Not applicable for Long Term Disability assumptions

Election probabilities are conditional probabilities utilized in situations where an additional condition, besides eligibility and decrement caused by the contingency initiating the benefit, must be met at the time of decrement to receive a particular benefit. That is, receipt of the benefit is not certain, even after a participant becomes eligible and decrements from the appropriate cause.  

Lapse probabilities apply after decrement to relect that the benefit may be forfeited each year after decrement.

The Election & Lapse Probabilities topic lists all Benefit Definitions that exist in the current Project (or were previously defined for a Valuation referencing either this Valuation Assumption set or a set from which it was copied by “saving as new”) and with which election or lapse probabilities are to be associated, i.e., those Benefit Definitions for which the “Election probabilities apply” or "Lapse probabilities apply" box has been checked (in Input | Plan Benefit Definitions | Benefit Definitions). The probability, if any, that has already been associated with the benefit, whether a constant value, a table or “none” (discussed below), is displayed next to the name of the Benefit Definition. To specify Election or Lapse Probabilities, select the desired benefits from the pertinent section, click the Edit button, and complete the parameters in the resulting dialog box. 

 

If you wish, you may select a Plan Filter, from the dropdown list, to reduce the list of possible choices to those Benefit Definitions associated with a particular Plan Definition. Please see Filters for details.

There are three options for defining the associated probabilities:

1. Select the Constant option to apply the same probability to all applicable records. Enter each probability as a number between zero and 1 (not as a percentage).

2. Select Variable to specify probabilities defined by tables that vary by age, service and / or sex for election probabilities or age, duration from decrement, and/or sex for lapse probabilities.. Select from the list of Election Probability Reference Tables or Lapse Probability Reference Tables that have been saved and unhidden in the current Project or click the  button to create a new table. Instead of a single table, you can specify “<rates by coded field/calendar year>” if the table to be used varies for different groups of records, identified by values of a coded database field (e.g., Division), and/or according to the calendar year of decrement (that is, the calendar year of the anniversary of the valuation date in the year of decrement). Click the Parameters button to select the tables (see the discussion of Additional Election & Lapse Probabilities Parameters).

3. Select None (i.e., probability of receipt is 1) to assign an election probability of 1 or lapse probability of 0, that is, all persons elect the benefit or no participants lapse the benefit. This option is useful when a benefit has been defined to accommodate election and/or lapse probabilities, but no election and/or lapse probabilities are to be reflected in this particular assumption set. Click “OK” to return to the Election & Lapse Probabilities library dialog box, where “None” now appears next to the name of the Benefit Definition.

Because a Benefit Definition in OPEB mode can represent both benefits payable to the member and benefits payable to the spouse, further discussion about using election probabilities to code participation assumptions is in order. For member benefits, input the election probability that the member will elect coverage given that he/she decrements and is eligible for coverage at the time of decrement. For spouse benefits, input the probability that the spouse will have the right to coverage at the time the member decrements and that coverage will be so elected for the spouse. For example, consider a retiree medical plan that makes medical coverage available to the spouse only if the retiree elects coverage for himself (or herself). If the probability that the member elects coverage is 80% and, of the married members so electing, 60% of their spouses also elect coverage, then 0.8 should be entered as the election probability for the member Benefit Definition and 0.48 (0.8 multiplied by 0.6) as the election probability for the spouse Benefit Definition. Note that the probability that the member is married is not a factor in calculation of the election probability value; because, typically, the percentage of members that are married is entered for the Fraction of population that is married parameter under the Other Valuation Parameters topic.

When a dual Benefit Definition (containing both a Member Payment Form and a Spouse Payment Form) is used, it is presumed that coverage has been elected for the spouse whenever coverage has been elected for the member. Therefore, if not all spouses of members with medical coverage will also have medical coverage, as in our example in the preceding paragraph (where only 60%, not 100%, of the spouses with a right to elect coverage actually did so), separate Benefit Definitions for member and spouse benefits must be defined. Similarly, when a dual Benefit Definition (containing both a Member Payment Form and a Spouse Payment Form) is used, it is presumed that the same lapse assumptions apply to both the member benefit and the spouse benefit, (for a table, looked up using the age and sex of the member or spouse respectively). If the assumptions differ, separate Benefit Definitions for member and spouse benefits must be defined.

The Parameters button provides access to additional parameters that are sometimes needed to specify conditional probabilities. When there are two or more applicable rate tables for a probability, these parameters specify how the rates vary, either by the calendar year associated with the year of decrement or according to the contents of a coded database field. Click this button to set parameter values for either of these options. For more information, see Additional Election & Lapse Probabilities Parameters. See also Election Probability Tables and Lapse Probability Tables for more information about the attributes of a reference rate table.

Click the Clear button to remove the selected benefits' election or lapse probabilities from the Valuation Assumption set you are editing. These probabilities will no longer appear when you View this set of Valuation Assumptions (although you might still have associated election probabilities with these benefits in another set of Valuation Assumptions).