The parameters of this dialog box indicate for inactive members the assumed payment form used to compute the value, as of the valuation date, of the stream of benefit payments or member life insurance coverage. The parameters of the (preceding) Inactive Benefits dialog box determine whether only one payment form is defined (when Single payment form for all records is indicated) or more than one is defined (when a coded Payment form field describes the payment form). Note that if a coded field describes the payment form for this inactive benefit, then every code listed must have an associated ProVal Inactive Payment Form.

To describe the ProVal Inactive Payment Form, first select the Type from the list of annuities, life insurance, lump sum (single) payments and post-decrement death benefits. If you are describing a payment form associated with a code from a database field, then “<not applicable>” will also be an option, for a code value that indicates that this particular Inactive Benefit is not payable for an inactive record with this code value in the database field.

The current ProVal Inactive Payment Forms allow you to specify the following benefit payment forms (depending on the ProVal mode of operation): a life annuity, joint life annuity, annuity paid for a certain period only, annuity paid for a certain period and life thereafter, joint life annuity paid for a certain period and life thereafter, life insurance coverage, a lump sum payment discounted without survivorship (no life contingencies assumed during a deferral period, if any), a lump sum payment discounted with survivorship (life contingencies are assumed during a deferral period, if any), post-decrement death benefits during a deferral period, if any, and a modified cash refund annuity (see Present values: modified cash refund annuity payment form).

Life insurance may be temporary and/or deferred. Life and joint life annuities also may be temporary and/or deferred. Annuities involving a certain period may be deferred. Note that life contingencies apply during a temporary period but not during a certain period. For more detailed information about each type of payment form (including how to code deferral, temporary and certain periods and, for a joint and survivor annuity, how to code beneficiary information), see Payment Form Definitions – Pension Modes, which discusses these parameters for active members.

After you select the type from the list, specify the details of the payment form definition by completing the remaining parameters in the dialog box. These parameters are similar to those for active plan member payment forms but also contain an option to define beneficiary information for a joint and survivor annuity by reference to a database field (as well as by entering a constant value in a parameter text field) and do not contain an option to define deferral, temporary and certain periods by reference to years specified by a table (i.e., a Benefit Component Table, which looks up values at decrement and thus would not apply to inactive plan members, whose decrement from active status has already occurred).

For either Type of joint life annuity, the parameters that determine (1) the fraction of benefit received during the single and joint lifetimes of the plan member and the beneficiary and (2) whether existence of a beneficiary is determined at the valuation date or a later date (either benefit commencement or member death) appear before the other parameters of this dialog box but are discussed at the end of this article (following discussion of other Inactive Payment Form parameters).

The Guaranteed amount at valuation date parameter applies to a modified cash refund annuity Type only. Select, from among the database fields unhidden in the current Project, the field that contains the value, as of the Valuation Date (in a Core Projection, as of the initial, or baseline, valuation date), of the guaranteed amount to be refunded in the event of the annuitant’s death, that is, the remaining amount as of the Valuation Date, which will be paid in the future as annuity benefits to the annuitant and, at the annuitant’s death, as a lump sum to the beneficiary. Thus, if annuity payments have already commenced as of the Valuation Date, the amount entered here would not be the same guaranteed amount as existed at the date when the annuity payments started. Guaranteed amounts for modified cash refund annuities with a deferral period will accumulate interest until the benefit commences (but not subsequently until the annuitant’s death), at a rate specified under the Increase & Crediting Rates topic of Valuation Assumptions (and, in a Core Projection, of Projection Assumptions). If the guaranteed amount has been exceeded by the adjusted sum of benefit payment amounts, reflecting annuity payments up to the time of the annuitant’s death, there will be no payment to the beneficiary.

