German state contribution adjustment
When the Adjust for state pension contributions box of a Benefit Definition is checked, ProVal will increase the benefit amount by the state pension contributions (i.e., taxes) that are assumed to be payable on the benefit. The contribution rates used for this calculation are entered behind the State Contributions button of the Regulatory Data topic of Valuation Assumptions.
The benefit adjustment will reflect the state contributions for the state pension, unemployment, healthcare and long-term care insurances. The state contributions are based on the participant’s earnings up to a statutory limit, where the statutory limit varies based on which state contribution is being calculated.
As an example, assume the following:
Participant Data
| Formula benefit: | 10,000 |
| Salary: | 45,000 |
| BBG: | 56,000 |
| BBG KV: | 44,500 |
State Contribution Rates
| State pension | 9.6% |
| Unemployment | 1.5% |
| Healthcare | 7.3% |
| Long-term care | 0.975% |
The state contributions prior to reflecting the pension amount would be calculated as:
| State pension(1) | 0.096 * minimum [45,000, 56,400] | 4,320 |
| Unemployment | 0.015 * minimum [45,000, 56,400] | 675 |
| Health care & long-term care | (.073+.00975) * minimum [45,000, 44,500] | 3,682 |
| Total | 8,677 |
The state contribution after reflecting the pension amount would be calculated as:
| State pension(1) | 0.096 * minimum [(45,000 + 10,000), 56,400] | 5,280 |
| Unemployment | 0.015 * minimum [(45,000+10,000), 56,400] | 825 |
| Health care & long-term care | (0.073+0.00975) * minimum [(45,000+10,000), 44,500] | 3,682 |
| Total | 9,787 |
The state contribution attributable to the formula benefit is 9,787 – 8,677 = 1,110.
Therefore, the amount valued as the result of this Benefit Definition would be 10,000 + 1,110 = 11,110.
As part of the Benefit Definition sample life report for each participant, a separate table is provided (below the table that develops the projected benefit, with and without adjustment) that contains details of this calculation.
(1) The state pension contribution rate varies depending on whether the participant is considered a coal miner for purposes of state contributions. If the calculation is done for a coal miner, the BBG used in the determination of the statutory pension amount would reflect the BBG applicable to a coal miner.