are effective at the end of the month while the participant is employed. The data contains historical monthly salaries, amounts of distributions or loans (data dictionary field "Loans") and amounts of repayments (data dictionary field "Repay") - all in start/stop arrays. For example: loans, repay. 

A few items in ProAdmin will require minor changes to allow integration of loans and repayments into the cash balance component:

• The cash balance component has parameters for basis formulas and accrual rates. Since amounts of loan/distributions are subtracted and repayments are added to balances, they can be incorporated into the accrual once accrual rates are applied.  To do this we make the accrual rate equal to 1 (one) and bring the accrual rate information into the basis formula.
• Use #GETASOF in the basis formula to capture the loan/repayment amounts and their effective dates.
• The data for salaries, loans and repayments are start & stop dated arrays. Two new effective dated arrays will be defaulted in the Census Specifications to contain the effective dates of the loans and repayments.  These fields will be used as the left parameter of #GETASOF.

Data default for loans_ef_dt:
s_dt := #STOP Loans &
12 #ARRAY (s_dt, s_dt)

Data default for repay_ef_dt:
s_dt := #STOP Repay &
12 #ARRAY (s_dt, s_dt)


• New Accrual Basis Components will be defined as as Field types for loans and repayments (e.g. Loans, Repay, Loans_ef_dt, Repay_ef_dt) so they may be used in the cash balance basis formula.
• The salary custom operator referenced within the basis formula of the cash balance benefit formula component requires adjustment for incremental amounts. You can do this by setting Salary before any cash balance component parsing is: to Incremental plan year amount within the the Cash balance Crediting topic of the custom operator.  Name the operator, or Save as new, #SAL_incr_mthly, for example. 

Benefit Formula Component - Cash Balance,

Basis formula - since #SAL_incr_mthly custom operator provides monthly salaries, the formula could be:

A := (Loans_ef_dt = #DATE) * (Loans_ef_dt #GETASOF Loans) &
B := (Repay_ef_dt = #DATE) * (Repay_ef_dt #GETASOF Repay) &
(#SAL_incr_mthly * 0.03) - A + B

Accrual rates - set the accrual rates to 1 (one)

The general accrual for the month is "#SAL_incr_mthly * 0.03." Adding and subtracting amounts from the general accrual results in a net accrual for the month. The cash balance component takes care of the interest. The results provide the progression of account balances as loans and repayments are made.