The Calculate lump sum equivalent for payment forms check box, when checked, indicates that the lump sum equivalent and (optionally) relative value of the payment forms should be calculated based on the parameters described below.

Actuarial equivalence interest & mortality selects the primary basis for the lump sum equivalence of each payment form. The drop down list shows the available entries from the Actuarial Equivalence library. The arrow button is used to open up the Actuarial Equivalence Library and edit an existing entry or add a new entry.

Typically a single actuarial equivalence basis is used for all optional payment forms, either the plan actuarial equivalence basis or, if the plan offers payment forms subject to IRC §417(e)(3), then the §417(e)(3) required interest and mortality. However, if the option to Use alternative basis for forms subject to 417(e)(3) is selected, the primary actuarial basis chosen above is expected to be the plan actuarial equivalence basis, while the alternative actuarial basis is expected to be the §417(e)(3) required interest and mortality.  If Use alternative basis for forms subject to 417(e)(3) is checked, the alternative 417(e)(3) basis is used, by default, for the decreasing payment forms: lump sums, certain-only annuities and social security level income forms. The lump sum equivalent value of the normal form of payment is calculated on both the primary and alternative actuarial equivalence bases and the appropriate value is used as the denominator for the relative value calculation depending on the form of payment. Note that for output purposes, the values based on the primary actuarial equivalence interest and mortality are always used to display the lump sum equivalent for the normal form(s) of payment and also the lump sum equivalent interest rate standard output item.  However, the values on both bases are always available in the normal form detailed results when both bases are relevant.  

Clicking the Payment Form Mapping button brings up the Payment Form Mapping for Actuarial Equivalence dialog.  This dialog lists all of the payment forms currently referenced in the Plan Definition with a checked box in front of each payment form for which the alternative 417(e)(3) actuarial equivalence basis is currently applicable.  The footnotes at the bottom of the dialog provide a reminder of the potential actuarial equivalence bases and which one applies depending on whether the payment form is checked. Clicking the Reset to default button will cause only the lump sum, certain only and social security level income payment forms to be checked. The View of the Plan Definition will say "Payment form mapping (default)" if the expected payment forms are checked, or "Payment form mapping (*Custom*)" if the checked payment forms vary from the default. 

Factors based on age determined by specifies the age assumptions for the calculation.  Typically the Plan Attributes will define the default age assumption for the plan and each payment form and these relative value assumptions will be set to use the Default Age Definition. However, if desired, an alternative Age Definition can be specified by selecting the Alternative radio button and choosing an existing Age Definition from the library or clicking on the back door button to modify or create a new Age Definition to use.

Note that any factor rounding set within each payment form (ie: None, Final factor only, All steps) is automatically applied to the lump sum equivalence annuity factor.

Checking Display relative value will cause the ratio to be determined of the lump sum equivalent value of each optional form to the normal form of payment, with the results displayed as a decimal value.  For example, a result of 1 would show perfect actuarial equivalence and a result of 1.05 would indicate that the form of payment is 5% more valuable than the normal form of payment.   The relative value is displayed on the Summary Report within the standalone tool and on the Audit Report from the server engine. If these relative values are calculated, the lump sum equivalence is also available and is shown in the Detailed Results and the Output Definition results within the standalone tool, and is optionally returned, along with the relative value, by the server engine. If relative value calculations are not selected (by not checking this box), the only available output is the lump sum equivalent.

The Use alternative normal form (denominator) check box, when checked, indicates that the denominator of the relative value calculation -- the value of the total normal form of payment -- for a Benefit Definition should be something other than the normal form of payment for that Benefit Definition.  This might be useful, for example, if an optional form of payment had to be calculated in its own separate Benefit Definition, or if the total benefit had to be calculated in multiple pieces.  Click on the Normal Form Params button to define the appropriate denominator for the relative value calculation.   

The top section of the Lump Sum Equivalence Normal Form (Denominator) Parameters dialog box allows you to Specify the Benefit Definition to be used as the Normal Form (i.e., denominator) for the relative value calculation.  Each Benefit Definition currently included in the Plan Definition is listed on the left side of the spreadsheet.  The default denominator Normal Form Benefit Definition for the relative value calculation for each Benefit Definition is <same>, which indicates that the value of each optional form of payment in that Benefit Definition will be divided by the value of the normal form of payment for that Benefit Definition in order to determine the relative value.  If this is inappropriate -- for example because an optional form needed to be calculated in a separate Benefit Definition for some reason -- choose an alternative Benefit Definition from the list to indicate that the value of the optional form(s) for the Benefit Definition listed on the left should be divided by the value of the normal form of the Benefit Definition listed on the right to present the relative value.  Note that the Normal Form Benefit Definition must have the same contingency type as the Benefit Definition for which it will be used.

