OPEB mode

(See also Attribution - pension modes.)

When ProVal performs projected unit credit calculations, the attribution parameters determine how growth in the formula of the Gross Benefit Definition and/or Participant Contribution is allocated, or attributed, to years of service. For each Benefit Definition you create for active members and their spouses, there are four choices for attribution (also known as proration), specified separately for Projected Unit Credit (Funding) and APBO (Accounting) liabilities and normal/service costs:

• Accrual rate proration, by component

The projected benefit value of each Benefit Formula Component in the formula is attributed separately, according to the pattern indicated under the Accrual Rates topic for an accrual definition type of component. This results in “natural” or “direct differencing” attribution. The service basis for attribution is specified by the Benefit service based on parameters of the Accrual Rates topic or the Attribution service based on parameters of custom attribution. Components that do not involve an accrual definition are considered fully attributed as of the valuation date. Therefore, if there are no accrual definitions in the formula of either the Gross Benefit Definition or the Participant Contribution, then the entire projected benefit payment and/or participant contribution is considered fully attributed as of the valuation date (in effect, assigned to past service). Note that if attribution rates vary by points (age + service) or, much less commonly, by age, rather than by service, then the “service” pattern of accrual rate proration will follow the pattern of rate variation over points or age, respectively. Note that the Basis Formula of an accrual definition, which may contain a salary-related expression, is projected although the summation implicit in the Accrual Rates topic will not reflect any additional service after the valuation date.

• Linear proration to decrement

The projected benefit as of each decrement age is spread linearly over attribution service until the decrement age. Attribution service is specified by the Linear Proration to Decrement Service based on parameters of the Plan Attributes topic. See Plan Attributes - OPEB mode for details about the service basis.

• Linear proration to benefit eligibility

The projected benefit as of each decrement age is spread linearly over attribution service until the earlier of the decrement age or the first age at which the employee is eligible for the benefit. Attribution service is specified by the Eligibility service parameter of the Benefit Definition. See Active Eligibility for details.

• Linear proration to full eligibility. This is the default setting in OPEB mode. The projected benefit as of each decrement age is spread linearly over attribution service until the full eligibility age, i.e., the first age at which the employee is eligible for a fully earned or most generous benefit. The full eligibility age and Service basis are defined by parameters of the Full Eligibility topic of the Plan Definition.

Note that the linear attribution methods produce the same attribution pattern for the gross benefit and participant contribution portions of a benefit. Accrual rate proration, however, follows the separate accrual, or attribution, patterns of accrual definitions contained in the gross benefit and/or participant contribution formulas; if these differ, different attribution patterns will be produced.

See the Technical Reference article entitled PUC and UC attribution for more information.

There are additional options available to control the Projected Unit Credit attribution start age when linear proration is selected. These options were added to support guidance issued by IFRS in 2021 related to attributing benefits to periods of service. These options may only be used if the applicable service has constant accruals of 1 per year. To use these parameters, first check the box Attribution begins at the later of hire age and then select an option for determining the attribution start age. You may either set the age to be a constant age  for all participants, a numeric database field that contains the age for each participant, or age based on eligibility. Age based on eligibility is only available if you select linear proration to benefit eligibility or linear proration to full eligibility. If you select age based on eligibility, ProVal will calculate the start age based on the eligibility requirements for the benefit definition. The hire age will be based on the applicable service definition: the eligibility service in the benefit definition when linear attribution to benefit eligibility is used; or the full eligibility service in the plan definition when linear attribution to full eligibility is used. 

If calculating the start age based on eligibility, ProVal will adjust the start age so that the benefit is attributed over only the service needed to meet the eligibility requirement. If meeting an age/service requirement first, this age will be the age when the requirement is met minus the service requirement. If meeting a points or age only requirement first (or simultaneously), it will be the hire age. 

Example:

Benefit Eligibility Requirements: Age 60 and 10 years of service, or 80 points. 

Participant 1:

Hire Age: 45

This participant will meet the age/svc criteria first, at age 60.

Attribution start age = age at eligibility – service requirement = 60 – 10 = 50

Participant 2:

Hire Age: 30

This participant will the points criteria first, at age 55.

Attribution start age = hire age = 30.