The Decrements topic of the Valuation Assumptions command specifies:

• probabilities of decrement (i.e., probability of leaving active status) for active plan participants for the four causes of decrement (retirement, termination, death, and disability), and

• in pension modes other than German and U.K., probabilities of post-termination retirement (i.e., probability of retirement after the termination decrement has occurred) for active plan participants, and

• probabilities of death for inactive participants and active participants after a decrement from active status has occurred

Separate sections of this article (below) discuss the parameters that pertain to these categories.

Actives are those database records for which the ProVal status code is “Active”. Inactives are those database records for which the ProVal status code is “Retired”, “Disabled”, “Vested” (not available in the German pension mode of operation), “Terminated Vested” (German mode only), “Vested valued through active” (pension modes except German and U.K.) or “Survivor”. For more information, see the Status Code Mappings topic of the Census Specifications command. Processing of the “Vested valued through active” ProVal status is a mix of “active status” and “inactive status” processing; see Vested inactives valued as active for details.

Note: this is not the place to define the mortality basis for certain U.S. qualified mode specialized liabilities (target liabilities, current liabilities, PBGC variable premium liability) and Canadian registered mode solvency liability, which have their own associated mortality rates, specified elsewhere in Valuation Assumptions.

  

Active Decrements (called Active Decrements other than Mortality under the “PPA” law selection in U.S. qualified mode or Active & Terminated Vested Decrements in German mode); not applicable under the “PPF” law selection in U.K. mode or for Long Term Disability assumptions in OPEB mode. 

There are two types of active decrements:

• From Active Status: Retirement Rates, Termination Rates, Mortality Rates and Disability Rates.  ​In ​OPEB, German Pension and U.K. Pension modes, these are the only decrements.

• Post-Termination: Retirement Rates. These rates will apply to any participant who terminates and is eligible for a benefit with a payment form commencing at post-termination retirement age and to any participant with the status vested valued through active. (This decrement is not available in ​OPEB, German Pension or U.K. Pension modes.)     

For each of the above contingencies, select from the list of reference rate tables that have been saved and unhidden in the current Project or click the button to create a new table. (Note: For each contingency, only the reference rate tables for the appropriate decrement type will appear in the list when you click the arrow for the parameter’s drop-down list box.)

The probabilities in these tables will be applied for each possible decrement age from the active record’s entry age to the first age at which retirement rates become 1 (aka 100% retirement age). In German mode, the rates for decrement causes other than termination will be applied to Terminated Vested records as well as to active records.

Active decrement rate tables may vary by age, service and/or sex. Mortality tables that specify projection of mortality improvement are also available.  "Dynamic" mortality tables that automatically calculate rates expected to be issued by the IRS under IRC §1.430(h)(3)–1 for the valuation year are available as the valuation assumption basis except (1) in OPEB mode and (2) for solvency liability in the Canadian registered mode. See Decrement Tables for more information.

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 Decrement Parameters at the end of this article).

• “<no rates>” if it is assumed that no decrements will occur (for this cause of decrement). This option is not available for the retirement decrement.

• “<100% at a specified retirement age>”, available only for the retirement decrement, if it is assumed, for each database record, that retirement will occur at a single age (rather than at two or more ages, with a retirement probability less than 1 occurring at some age prior to the 100% retirement age). Click the Parameters button to specify the retirement age (see the discussion of Additional Decrement Parameters at the end of this article).

• “<100% at actuarial retirement age>”, available only for the retirement decrement and only in German mode. If you choose this option, you must set actuarial retirement age on the Other Valuation Parameters screen. 

• “<rates by age / service on valuation date>”, available only for the retirement decrement, if a different table is used for different participants based on age and service criteria on the valuation date. Click the Parameters button to select the tables (see the discussion of Additional Decrement Parameters at the end of this article).

• "<rates by benefit>", available for active decrements (other than mortality in U.S. Qualified and Canadian mode funding Valuation Assumptions, and termination and retirement in German mode Valuation Assumptions), if the cause of decrement can be attributed to more than one table, with different tables applicable to different benefits (e.g. the total disability decrement is the sum of disability rates in the line of duty and disability rates due to other causes, and the Plan Definition contains at least one benefit triggered by disability in the line of duty and at least one benefit triggered by other causes of disability). See the Technical Reference article Decrements: rates by benefit for details. Click the Parameters button to select the tables (see the discussion of Additional Decrement Parameters at the end of this article). 

• "<same as retirement from active status>", available only for the post-termination retirement decrement, to indicate that the post-termination retirement rates are assumed to the be same as the retirement rates from active status.  

