The late retirement component type allows you to calculate late retirement increases.  While the default action is to add the late retirement increase to any other existing component, it is also possible to use this component type to calculate the U.S. 415(b) maximum dollar limit on the plan factor basis or to return an increase factor only (rather than an adjusted benefit).

The calculations are based on: (1) the benefit formula, (2) the Normal Retirement Date (NRD) after which late retirement increases apply, (3) the plan’s actuarial equivalence assumptions, and (4) the plan’s late retirement increase methodology.  Some age methodology and rounding options are also available.

In the Accrued Benefit section, specify the Benefit Formula Component to which the late retirement increases should be added, as well as the normal form of annuity. Typically the Benefit Formula Component will be a subformula type of component because it should represent the entire benefit formula. The Normal Form Type of annuity can be specified as either a Life Annuity or a Certain & Life Annuity.  If the latter, specify the Certain Period (in years). 

There are two additional, mutually exclusive, calculation options in the Accrued Benefit section in lieu of the component returning a benefit adjusted for late retirement. If either Calculate U.S. 415(b) maximum on plan factor basis or Return factor (rather than adjusted benefit) is selected, the Benefit Formula Component parameter becomes ghosted (unavailable) because it is not relevant to the calculation. If Calculate U.S. 415(b) maximum on plan factor basis is selected, the plan factor adjusted 415(b) dollar maximum is returned. This calculation is useful if it is necessary to make manual maximum benefit calculations for some reason, and you need to reflect the lesser of the plan and statutory adjustment factors.  (The statutory adjustment factors would be reflected in the #MAXBEN operator output.) If Return factor (rather than adjusted benefit) is selected, the late increase factor is returned and can be manually applied in a calculation.

In the Actuarial equivalence for late retirement section, you define the following actuarial equivalence assumptions:

• The Normal Retirement Date (NRD) defined by parameter indicates the date after which late retirement increases apply. Choose Plan Attributes if this date is the Normal Retirement Date parameterized in the Plan Attributes topic of the Plan Definition. Choose Eligibility Definition to define the date directly by specifying an Eligibility Definition from the library. In this case, Using Service Definition Set selects the Service Definition Set which defines how to evaluate any service or points criteria in the selected Eligibility Definition. If <Base Service Set> is selected, the Service Definition Set specified in the Census Specifications is used.

• The applicable Actuarial Equivalence assumptions, which may be specified as an an entry from the Actuarial Equivalence Library, or, if <Based on a table> is selected, the Conversion table multi-choice field becomes available to select an age-based table from the Benefit Component Tables Library.  If <Based on a table> is selected, the Normal Form Type, Reflect Interest only and Reflect constant COLA rate parameters are unavailable (ghosted). If the referenced Actuarial Equivalence library entry has the Use zero mortality in any deferral period box checked, the late retirement calculations will assume no member mortality from the Normal Retirement Date defined for the component until their late retirement benefit commencement age.  (This produces a lower factor than if mortality is reflected in the deferral period.)

• Check the Reflect interest only box to ignore the mortality assumptions in the referenced actuarial equivalence library entry and use only the interest assumptions.  This might be useful, for example, if a plan grants the greater of 5% or the plan accrual after normal retirement. 

If the interest-only calculation is based on segment rates, spot rates or duration-based rates, the normal retirement date is the anchor point for determining the applicable rate for calculations performed At commencement age.  For example, if a commencement date is 6 1/2 years after NRD, the second segment rate (or spot rate applicable to the 7th year) is used for the entire period. The first segment rate, spot rate or duration rate is used for each calculation date for calculations performed Annually.

• The Calculation performed: parameter defines the methodology for the actuarial equivalence calculation. Please see technical reference article Late Retirement calculations for a complete discussion regarding the calculations.  If you specify that the calculation is made At commencement age, the late retirement benefit will be the greater of:

1. The amount determined by the referenced Benefit Formula Component at the commencement age, and
2. The value determined at the NRD adjusted for actuarial increases to the commencement age.

If you specify that the calculation is made Annually using factors from [ ] (or Annually when the calculation is either interest-only or based on conversion factors), the benefit accrual for each year after NRD is the greater of:

1. The standard accrual (i.e., the change from the prior year’s benefit) determined using the referenced Benefit Formula Component, and
2. The actuarial adjustment for late retirement applied to the prior year’s accrued benefit.

When the calculation is made Annually using factors from [ ], there are two methodological options:  NRD or the beginning of the plan year. If interest and mortality are static over the period, these two approaches create identical results (excluding some rounding differences); the results vary more when mortality is dynamic and/or interest is segment rates.  These options are not applicable if the calculation is based on a Conversion table or if it Reflects interest only. Please see technical reference article Late Retirement calculations for a complete discussion regarding the calculations and the FAQ Computing late retirement factors for numerical examples.  

• If a constant COLA rate applies to the calculation, check the Reflect COLA rate box and select either Constant (and specify the decimal COLA rate to be applied) or Field (and select the scalar database field that defines the constant COLA rate). The COLA rate will be compounded based on the payment frequency as indicated in the plan attributes. COLAs are not available for interest-only calculations.

• Whether or not a stop date applies to the calculation (such as for a suspension of benefits notice).  If a stop date applies, check the Stop actuarial increases at date in field box and choose the name of the scalar date field that specifies the stop date. If the applicable actuarial equivalence uses dynamic or generational mortality or a spot rate interest rate table, you may optionally Reflect mortality and interest updates through commencement.

The Age section specifies the age assumptions for determining the factors. You may Calculate factors using:

• Default Age Definition determines age as defined by the default Age Definition selected in the Plan Attributes
• Alternative determines age using the selected alternate Age Definition. 

Additional details about how ProAdmin calculates age are available in the Technical Reference article Age Calculations.

There is also an option to evaluate the late retirement component using the Beneficiary's age, sex & mortality. This option allows you to essentially calculate an actuarial increase factor for a death benefit.

The Rounding section specifies whether there is any rounding of the late retirement factors and, if so, defines the rounding rule. Use the Round: parameter to indicate whether there should be no rounding (choose None), or rounding of the Final factor only or rounding of All steps. If you select Final factor only, the final (cumulative or incremental, depending on the calculation type) late retirement factor is rounded based on the Using rounding rule: parameters.   If you select All steps, the annuity and late retirement adjustment factors are rounded at each step of the calculation based on the rounding rule.

Using rounding rule: defines the amount and direction of the rounding. Amount sets the rounding amount. A value of .001, for example, indicates that values should be rounded to thousandths. Direction sets the direction that the values should be rounded: Up, Down, or to the Nearest multiple of the Amount.