Coding a pre-retirement death benefit (PRDB)
QUESTION: My plan has a pre-retirement death benefit for married participants who die before retirement. At no cost to participants, the benefit to the surviving spouse is 50% of the benefit the member would have received had he, or she, quit working on the date of death, survived to the earliest retirement date and selected the 50% J&S option. For a cost, members can elect the 100% Joint & Survivor-Pre-Retirement Surviving Spouse Benefit (PRSSB) program as the selection for their pre-retirement death benefit
At hire, or upon marriage, members decide which benefit they would like their surviving spouse to secure. If none is selected, and they are married, they are automatically enrolled in the 50% J&S option. Members can elect at any time to change between the two optional death benefits. The chart below shows the cost per year for election of the 100% Joint & Survivor-Pre-Retirement Surviving Spouse Benefit
| Chart 1. Cost per annum - 100% Joint & Survivor PRSSB | ||
| Age | Active status | Terminated status |
| < 35 | no charge | no charge |
| 35 - 40 | 0.05 %; | 0.10 % |
| 40 - 45 | 0.10 % | 0.20 % |
| 45 - 50 | 0.15 % | 0.30 % |
| 50 - 55 | 0.20 % | 0.40 % |
| 55 - 60 | 0.25 % | 0.50 % |
| 60 - 65 | 0.30 % | 0.60 % |
| > 65 | no charge | no charge |
At commencement of benefits, a death reduction factor is applied. The reduction factor is the accumulation of monthly charges while the member is participating in the 100% J&S death benefit option subtracted from one (1). Chart 2 below, explains five examples.
| Chart 2. Examples | ||||
| Example | Events | Elections | Computations. | Reduction factor |
| 1 | Hired at age 21 | Never elects the 100% J&S PRSSB. Remains employed until age 65, NRD | 30 years at no cost | 1.0000 |
| 2 | Hired at age 21 | Elects the 100% J&S PRSSB; remains employed until death: the day before 65th birthday | 30 years: 5 years each at 0.05%; 0.1%; 0.15%; 0.2%; 0.25% and .3% |
0.9475 |
| 3 | Hired at age 27 | Elects the 100% J&S PRSSB | 10 years: 5 years at 0.05%; 5 years at 0.1% | 0.9775 |
| Quits at age 45 | Continues to participate in the 100% J&S PRSSB. | 5 years at 0.30 = 1.5 % | ||
| Dies at age 50 while unemployed | ||||
| Spouse begins 100% J&S benefits when member would have been age 55 | ||||
| 4 | Hired at age 42 | Elects the 100% J&S PRSSB. | 10 years: 3 at 0.1%; 5 at 0.15%; and 2 at 0.2% = 1.45% | 0.0000 |
| Quits at age 52 | Continues to not participate in 100% J&S PRSSB |
3 years at 0.4% = 1.2% | ||
| Spouse dies three years later | Stops participating in any death benefit |
|||
| Member remains unmarried through retirement | ||||
| 5 | Hired at age 21 | Elects the 100% J&S PRSSB | 5 years at 0.05 = 0.25% | 0.9975 |
| At age 40 | Elects to quit 100% J&S PRSSB | 5 years at no cost | ||
| Quits at age 45 | Continues to not participate in 100% J&S PRSSB | |||
| Dies at age 50 | While unemployed | |||
| Spouse begins 50% J&S benefits when member would have been age 55 | ||||
The data contains the following items:
| Chart 3. Data | ||
| Name; | Data item/Label | Numeric Code |
| DOB | Date of Birth | |
| DOH | Date of Hire | |
| Numeric coded effective dated array - Is member married? | ||
| Married_Divorced_Widowed | Married | 1 |
| Divorced or never married | 2 | |
| Widowed | 3 | |
| Numeric coded effective dated array - What event has occurred? | ||
| Events | Date of hire - active | 1 |
| Date of rehire | 2 | |
| Date of termination | 11 | |
| Leave of absence | 12 | |
| Layoff | 13 | |
| Date disabled | 14 | |
| Date of death | 15 | |
| Return from leave | 22 | |
| Return from layoff | 23 | |
| Return from disability | 24 | |
| Numeric coded effective dated array - Has member elected 100% J&S pre-retirement surviving spouse benefit? | ||
| PRSSB | Yes | 1 |
| No | 2 | |
How can I code this in ProAdmin?
ANSWER: We will take advantage of a Service Definition expression to accumulate the costs. To do this we need to know when the member is being charged and at which cost. We will do this in three steps:
Step 1. Determine the dates when the member reaches the beginning ages in Chart 1. Since there are two costs per age, we can do this in data defaults with two (2) effective date numerical array fields: PRSSB_active_cost and PRSSB_terminated_cost. Since we know their dates of birth, from Chart 3, we can determined the dates when they reach certain ages. The defaulted arrays are set up as follows:
PRSSB_active_cost:
2 #ARRAY (
DOB #DATEPLUS 18Y, 0.0000,
DOB #DATEPLUS 35Y, 0.0005,
DOB #DATEPLUS 40Y, 0.0010,
DOB #DATEPLUS 45Y, 0.0015,
DOB #DATEPLUS 50Y, 0.0020,
DOB #DATEPLUS 55Y, 0.0025,
DOB #DATEPLUS 60Y, 0.0030,
DOB #DATEPLUS 65Y, 0.0000 )
PRSSB_terminated_cost:
2 #ARRAY (
DOB #DATEPLUS 18Y, 0.0000,
DOB #DATEPLUS 35Y, 0.0010,
DOB #DATEPLUS 40Y, 0.0020,
DOB #DATEPLUS 45Y, 0.0030,
DOB #DATEPLUS 50Y, 0.0040,
DOB #DATEPLUS 55Y, 0.0050,
DOB #DATEPLUS 60Y, 0.0060,
DOB #DATEPLUS 65Y, 0.0000 )
Step 2. In the Service Definition Set, compute the cost of the 100 J&S death benefit. This will be based on the member's date of death (no costs after death) and four "moving" conditions:
1. Member's age (which has been addressed by determining the important dates in step 1. above),
2. Whether they are active or terminated,
3. Whether they have selected the 100% J&S Death Benefit or not, and
4. Whether they are married or not.
Name: PRSSB_Cost Based on Reported hours Measurement period: calendar year Hours conversion expression d_dt := #DATE & ; date
p_dt := "P" #GETASOF D_DT & ; get previous date
svc := {#INT [(d_dt + 1) #MONTHDIF p_dt]}/12 & ; service between successive dates
mar := Married_Divorced_Widowed = 1 & ; is married
in_100 := PreRetirementDeath = 2 & ; selected 100% J&S death benefit
act := Events #IN (1,2,3,12,13,3,14) & ; active or treated as active employment.
term := Events = 11 & ; terminated. event = 15 for death is
cost := [PRSSB_active_cost * svc * mar * act] + ;- ignored - no cost upon death of participant.
[PRSSB_terminated_cost * svc * mar * term] & ; compute the cost per svc period
0 #MPSUM cost ; sum the costs for service definition