QUESTION: How does ProAdmin project future salaries?

ANSWER: ProAdmin looks at the settings in the Salary Increases topic of the Projection Assumptions for the salary inflation assumption and the setting for apply increase rates to. Based on how these are set ProAdmin will apply the increase in the following manner.

If you set the most recent available salary that indicates that you wish to take the last reported salary and apply the increase assumption to it. For example, if your last reported salary of $32,000 covers the period 01/01/2005 through 05/31/2005, your plan year is January, and your increase assumption is 3% ProAdmin will annualize this pay to be $76,800 (for example) apply the 3% to that and use $79,104 as the pay for the period 01/01/2006 – 12/31/2006.

 

The greater of most recent & prior year salaries indicates that you wish to apply the increase assumption to the greater of the most recent available salary and that for the prior plan year. For example, if your last reported salary of $32,000 covers the period 01/01/2005 through 05/31/2005, your prior year salary is $81,250, your plan year is January, and your increase assumption is 3%. ProAdmin will annualize the most recent salary to $76,800 (for example) and compare that to the $81,250 and then apply the 3% to the $81,250 as it is the greater and use $83,687.50 as the pay for the period 01/01/2006 – 12/31/2006.

 

The rolling 12 month average of empirical salaries indicates that you wish to apply the increase assumption to a rolling 12-month average of the most recent available whole month empirical salaries. This is only done for monthly measurement periods. Annual measurement periods will use the greater of the most recent available salary and that for the prior plan year. For example, if your last 12 reported monthly salaries are 3000, 3000, 3200, 3200, 3500, 3500, 3700, 3700, 3100, 3100, 3275, and 3275 which covers the period 06/01/2004 through 05/31/2005, your plan year is January, and your increase assumption is 3%. ProAdmin will determine that $39,550 was the salary for the period, then apply the 3% to the $39,550, and use $40,736.50 as the pay for the period 01/01/2006 – 12/31/2006