In all modes, for the Termination decrement, a check in the Continues after retirement eligibility box indicates that termination rates continue when eligibility conditions for a Benefit Definition initiated by the "Retirement" Contingency are met.  Leave the box unchecked to deem termination rates as 0 instead (i.e., retirement and termination decrements are mutually exclusive).

Note that in the event a retirement eligible participant has a 100% termination rate at any age, the retirement decrement will also be set to 100%, regardless of whether or not this checkbox is selected.

In all modes, for the Disability decrement, a check in the Continues after retirement eligibility box indicates that disability rates continue when eligibility conditions for a Benefit Definition initiated by the "Retirement" Contingency are met.  Uncheck the box to deem disability rates as 0 instead. 

In modes other than German pension, there are parameters to tell ProVal the Timing of active decrements, which can be at the "beginning of year" or in the "middle of year", and how to adjust the calculations to take decrement timing into account. See Decrements: beginning of year vs. middle of year for more information.

In German mode, you must select the method for Benefit determination for mid-year (death and disability) decrements:

• Valuation Date Method: Death and disability decrements are computed by averaging amounts on successive valuation dates. Typically, under mid-year decrement timing, ProVal determines eligibility at the middle of the year and averages the beginning-of-year and end-of-year benefit amounts to derive an average benefit payable for decrementing in that year. This is how ProVal will calculate benefits if the Apply eligibility before averaging benefits box is not checked. That is, for decrementing directly from active service at age x, if E[x] represents eligibility at age x (E=1 if eligible for a benefit and 0 if ineligible) and B[x] is the benefit amount associated with decrement age x, the average benefit will be calculated as E[x+0.5] * {(B[x] + B[x+1]) / 2}. If the box is checked, then benefit eligibility will be considered before averaging death and disability benefits to mid-year and the average benefit will be calculated as {(E[x] * B[x]) + (E[x+1] * B[x+1])} / 2. (Thus checking the box produces different averaged benefit amounts if, and only if, a plan member is not already eligible for the benefit at the beginning of the year but becomes eligible by the end of the year.) For details, see Decrements: beginning of year vs. middle of year.

• Back-calculation Method: Death and disability benefits are computed on the same dates as (old-age) retirement benefits. In other words, dates are determined by counting back, in one-year intervals, from the earliest retirement date. Benefits are determined with age and service to these exact dates, rather than to valuation anniversaries. For details, see Decrements: beginning of year vs. middle of year.

In modes other than German mode, specify the Decrements to adjust for competition, which tells ProVal whether, and how, to adjust rates for a multi-decrement environment. If you select:

• "all (rates)", ProVal will transform the rates of your decrement rate reference tables into probabilities, accounting for the fact that (two or three) decrements are “competing” in a multi-decrement environment. This says that the values you’ve entered in your reference rate tables reflect a single-decrement environment and hence are absolute rates of decrement that need to be adjusted. Then at any decrement date, ProVal adds the transformed rates (now probabilities) together to get the total probability of decrement.

• "none (probabilities)", ProVal will use your decrement rates exactly as they were entered in the Reference Rate Table libraries. This says that the values you’ve entered already reflect the fact that decrements are “competing” in a multi-decrement environment and hence need no adjustment. Then, at any decrement date, ProVal adds the unadjusted probabilities together to get the total probability of decrement.

• "mortality only", ProVal will transform your mortality rates into probabilities but use the other decrement rates exactly as they were specified in the Reference Rate Table libraries. Thus only the mortality rates will be adjusted, or transformed, to reflect the fact that they “compete” in a multi-decrement environment. Then at any decrement date, the total probability of decrement is the sum of the adjusted mortality rate (now a probability) and the unadjusted probabilities of retirement/termination and/or disablement.

In German mode, the parameter Retirement and Termination rates entered are allows you to specify how to treat the rates you have entered for retirement and termination in a multiple-decrement environment. Select Dependent probabilities to indicate that the retirement and termination rates already take into account the probability of death and disability, and should not be adjusted (thus ProVal will use the retirement and termination decrement rates exactly as they are specified in the Reference Rate Table Library). Select Independent rates to indicate that retirement and termination rates should be adjusted for competition with death and disability decrements. Death and disability rates will be adjusted automatically for competing decrements, and any adjustment to rates will be in accordance with Richttafeln methods.

See Decrements: rates vs. probabilities for more information.

Inactive Mortality & Active Mortality after Decrement (called Mortality Rates under the “PPA” law selection in U.S. qualified mode, Inactive Mortality for LTD assumptions in OPEB mode, or Inactive Mortality & Mortality after Decrement in German mode)

The probability of death for inactives and the probability of death for actives after a decrement from active status has occurred are determined by the relevant Inactive Mortality & Active Mortality after Decrement parameters.