Benefit commences (or Benefit paid, for lump sum payment forms, or Coverage commences, for a life insurance payment form) parameters determine the start date for deferred benefits. This parameter is also used to specify the start date (which can be a date in either the past or the future) for annuity benefits paid for a period certain. For payment forms other than lump sum, the commencement date specified here also defines the start of the temporary period, if any. Commencement dates prior to the valuation date are treated as indicating immediate benefits (i.e., no deferral if the specified commencement date or age is prior to the valuation date). In German mode, you may select that benefit commences at date (or age) defined by field <actuarial retirement age>. If this option is selected, you must set actuarial retirement age on the Other Valuation Parameters topic of Valuation Assumptions.

For lump sum payment forms, payment forms where commencement or the temporary stop period is specified at an age, and all payment forms in U.K. or German modes, fractional deferral periods will be rounded. For all other payment forms, benefits paid in the year of commencement will be prorated. If a commencement date occurs during a period, a full payment is considered to be made for that period. For example, for a January 1 valuation with monthly payment frequency, a benefit commencing on August 31 would receive payments for each month August - December, and the annual benefit amount would be 5/12 times the original benefit amount. Note that the payment timing parameter determines beginning of period or end of period payments, not where the commencement date falls in the period.

In German mode, lump sums without life contingencies can also be deferred to a specified month and day in the 12 month period after the valuation date. If using this option, we assume the benefit amount provided in the inactive benefit definition is already increased with COLA to the exact payment date. We only adjust the interest discounting to that date.  

Temporary period stops parameters define the end date (i.e., the first date at which the member no longer receives a payment) for temporary annuity or insurance benefits. Temporary periods defined as a number of years are measured from the point defined by the benefit commencement parameters. Benefits that have expired before the valuation date (i.e., the temporary period ended before the valuation date) have no liability and will generate a warning at execution. Note that for modified cash refund annuities, the guaranteed amount will also expire, even if the guaranteed amount has not been exhausted. Any guaranteed amount remaining when benefit payment stops will not be valued. In German mode, you may select that benefit temporary period stops at date (or age) defined by field <actuarial retirement age>. If this option is selected, you must set actuarial retirement age on the Other Valuation Parameters topic of Valuation Assumptions.

For payment forms where commencement or the temporary stop period is specified at an age, and all payment forms in U.K. or German modes, fractional temporary periods will be rounded. For all other payment forms, benefits paid in the temporary stop year will be prorated, as described above for deferral periods.

Certain period stops parameters define the length of a certain period, which may be defined by a database field or by a constant. The certain period is considered to start (or to have started) at the date indicated by benefit commencement parameters. 

In U.K. or German modes, fractional certain periods will be rounded. In other modes, benefits paid in the certain stop year will be prorated, as described above for deferral periods.

Benefit changes parameters define a change in the benefit amount at date (or age) defined by field to a new amount defined by field. For example, these parameters can be used to model a Social Security Level Income Option, where the change date is the Social Security date or age and the new amount is the lower amount payable after that date. If the timing of the change is defined by age, the age is rounded. If the timing is defined by a date, the exact timing is used. If COLA applies, the new amount you enter should be increased with actual COLA to the valuation date. ProVal will increase it with assumed COLA from the valuation date to the change date. 

Fraction of Joint & Survivor benefit received when parameters are used when defining a joint life annuity. Each describes the fraction or multiple of the benefit amount that is payable under a given survival status. These parameter values may be either contained in a Database field or input as a Constant value. For Both member & beneficiary are alive, specify the fraction of the benefit amount payable during the joint lifetime of the member and beneficiary. This is often set to be 1. For Only the member is alive, specify the fraction of the benefit amount payable (if the beneficiary predeceases the member) to the member after the beneficiary’s death. This is often set to 1; it may be a value greater than 1 if there is a pop-up benefit payable or a value less than 1 if the benefit is a true joint and survivor benefit (i.e., a reduced benefit is payable upon the death of either the member or the beneficiary). For Only the beneficiary is alive, specify the fraction of the benefit amount payable (if the member predeceases the beneficiary) to the beneficiary after the member’s death. Note that if the Beneficiary determined by parameter (described below) is set to “assumptions at member death”, then the Fraction of Joint & Survivor benefit received when both member and beneficiary are alive parameter will not be available, because the spouse does not functionally "exist" until the member dies.

