This topic pertains to overriding ProVal’s calculation of expected benefit payments, categorizing benefits in receipt and rounding of Valuation Set and forecast calculations:

• The expected benefit payments parameters allow you to override, by a specified total amount for all plan members, ProVal’s calculation of expected benefit payments (under the Valuations or Core Projection commands) to be paid during the current plan year, i.e., the year beginning on the Valuation Date or, in a forecast, the baseline year. In the U.S. qualified pension mode, depending on whether the current, or baseline, year is subject to the funding rules of the Pension Protection Act of 2006 (PPA), there may be a parameter to choose a methodology option for treatment of expected benefit payments in current liability calculations (see the discussion below of these parameters).

• Available in the U.S. qualified and universal pension modes, the benefits in receipt split parameter allows you to categorize the benefits of inactive participants as either “in receipt” or “deferred”, according to the option selected for this parameter. Thus you may split liabilities for inactive participants between those considered to be currently receiving benefits and those whose benefits are considered deferred. This split affects the ASC 960 exhibit, the pre-PPA and multiemployer breakdown of inactive participant current liability in the minimum-basis full funding limitation exhibit and the PPA breakdown of target liability for inactive participants in the exhibit developing the funding target.

• In all modes, the rounding parameter allows you to specify the desired degree of rounding of results. The rounding occurs before and during the calculations, so that results will “add up” in exhibits and in the detailed output available under the Output menu.

Expected Benefit Payments

The following parameters are available to Override first year expected benefit payments in your Valuation Set results or, for a forecast, in results of the valuation as of the baseline valuation date. All override amount(s) are intended to replace ProVal’s calculated value of total benefits expected to be paid during the plan year for all plan members. 

• If you check the Current liability box (U.S. qualified mode only, all law selections except “PPA”) ProVal will use the specified amount as estimated benefit disbursements to determine end-of-year current liability and, depending on your methodology choice, end-of-year current liability assets on all applicable bases (for example, RPA’94) for calculation of the full funding limitation and the (single-employer plan) additional funding charge.

• If you check the Accounting expense box, ProVal will use the specified amount as the value of expected benefit payments to determine pension expense, in particular, to calculate the interest cost on expected benefit payments and the expected return on assets. This parameter does not apply to overriding expected benefit payments when rolling PBO (APBO, in OPEB mode) and EAN Accounting in U.S. public mode to a Measurement Date later than the date the liabilities are calculated as of (see the following discussion, under the second bullet, of the relevant accounting override parameter for that purpose). Note that ProVal calculates, displays (in the output produced under commands on the Execute and Output menus) and thus overrides expected benefit payments on the EBO basis (or EPBO basis, in OPEB mode). Therefore, be sure to enter an override amount that is not adjusted, for example, to convert expected benefit payments to a PBO basis (or APBO basis, in OPEB mode) by prorating by a service ratio.

• If you check the Accounting roll forward box, ProVal will use the specified amount as the value of expected benefit payments to roll forward the PBO (APBO in OPEB mode) and EAN Accounting in U.S. public mode from the liability calculation date to the Measurement Date, if the dates differ. An annual amount should be entered as ProVal will prorate the amount to reflect any fractional periods. If these dates are the same, this parameter value is ignored. This parameter does not apply to overriding expected benefit payments to determine pension expense (see the preceding discussion, under the first bullet, of the relevant accounting override parameter for that purpose). Note that ProVal calculates, displays (in the output produced under commands on the Execute and Output menus) and thus overrides expected benefit payments on the EBO basis (or EPBO basis, in OPEB mode). Therefore, be sure to enter an override amount that is not adjusted, for example, to convert expected benefit payments to a PBO basis (or APBO basis, in OPEB mode) by prorating by a service ratio.

In modes other than US Public Pension (where the following parameters are not available), if you are using the benefit payment roll forward method, the radio buttons regarding which benefit payment to adjust are relevant.  The first option adjust first year benefit payments will adjust the first term in the benefit payment stream.  The second option spread over all future benefit payments will adjust each term in the benefit payment stream and might be appropriate, for example, when there are many lump sums.  For more information regarding these calculations, see the technical reference article Roll forward of liabilities.