Mortality rate tables applied to inactives and actives after decrement may vary by age and/or sex but not by service. Mortality tables that specify projection of mortality improvement are also available, as well as "dynamic" mortality tables that automatically calculate rates expected to be issued by the IRS under §1.430(h)(3)–1 for the valuation year. See Decrement Tables for more information. Except under a “PPA” law selection in the U.S. qualified mode, instead of a single table, you can specify:

• “<rates by coded field/calendar year>” if the table to be used varies according to the calendar year of decrement (that is, the calendar year of the anniversary of the valuation date in each future year of decrement), and/or for different groups of records, identified by values of a coded database field (e.g., Division).  Click the Parameters button to select the tables (see the discussion of Additional Decrement Parameters at the end of this article).

• “<no rates>” if it is to be assumed that no deaths will occur before age 126 (plus the largest spouse age difference assumption, or plus 30 when spouse age difference tables or actual spouse dates of birth are being used) . The mortality rate beyond this maximum age is set to 1.

Under the “PPA” law selection, Active and Non-disabled Inactive Members rates and Inactive Disabled Members and Actives after disablement rates may be a single table or “<rates by coded database field>”.  If “<rates by coded database field>” is selected, click the Parameters button to select the tables (see the discussion of Additional Decrement Parameters at the end of this article).     

You may specify separate mortality tables for the four categories of inactive participants (three in German mode): Retired Members, Vested Terminated members (in modes other than German mode), Survivors & Beneficiaries and Disabled Members. For the “PPA” law selection in the U.S. qualified mode, the first three categories, plus the active mortality decrement, are condensed into Active and Non-disabled Inactive Members, i.e., healthy members. For the “PPA” law selection, there is a second parameter, Inactive Disabled Members and Actives after disablement, i.e., disabled members.

Check the box Use retired member mortality prior to member death to use the mortality rates for a retired member in contingent lives prior to member death, using the contingent life's age and sex. This will affect all active and inactive benefits with Joint Life, Certain & Joint Life, Reversionary, and Post-Decrement Death Benefit payment forms where the beneficiary is not determined at member death. If the beneficiary is determined at member death, there is no contingent life survival prior to member death, so this box will have no effect. If the box is unchecked (default setting), the mortality rates entered for Survivors & Beneficiaries will be used in contingent lives both before and after member death, if applicable. Note that Joint Life payment forms deferred by age/svc/points conditions cannot be run with this box checked. (This parameter is not available in German mode and PPA runs.)

In German mode, select if mortality for disabled members should change to retired member mortality at actuarial retirement age. If this option is selected, you must set actuarial retirement age on the Other Valuation Parameters screen.

If setting up Long Term Disability Assumptions, select to use the mortality and recovery rates from the following list of available built-in tables:

• U.S. 1987 NAIC GLTD Tables (6 month elimination period) (https://www.soa.org/globalassets/assets/library/research/transactions-of-society-of-actuaries/1987/january/tsa87v3913.pdf)
• U.S. 2005 SOA Life Waiver Tables (http://www.soa.org/resources/experience-studies/2005-2009/hlth-2005-group-term-life-mortality-and-morbidity-study/)
• U.S. 2012 NAIC GLTD Tables (http://www.naic.org/documents/01_naic_2012_group_long-term_disability_valuation_table.xls)
• CIA 1988-1997 LTD Study (Study on Canadian Group Long Term Disability Termination Experience (1988-1997) (revised) (210002r) (cia-ica.ca)
• CIA 2004-2008 LTD Study (http://www.cia-ica.ca/docs/default-source/research/2019/219012e.pdf)
• CIA 2009-2015 LTD Study (http://www.cia-ica.ca/docs/default-source/research/2020/220015e.pdf)

To specify no mortality or recovery for all LTD participants, select the <no rates> option, or to specify no mortality or recovery for a select group of LTD participants, select the applicable table then, under the Params... button, provide a selection expression to indicate the participant records for which zero mortality and recovery is to be assumed.