There is a third option for the Normal Form Benefit Definition:  <sum of benefits>.  This choice indicates that the values of two or more pieces of benefit should be combined to determine the total value of the normal form of payment for the plan.  This might be because there are grandfathered benefits with different payment parameters, or because there are separately calculated partial payments, such as for the first partial month of commencement.  If <sum of benefits> is selected for one or more Benefit Definitions in the plan, the bottom half of the dialog becomes available, allowing you to put a check next to the Benefit Definitions for which the value of the normal form of payment should be combined to represent the Relative value denominator for <sum of benefits> is the sum of the Normal Form value of these Benefit Definitions (where only benefit with the same contingency are considered).  If there are multiple contingencies (i.e., retirement, termination, death and/or disability) for which a "sum of benefits> is required, the sum for each contingency will only be the benefits checked off that are that same contingency, and each contingency reflected must have at least two benefits of that contingency chosen.

The Reflect partial payments (numerator) check box is available for relative value calculations when the Use alternative normal form (denominator) box is also checked.  The two boxes are dependent on each other because: if a plan has partial payments that must be combined for the numerator, those partial payments must require an alternative denominator as well in order to calculate a reasonable relative value.  The Reflect partial payments (numerator) check box, when checked, indicates that the numerator of the relative value calculation -- the total value of the optional form of payment -- should be something more than just the value of the optional form of payment in the current Benefit Definition.  This is typically used for partial lump sum payments which may or may not be related to benefit restrictions under the Pension Protection Act of 2006 (PPA).  Click on the Partial Payment Pairs button to define the appropriate numerator.

The Partial Payment Pairs (numerator) dialog box displays either 3 or 6 "payment form pairings, each its own frame.  For the 1st Pairing, and also for any subsequent pairings:

1. Choose the Benefit Definition containing the Partial lump sum: whose value should be added to one or more other Benefit Definitions in order to define the value of a single total optional form of payment under the plan.  For example, if the plan has an option to take 25% of the benefit as a lump sum and the other 75% as an annuity, choose the Benefit Definition that calculates the 25% lump sum.  The summary results will not display relative values for payment forms specified as partial lump sums; instead, their value will be included in the relative value displayed for the ongoing annuity(ies) specified below.
2. Select the Payment form: that represents the desired partial lump sum from those associated with the Benefit Definition selected in step 1 above,  If the Benefit Definition has only one payment form, that form will be chosen for you.
3. Choose the Benefit Definition containing the Ongoing annuity: to which the value of the partial lump sum should be added. For example, if the plan has an option to take 25% of the benefit as a lump sum and the other 75% as an annuity, choose the Benefit Definition that calculates the 75% annuity form(s) of payment.
4. Select the Payment form(s):, from those associated with the Benefit Definition selected in step 3 above, to which the value of the partial lump sum should be added for the relative value calculation.  If the value of the lump sum can be added to all of Benefit's payment forms, select <all payment forms>.  If the actuarial equivalence methodology requires that a different "partial lump sum" be added to each optional form of payment, then a separate "pairing" must be defined for each combination.

When you first enter the dialog box, the 1st Pairing will indicate that the Partial lump sum is <not applicable> and the rest of the dialog box will be ghosted. Selecting a Benefit Definition for the Partial lump sum for the 1st Pairing will cause the rest of that pairing to become available and will cause the 2nd Pairing to become partially available, but its  Partial lump sum will be specified as <not applicable>.  

If you require more than three (3) partial payment pairings, the Maximum number of pairs on the bottom of the dialog allows you to choose six pairing and will re-size the dialog box accordingly.  When you later re-open the Plan Definition, ProAdmin will choose either the three or the six dialog, depending on the number of pairs defined.  To remove a pair from the list, choose <not applicable> from the choices for the Partial lump sum pair.

While the dialog box cannot currently handle more than six pairings, the underlying mechanics of ProAdmin can.  If you require more than six pairings, please contact ProAdmin Support.  You will need to send your client files and describe your requirements.  We will update your files and return them, and the Plan Definition view listing will show that all of your desired pairings are included.

If you reflect partial payments, the Detailed Results for partial payment payment forms will include a footnote indicating that the payment form "is a partial lump sum excluded elsewhere for relative value purposes," and the payment form details for ongoing annuities will include an "additional lump sum" column totaling the amount to be added to the form's lump sum equivalence in order to calculate the relative value.  Also if you reflect partial payments, the Summary Results will include both the lump sum equivalence value (for all payment forms) and the relative value (for those payment forms not defined as a "partial lump sum").  (Typically the Summary Results display either the lump sum equivalence or the relative value, but not both, while the server engine returns whichever results were requested in the XML Output Linkage).  

Please see the FAQ Computing relative value using a partial lump sum for an example of using the partial payments parameters.