Funding assumptions and methodologies for calculation of actuarial liability (and normal cost) under one or more traditional liability methods are specified by the Additional Liabilities topic. The funding interest rates and mortality rates will be used to compute these liabilities.

You may select calculation of liabilities under one or more traditional liability methods, that is, Entry Age Normal – Level percent of salary, Entry Age Normal – Level dollar, Projected Unit Credit (PUC), Pure Unit Credit (UC) and Attained Age – Level percent of salary. If an entry age normal method is selected, you can also specify the EAN funding span for each benefit and EAN historical salaries for PVFS at entry. Under any selected liability method, you can specify a Maximum Compensation Limit for PVFS & valuation salary. For details about these parameters, and information about coding them, see the discussion under the Liability Methods - Funding topic.

Note that ProVal will always calculate the present value of future benefits (PVFB). The PVFB assumptions will be the same as for the Teilwert liability, unless you specify adjustment of the first funding age (so that not all employees are included in the plan from hire date) or selection of the term cost method to value specific benefits. (See the discussion of the relevant parameters below.)

Depending upon your selection of liability methods, additional parameters, discussed in the remaining sections of this article, become accessible to further define your approach.

Projected salary and head count in Output

The Projected salary & headcount based on parameter allows you to set the basis (“total” or “valuation”) for Valuation output for projected salaries and projected head counts (these variables are available on the Projected Benefits tab of the Output pane and by selecting the “Projected Headcount and Benefits” category when you access output by clicking the Valuation’s View button). For details about the parameter settings, see the discussion under the Liability Methods - Funding topic.

First Funding Age

Check the Adjust first funding age box and then click the Funding button to specify the age, or starting point, for including employees in the plan, thus generating a normal cost for them under your selected liability method(s). (This is also the first age at which there can be a term cost, if any benefits are valued under the term cost method.) Inclusion in the present value of future benefits will also be determined by these specifications.

For details about coding the parameters of the First Funding Age dialog box, see the discussion of inclusion parameters under the Other Valuation Parameters topic.

Term Cost

The term cost method calculates the liability expected to be incurred by a decrement occurring during the year beginning on the valuation date (current year) only. In other words, the term cost liability is equal to the probability that an individual will decrement during the current year, with a benefit payable (either immediately or deferred), multiplied by the benefit’s present value on the valuation date. A benefit selected for term cost is excluded in the determination of liabilities and normal costs under the selected actuarial cost method, because the term cost itself is the plan’s normal cost for this benefit.

Check the Term cost specific benefits box and then click the Benefits button to select the plan benefits to value under the term cost method.

For details about coding the parameters of the Term Cost Benefits dialog box, see the discussion of term cost method parameters under the Liability Methods - Funding topic.

Projected Unit Credit, Unit Credit and Attained Age Liability Methods Parameters

If you select either the projected unit credit cost method or the attained age cost method, the check boxes entitled PUC benefits never less than UC Benefits and PUC equal to UC for cash balance and career average components become accessible.

If you select either the projected unit credit cost method, the (pure) unit credit cost method or the attained age cost method, the PUC & UC Attribution Service parameters become accessible; they apply to attribution of benefits under these cost methods when the attribution method is Linear Proration to Decrement.

For details about these parameters, and information about coding them, see the discussion under the Liability Methods - Funding topic.