For the U.S. 2012 NAIC rates, enter the information needed to look up values from the 3 death rate tables and 6 recovery rate tables under the Params... button. Select the coded database field that contains each participant's Diagnosis and map the field labels to the ProVal diagnosis codes. Enter the Elimination Period, in months, as either a constant value or based on a database field and check whether to Assume zero mortality and recovery rates during the elimination period. Enter the Indexed Gross Monthly Benefit and check whether to adjust it to 2007 at 2.4% if you wish to include the rates from tables 3D and 3R. Enter the Own Occupation Period, in months, as either a constant value or based on a database field. If you'd like to modify the built in margin in Table 1D of .2775, check Replace Table 1D Margin of .2775 with and either enter 0 to remove the margin or another number to apply a different margin. If you'd like to modify the built in margin in Table 1R of .15, check Replace Table 1R Margin of .15 with and either enter 0 to remove the margin or another number to apply a different margin. Check Interpolate to exact age at disability to interpolate the rates from Tables 1D and 1R on the age dimension. 

For the three Canadian CIA tables, enter the information needed to look up values from the published tables under the Params… button. If applicable, enter the Own Occupation Period, in months, as either a constant value or based on a database field. This value is used to determine when to add the Change in Definition value to the recovery rate. The Region parameter allows you to specify the use of the Quebec rates, the non-Quebec rates, or to specify the region by coded database field. Last, to Assume zero mortality and recovery rates during the elimination period, enter the elimination period as a constant value or based on a database field. Note that the elimination period is always required under the 1988-1997 CIA table. For the CIA 2009-2015 LTD Study and the U.S. 1987 NAIC table, check Extend mortality and recovery rates an additional 20 years to use the last published rate for 20 years past the end of the table. This may be useful if the disability benefit is paid past age 65 since this table does not contain ultimate rates. If the box is unchecked, 100% death will be assumed in the first month after the end of the table.

All tables may apply Scaling Factors separately to the mortality and recovery rates under the Params… button. Scaling factors may be constant values or vary by duration from disability onset in months. Enter the factor(s) to Multiply mortality rates by (or Multiply termination rates by, in the case of the U.S. 1987 table or Multiply Table 1D by, in the case of the U.S. 2012 NAIC table) to scale mortality rates by. Similarly, enter the factor(s) to Multiply recovery rates by (or Multiply Table 1R by, in the case of the U.S. 2012 NAIC table) to scale recovery rates by.

Note that for current inactives, the status code mappings determine the category. To apply the appropriate mortality table after decrement for future inactives (i.e., current actives after decrement), the cause of decrement determines the category. Furthermore, the beneficiary or spouse of a disabled member is presumed to be healthy.  Note:  ProVal does not "switch" the mortality rates for a vested terminated member, or for an active member who terminates with a deferred benefit, to rates for Retired Members once the benefit payment commencement date (or post-termination retirement age) is reached; if the selections for Retired Members and Vested Terminated members are not the same and you wish to make this switch, you must specify mortality rate tables of the "Age by Pre/post-commencement" type.    

Specify the rates by selecting from the list of mortality rate reference tables unhidden in the current Project or click the buttons on the right to create new mortality tables.  (Note:  if you create a new table, or edit an existing one, by linking to base rates, the mortality rate table currently selected for this mortality rate valuation assumption will not appear in the list of base rate tables.  To select it to populate the base rates, use the Mortality Rates Reference Table command.)  

Note that the Survivors & Beneficiaries mortality table applies to:

• the annuitant under Benefit Definitions for actives initiated by death;

• in the pension modes, the contingent annuitant under a “joint life annuity” (joint and survivor), “certain & joint life annuity” or “post-decrement death benefit” Payment Form and

• in OPEB mode, the spouse under a “life annuity to spouse”, “joint life annuity to spouse”, “reversionary annuity to spouse” or “life insurance on spouse’s life” Payment Form.

Additional Decrement Parameters

The Parameters buttons provide access to additional parameters that are sometimes needed to specify the decrement rates. When there are two or more applicable rate tables for a decrement, these parameters specify how the rates (or probabilities) vary, whether it be by the calendar year associated with the year of decrement and/or according to the contents of a coded database field. In the case of decrements other than retirement, rates could instead vary by benefit. In the case of the retirement decrement (only), there are two additional methods for specifying rates, both of which also require additional parameters. These options for the retirement decrement are “<100% at a specified age>” and “<rates by age / service on valuation date>”. For active decrement rates, these buttons also provide access to parameters that define table service for lookups if the decrement rates are service-based.

Click a button to set parameter values for any of these options for the appropriate contingency. For more information, see Additional Decrement Parameters. See also Decrement Tables for more information about the attributes of a reference rate table.

In Canadian mode, you may Assume zero pre-commencement mortality for inactives and actives after decrement.  By checking this box ProVal will use 0 mortality rates prior to benefit commencement for inactives and actives after decrement.  Note, the only mortality table types permitted with this option are age tables or age by pre/post-commencement tables.