Note: When accounting output values are displayed, it is the expected benefits payments override amount for expense, not for the roll forward (if different), that is shown.

U.S. public pension & OPEB modes

In these two modes, liabilities may be rolled forward up to 30 months.  Therefore additional benefit payment overrides may be specified to handle the roll forward beyond one year.  If you have checked the Accounting roll forward override box, and your accounting roll forward period is greater than 12 months, you must enter a Year 2 override. If you have checked the accounting roll forward override box, and your roll forward period is greater than 24 months, you must enter a Year 3 override. Annual amounts should be entered as ProVal will prorate the amount to reflect any fractional periods. 

If you check the Funding roll forward override box (U.S. public pension and OPEB modes only), ProVal will use the specified amounts as the values of expected benefit payments to roll forward the actuarial liability from the liability calculation date to the Valuation Date, if the dates differ. Annual amounts should be entered as ProVal will prorate the amount to reflect any fractional periods. This input will be ghosted unless liabilities are calculated as an earlier date than the funding valuation date. If you have checked the funding roll forward override box, and your funding roll forward period is greater than 12 months, you must enter a Year 2 override. If you have checked the funding roll forward override box, and your roll forward period is greater than 24 months, you must enter a Year 3 override. 

If liabilities are rolled forward, you must enter a salary scale to be used to roll forward the normal cost (service cost) to the measurement date for cost methods that are based on a level percentage of pay or the pure unit credit cost method.

In the U.S. qualified mode, for all law selections except “PPA”, specify, for the determination of end-of-year current liability asset values, the basis of the expected benefit payments subtracted from the asset values when rolling these values to the end of the year. If you select the Roll forward current liability assets with current liability expected benefit payments option, the same expected benefit payments amount will be used to determine end-of-year current liability and end-of-year asset values (under any current liability basis, for example, RPA’94). If you select the Roll forward current liability assets with funding expected benefit payments option, the same expected benefit payments as used for non-specialized liabilities (i.e., other than current liability and PBGC variable premium liability), a.k.a. funding expected benefit payments, will be used to determine the end-of-year asset value (again, under all current liability bases). Hence, under the latter option, the same end-of-year asset value will be produced for projected end-of-year current liability calculations under all applicable current liability bases and this end-of-year asset value would be the same as used to determine the actuarial liability full funding limit.

In a forecast, expected benefit payments calculated under the Core Projection command will be overridden only for the baseline year of the forecast; ProVal will not override the expected benefit payments value calculated at future (forecast) valuation dates. Note that the parameter to override experience benefit payments (a.k.a. cash benefit payments) paid out of plan funds in the baseline year is found under the Forecast Analysis topic.

In Valuation Set Output and Deterministic Forecast Output, the split of the amount of expected benefit payments by status and benefits, if selected, will be multiplied by the ratio of the amount entered here to the expected benefit payments amount calculated by ProVal, so that the pieces sum to the override amount entered.

Benefits in receipt split

In the U.S. qualified and universal modes, for purposes of allocating inactive participant liabilities according to the categories of the ASC 960 statement of present value of accumulated benefits and the IRS Form 5500 Schedule B/MB breakdown of RPA ’94 current liability and Schedule SB breakdown of target liability, the Benefits in receipt split based on parameter indicates how to differentiate benefit payments currently (i.e., as of the Valuation Date) in pay status from deferred benefit payments.  In a forecast, "currently" refers to pay status as of the Valuation Date for initial inactive participants (including participants whose status is mapped to the "Vested valued through active" ProVal status) and as of the decrement date for emerging inactive participants (aka decrementing active participants).  

• Select the Payment form option to base the inactive liability split on the benefit payment commencement date indicated by the Payment Form of the participant’s Inactive Benefit(s) (for participants with a "Vested valued through active" status, the payment form of the participant's Benefit Definition(s)) or, for emerging inactive participants, indicated by the payment form of the Benefit Definition(s) initiated by the contingency causing the decrement from active status.

• If the participant has any annuity benefits in pay status on the valuation date (decrement date, for emerging inactive participants), then the participant’s total liability, including any liability for life insurance, post-decrement death benefits and lump sum benefits, is considered to be in pay status.

