This topic contains the parameters that tell ProVal how to customize final average salary. The standard operator is based upon the Valuation Salary definition (i.e., the Salary Definition specified under the Active Data topic of the Census Specifications command), salaries in consecutive years only, and, for U.S. qualified pension and U.S. public sector pension modes only, salaries limited to the U.S. Internal Revenue Code section 401(a)(17) compensation limit.

The Salary definition parameter defines the salary data to use, in the final average salary calculation, for the current year salary and for historical salaries, if any. If the Salary (from census specifications) option is selected, then (only) the Salary Definition included as part of the Census Specifications will be used. If you select the Alternative Salary (or sum of alternative salaries) option, then you may choose one or more Salary Definitions from the list of Salary Definitions unhidden in the current Project. To access the Salary Definition Library dialog box, in which you may edit an existing Salary Definition or create a new one, click the button. For details, see Salary Definitions.

Check the Final average salaries in consecutive years only box to specify that only consecutive salaries should be used in the calculation of the final average salary. If the box is unchecked, then non-consecutive salaries may be used to calculate the final average salary. For example, if this box is checked, 3 #FASCUSTOM 10 will be calculated as the average of the 3 highest consecutive salaries in the 10 years preceding the decrement date. If this box is not checked, 3 #FASCUSTOM 10 will be calculated as the average of the 3 highest, not necessarily consecutive, salaries in the 10 years preceding the decrement date.

The Salary limit parameter indicates whether the salaries used in the averaging calculation will be limited to the U.S. qualified plan maximum compensation limit under IRC Sec. 401(a)(17), to the lower of the 401(a)(17) limit and the U.S. social security maximum taxable wage base, to the (Canadian) Yearly Maximum Pensionable Earnings (YMPE), to a custom regulatory table (of either the wage base or salary limit type), or not at all. To specify a custom table, either select from the list of tables unhidden in the current Project, or click the button to edit a table or create a new one.

The Starting Point parameter may be used to initiate the calculation of final average salary at a date later than the hire date assumed by ProVal (hire date is the date at which the standard operator first calculates a final average salary). Final average salaries will be zero as of any decrement date before this starting date. When the starting point is based on Age, Service and/or Points (i.e., age plus service), these criteria are applied in the same manner as for benefit eligibility requirements (and the same rules for computing age and service apply). When the starting point is based on Year (perhaps in addition to the other criteria), enter the year of the decrement date at which you wish to compute the first final average salary. For example, suppose the valuation date is 1/1/2001 and you enter 1995 as the starting point year. Then the starting point is 1/1/1995, and final average salaries as of 1/1/1995 and later dates are calculated.

Note: the averaging period for final average salary (Final average salary calculation parameter in the Plan Attributes dialog box of the Plan Definition) determines whether the 1995 salary, in our example, is included in the final average salary as of 1/1/1995.

Furthermore, ProVal excludes, from the average, salaries prior to the starting point, so that the averaging period begins at the starting point. Thus, if the averaging period for final average salary excludes the current salary field, then, in our example, the final average salary as of 1/1/1995 will be calculated as zero, because only salaries through 1994 are included in this average and these salaries are before the starting point (1/1/1995). If you wish to include earlier salaries (back to the hire date) in final average salary, then check the Include salaries before starting point box.

The Freezing Point parameter freezes the final average salary (in the future or in the past) as of the decrement date when the freeze conditions are first met. If the final average salary is frozen before a participant’s date of hire, then that participant’s final average salary will be zero at all decrement dates. When the freezing point is based on Age, Service and/or Points (i.e., age plus service), these criteria are applied in the same manner as for benefit eligibility requirements (and the same rules for computing age and service apply). When the freezing point is based on Year (perhaps in addition to the other criteria), enter the year of the decrement date at which you wish to freeze the final average salary. ProVal calculates a final average salary as of that date and final average salaries at any later date will be the same amount. For example, suppose the valuation date is 7/1/2001 and you enter 1997 as the freeze year. Then final average salaries as of July 1 of 1998 and later years will be the same as the 7/1/1997 final average salary.

Note: As mentioned for the Starting Point, the option chosen for the Final average salary calculation parameter determines whether the salary for the year beginning on 7/1/1997 is included in the final average salary as of 7/1/1997.

A final average salary custom operator may have both a starting point and a (later) freezing point. If the final average salary is to be calculated at all decrement dates, starting with ProVal’s assumed hire date, and is not to be frozen, then the starting and freezing point spreadsheets may be left blank.

When the starting and freezing points are determined by service or points, the Service based on parameter defines service for purposes of starting and freezing. Typically, this is specified as a database Field that refers to either current service or a service start date. Select the desired field from among the numeric and date fields unhidden in the current Project. Alternatively, if you need fractional service accruals (e.g., hours-related service) or rounding (e.g., completed years), select a Service Definition from the library of Service Definitions included in the current Project. The button accesses the library to create and modify Service Definitions.

If the starting and freezing points depend instead upon age or year only, then the Service based on parameter will not be used.

Note: if the Service based on parameter is set as the “<date of hire>” field, then the date of hire defined under the Active Data topic of the Census Specifications will be used.