For joint life annuity payment forms, the manner of determining beneficiary information (and thus when to apply beneficiary mortality) is specified under the Beneficiary determined by parameter. This parameter indicates (1) whether marital status and beneficiary age and sex will be determined by data inputs or by assumptions and (2) the time at which assumptions will be applied, if used. If the “data as of valuation date” option is selected, beneficiary age and sex must be specified in the data, and beneficiary mortality will be applied starting on the valuation date (initial, or baseline, valuation date of a forecast). If the “assumptions at commencement” option is selected, marital status and beneficiary age and sex will be determined by applying the marital assumptions (found under the Other Valuation Parameters topic of Valuation Assumptions) at benefit commencement (or at valuation date if later) and beneficiary mortality will be applied starting at that time. Thus if you select “assumptions at commencement”, the existence of a beneficiary depends on the valuation marital assumptions, applied at the payment start date, and any spouse or beneficiary data, with respect to sex and birth date, contained in fields on the member record in the Census Database will be ignored for this purpose; only member mortality will apply during the deferral period and if the member dies during the deferral period, there will be no benefit payable to a beneficiary. If the annuity Type is “Joint Life Annuity” (not “Certain & Joint Life Annuity”), the “assumptions at member death” option is available; if you select this option, the valuation marital assumptions will be applied separately at each age of potential member death, and spouse mortality will be applied starting at each possible age of member death. If the member dies during the deferral period, the spouse will receive a benefit deferred to the member’s deferral age. (If the member dies during the payment period, the spouse will receive an immediate benefit.) Note that “assumptions at member death” is the only option available in the German pension mode.

See the Technical Reference article on joint & survivor payment forms for more information.

If a COLA applies to a life insurance benefit, the switch from a deferral period COLA (if any) to a payment period COLA will happen at the age when Coverage commences as specified in the life insurance payment form. In the U.K. mode, the switch will happen at the age when the Temporary period stops (or at the age at which coverage commences, if “not temporary” is selected), because life insurance in U.K. mode is typically used in death-in-deferment cash benefits, for which the life insurance temporary period corresponds to the deferral period. To adjust the face amount by a factor that varies by the member’s age at death (useful for applying lump sum or early retirement factors based on age at death, rather than age at decrement), select, under the Adjustment factor at member death (from table) parameter, the appropriate attained age type Benefit Component Table from the drop-down list of tables unhidden in the current Project (click the button to edit a table or create a new one). If no such factors should apply, select “<none>”. In the U.K. mode, a “multiple of pension” death-in-deferment benefit can be coded by creating a Benefit Component Table with the multiple entered for all ages and selecting this table as the adjustment factor.

For life insurance benefits in the German pension mode, check whether the benefit is Only payable if married at death, in which case the Fraction of population that is married assumption specified under the Other Valuation Parameters topic of Valuation Assumptions will be applied.

For lump sum benefits, if you would like the benefit divided into annual installments, check the Divide into box and indicate the (numeric) database field containing the number of payments remaining (equal remaining installments). In this case, the Annual benefit amount parameter of this Inactive Benefit should specify the remaining lump sum amount as of the Valuation Date (the original lump sum less previously paid installments with interest).  If there is interest applied to unpaid installments, check Apply interest of and select whether the interest is specified as a constant entered directly in the payment form definition (in all modes other than UK mode), or specified in COLA assumptions (in Valuation and Projection Assumptions).  Note that survivorship (mortality) probabilities will apply during the installment period if the lump sum payment form Type selected is “Lump Sum, Life Contingencies”; if “Lump Sum, No Life Contingencies” is selected instead, only interest will apply during the installment period, not survivorship.