The Mortality section specifies the applicable mortality rates. Choose a table from the Mortality Rates table library. All mortality table types are permitted. If you check Use the current applicable mortality for 417(e), the mortality table will automatically switch to use the appropriate IRS 417(e) table for calculation dates beginning 1/1/2008 and later. This option is only available if one of the dynamic IRS applicable mortality tables for 417(e) is selected. Additionally, if joint & survivor annuities are applicable, the beneficiary mortality must use the same mortality table as the member in order to use this feature. If you check the Use zero mortality in the deferral period checkbox, zero mortality will be assumed during any deferral period for the primary annuitant's mortality and the beneficiary's mortality (if any). This checkbox will only be enabled if you select the deferral option under Payment / Calculation Period. The checkbox to Freeze mortality at date in field is available when a dynamic or fully generational table is selected for the member mortality (but applies to both member and beneficiary mortality tables). If selected, the mortality projection will be frozen at the applicable mortality rates in effect at the date defined by the selected scalar database field.
The Interest section defines the interest rate during the payment and deferral periods of the annuity. Interest may be either a Static rate (or rates) or Based on an Interest Rate Table. There are three (3) options for Static rate:
- Constant indicates that the annuity is determined based on a static interest rate. Enter the rate as a decimal (e.g. 0.08 for 8.0%).
- Database field indicates that the interest rate is a static rate (e.g., 0.08) specified by a field within the data. Select the scalar numeric field from the drop-down menu.
- Segment style rates indicates that the interest rate is constant rates with the duration structure of PPA segment interest rates. Enter the 1st (less than 5 years after the calculation date), 2nd (at least 5 years but less than 20 years after the calculation date) and 3rd (at least 20 years after the calculation date) segment rates as decimals (e.g., 0.08 for 8%).
If the interest is Based on an Interest Rate Table, the interest rate is determined based on the year and month of benefit commencement. Select the applicable table from the Interest Rate Tables library. Checking the Apply PPA phase-in from this GATT Interest Rate Table checkbox indicates that the interest rates are determined based on the PPA rules to phase in from GATT interest rates to PPA spot interest rates between the 2008 and 2012 plan years. The multi-choice field selects the applicable GATT interest rate table.
Check the Use alternative interest rate in the deferral period checkbox to reflect a different constant rate or interest rate table during the annuity factor deferral period. This checkbox will only be enabled if you select the deferral option under Payment / Calculation Period.
- Constant indicates that the interest rate during the deferral period is a static interest rate. Enter the rate as a decimal (e.g. 0.08 for 8.0%).
- Based on Interest Rate Table indicates that the interest rate during the deferral period is determined based on the year and month of decrement. Select the applicable table from the Interest Rate Tables library.
If Freeze at decrement is checked, the interest rate(s) used for all calculation dates after the decrement date will be those in effect at the decrement date.
The Cost-of-Living Increases (COLAs) section defines the cost-of-living increase rate assumption during the payment period and the deferral period.
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The COLA rate during payment period is used to index benefits after payment has commenced.
- Select the Constant option to specify a single COLA rate to apply to all years after payments start. If there is no payment period COLA, then enter zero as the COLA rate. Enter the COLA rate as a number (e.g., 0.03), not as a percentage.
- Select the Field option to specify that the single COLA rate to apply to all years after payments start is defined by a database field. Select the scalar numeric field from the drop-down menu.
- Select the Variable option to access COLA rate tables. Select from the list of all COLA rate reference tables in the current Project or click the
button to create a new table. COLA rate tables for payment periods may vary by age, sex and duration (time elapsed) since the commencement of payments. Note that the age reference for COLA rate tables is the member age whether or not the annuity factor is calculated based on the beneficiary age and sex.
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The COLA rate during deferral period is used to index benefits from the decrement date up to the payment commencement date.
- Select the Constant option to specify a single COLA rate to apply all years before payments start. If there is no payment period COLA, then enter zero as the COLA rate. Enter the COLA rate as a number (e.g., 0.03), not as a percentage.
- Select the Field option to specify that the single COLA rate to apply to all years before payments start is defined by a database field. Select the scalar numeric field from the drop-down menu.
- Select the Variable option to access COLA rate tables from the library. Select from the list of all COLA rate reference tables in the current Project or click the button to create a new table. COLA rate tables for deferral periods may vary by age and sex. Note that the age reference for COLA rate tables is the member age whether or not the annuity factor is calculated based on the beneficiary age and sex.
- Rate type indicates whether Compound interest (geometric) or Simple interest (arithmetic) COLAs apply. That is, if next year's annual pension amount is determined by applying the COLA rate to this year's pension amount (the typical application of COLAs), then the COLA is compound, whereas a simple COLA applies the COLA rate for all years (for both the deferral period and the payment period) to the initial annual pension amount determined at the date of decrement from active status.
The Timing parameters section defines how and when benefits are paid.
- Payment frequency specifies how many payments, in equal installments, will be made during a year. Valid choices are Annual, Semi-annual, Quarterly, Monthly, and Continuous.
- Payment timing indicates payment at the beginning or end of the payment period defined by the payment frequency parameter. Select “Beginning of period” for an annuity-due or “End of period” for an annuity-immediate.
- The checkbox to Use prior day interest & mortality for 1st plan year day commencement allows you, in the case of calendar year plans, to calculate benefits commencing on January 1 based on the interest rates and mortality that were effective for the immediately preceding December 31. Note that this parameter affects the interest rate and the dynamic or generational mortality year, but not any age determinations.