• If the participant does not have any annuity benefits in pay status on the valuation date (or decrement date), then the participant’s total liability, including any liability for life insurance, post-decrement death benefits and lump sum benefits, is considered to be deferred.

• If the participant has only life insurance, a post-decrement death benefit and/or a lump sum benefit, then the total liability is considered to be deferred.

Note that, under this option, 1) initial inactive participants whose status is mapped to either the ProVal “Vested” status or the ProVal “Vested valued through active” status and who are at or older than the payment commencement age on the valuation date are considered currently in receipt, or in pay status, and 2) initial inactive participants whose status is mapped to a ProVal “Retired”, “Disabled” or “Survivor” status and who are younger than the payment commencement age on the valuation date are considered not currently in pay status.  Treatment of emerging inactive participants is similar: the payment status is evaluated at the decrement date and if payments are considered in receipt, the contingency initiating the benefit determines the status category (“Retired”, “Disabled” or “Survivor”) for display of results in Output; if payments are not considered in receipt, the status category is "Vested".            

• Select the Status code option to base the inactive liability split on the value contained in the status field of the inactive record or, for an emerging inactive participant, determined by the contingency initiating the benefit (as discussed for the preceding option). Under this option the total liability for all benefits of an inactive, or emerging inactive, participant whose status is mapped to a ProVal “Retired”, “Disabled” or “Survivor” status is considered to be in pay status, or currently in receipt, and the total liability for all benefits of an inactive, or emerging inactive, participant whose status is mapped to either of the two ProVal vested statuses is considered to be not in pay status, or deferred.  (Note that a vested status mapping is not redetermined, as retired, when payments commence.)

• Select the Status code if Vested, otherwise payment form option to base the inactive liability split on both 1) the value contained in the status field of an initial inactive participant or the status determined by the contingency initiating the benefit of an emerging inactive participant (as described above) and 2) the benefit commencement date of the relevant payment form(s) of the participant's benefit(s). Under this option, the total liability for all benefits of a participant whose status is mapped to either of the two ProVal vested statuses is considered to be not in pay status, or deferred.  (Again, the vested status mapping is not redetermined, as retired, when payments commence.)  For inactive, or emerging inactive, participants whose status is mapped to one of the other ProVal inactive statuses, the split will be based on the commencement date indicated by the payment form(s) of the participant's benefit(s), as discussed for the preceding options.

Rounding

Select the degree of Rounding you wish ProVal to use when displaying calculation results. Note that this parameter always determines the degree of rounding displayed for output variable values under Valuation Set and forecast Output commands, whether viewed under the Output menu or under the Valuation Set and forecast commands of the Execute menu. You may, however, select a different degree of rounding when you view exhibits under the Valuation Set Exhibits and Deterministic Forecast Exhibits commands. The rounding occurs before and during the calculations, so that results will “add up” in the exhibits and in the detailed output available under the Output menu.

You may specify to round to the nearest $1, $100, $1,000 or $1,000,000. If no rounding is desired, select “<NONE>”. If a degree of rounding other than “<NONE>” or $1 is specified, be sure that this selection is appropriate for the magnitude of your liabilities. For example, if you select $1,000,000 rounding but your liabilities amount to just $700,000, undesirable results may be produced. Note that in a forecast for which the Forecast Analysis Use contribution timing to calculate interest on the receivable for funding assets (in first year) parameter has been set to achieve the objective of equal end-of-year funding and accounting asset market values, it is unlikely that the desired result will be attained with such a broad degree of rounding.

In the U.S. qualified mode, under the “PPA” law selection, in order for certain ratios and percentages (such as the AFTAP) to be rounded down in Valuation Set Exhibits and forecast exhibits, the “<NONE>” option must not be selected. The preferred option is $1 rounding, under which all decimals are rounded to four places, and truncated if required. (Because the “<NONE>” option performs no rounding, it produces ratios and percentages that are not truncated when displayed in the exhibits.)

Also in the U.S. qualified mode, under any law selection, if this Asset & Funding Policy will be used to produce a Valuation Set whose results will be exported under the Government Forms Extract command, $1 rounding should be selected. Results under other rounding options may have an undesirable effect on internal consistency of arithmetic calculations in the Form 5500 Schedules B, SB and MB and in the PBGC Comprehensive Premium Filing form.