This topic pertains to an “Ongoing” law selection and specifies the parameters used to calculate the commuted amounts, when commutation applies. Inactive Benefits will be commuted for Inactive participants with a “Vested” status if the Commutation Applies box is checked in each benefit. For active participants, commutation will be applied if selected in the Benefit Definition in the Payment forms section. If selected, some portion of the benefit will be paid as a lump sum upon commencement and the remaining portion will be paid as an annuity. The commutation method will determine what fraction of the benefit will be commuted and what the value of the lump sum will be.

The Commutation topic contains two tabs, one for Active Benefits and one for Inactive Benefits.

The upper section of each tab displays the Amount Commuted and is the same for both active and inactive benefits.

The Amount commuted may be determined using one of three methods: maximum allowed, total pension value or initial annual pension. In addition to the method, enter the value of the multiplier (the times parameter). The fraction commuted is determined under the three methods as follows:

• Maximum allowed method: the fraction commuted is (1 / (1 + 0.15 * the Commutation Factor)) times the multiplier entered by the user.

• Total pension value method: the fraction commuted is the multiplier entered.

• Initial annual pension method: the fraction commuted is the multiplier entered divided by the Commutation Factor.

The value of the commuted lump sum will be the fraction commuted times the pre-commutation total pension (this product is limited to the pre-commutation excess pension) times the Commutation Factor.

The lower section of each tab (Commutation Factors) assigns an age-based Benefit Component Table to be used in determining the value of the commuted amount for each benefit. On the Active Benefits tab, each Benefit Definition that exists in the current Project and has a check in the Commutation Applies box is listed. On the Inactive Benefits tab, each Inactive Benefit (defined under the Inactive Data topic of the Census Specifications) that exists in the current Project and has a check in the Commutation Applies box is listed. To specify a commutation table assumption set for a benefit (active or inactive), click in the Commutation Table column (to the right of the name of the relevant benefit) and select the applicable assumption set from the drop-down list, which includes all Benefit Component Tables in the current Project. For any benefits without an associated commutation table assumption, “<unspecified>” is shown. Note that all benefits included in a Valuation or Core Projection that have a check in the Commutation Applies box need to be assigned a valid commutation table assumption set in order for the command to run properly.

 

 

Example 1: Maximum Allowed

Commutation method = Maximum Allowed times 0.8

Commutation factor = 10

Fraction commuted = 0.32

Pre-commutation total pension = 1,000

Pre-commutation excess pension = 750

Pension commuted = 320 = min (0.32 * 1,000, 750)

Post-commutation total pension = 680 = 1,000 – 320

Post-commutation excess pension = 430 = 750 – 320

Commuted amount = 3,200 = 320 * 10

 

Example 2: Total Pension Value

Commutation method = Total pension value times 0.8

Commutation factor = 10

Fraction commuted = 0.8

Pre-commutation total pension = 1,000

Pre-commutation excess pension = 750

Pension commuted = 750 = min (0.8 * 1,000, 750)

Post-commutation total pension = 250 = 1,000 – 750

Post-commutation excess pension = 0 = 750 – 750

Commuted amount = 7,500 = 750 * 10

 

Example 3: Initial Annual Pension

Commutation method = Initial annual pension value times 6

Commutation factor = 10

Fraction commuted = 0.6

Pre-commutation total pension = 1,000

Pre-commutation excess pension = 750

Pension commuted = 600 = min (0.6 * 1,000, 750)

Post-commutation total pension = 400 = 1,000 – 600

Post-commutation excess pension = 150 = 750 – 600

Commuted amount = 6,000 = 600 * 10