Under the individual aggregate cost method, assets are first allocated to individual participants and then individual normal costs are computed as if each active had a separate plan, valued under the aggregate cost method. (See “Individual Aggregate Calculations” below for details.)

Steps to follow to use Individual Aggregate:

To use the individual aggregate cost method in a Valuation Set (it is not available in a forecast):

1. Under the Liability Methods topic, check the appropriate Entry Age Normal liability method (level % or level $). Then click the Individual Aggregate button and check the Run individual aggregate box.

Next provide the basis to allocate the actuarial value of assets (adjusted in the U.S. qualified mode for minimum funding or maximum tax deductibility requirements) to active participants; select the basis under the Allocate assets using parameter. (See “Individual Aggregate Calculations” below for details.) The allocation basis can be either:

• Last year’s assets + normal cost (from database) for this year’s active participants. This basis, of course, cannot be used for the valuation performed for the first year that the plan is in effect or the first year that the individual aggregate cost method is in use.

The prior (last) year’s allocated adjusted assets and normal cost, both determined as of the prior valuation date, must be available, for each active participant, from the Census Database referenced by the Valuation. Indicate the Database expression that defines the sum of last year’s assets and normal cost. In the U.S. qualified mode, provision is made for both a Minimum basis expression and a Maximum basis expression, to allow for different asset value adjustments for minimum funding and maximum tax deductibility purposes, due to a Funding Standard Account Credit Balance or a (tax) Carry Forward, respectively.

Note: Under a “PPA” law selection in U.S. qualified mode, individual aggregate calculations can be used only to develop an actuarial liability (not for minimum funding calculations); therefore no credit balances are subtracted from the minimum contribution basis asset value.

• Current year’s liability for active participants. Select this option only if you are performing the valuation for the first year that the plan is in effect or the first year that the individual aggregate cost method is in use (or there is otherwise no allocation basis from last year). The available liabilities are the actuarial liability under the entry age normal, projected unit credit and pure unit credit cost methods and the present value of future benefits. Select the unit credit liability if you wish to allocate in proportion to the present value of accrued benefits. If you select the entry age normal cost method, be sure to select the variation (level percent of pay or level dollar) that underlies your actuarial cost method (level percent of pay or level dollar variation of the individual aggregate cost method). Also make sure that you have selected this variation under the Liability Methods topic (liability method parameter).

Finally, choose the Record identifier(s) from the list of fields in the data dictionary of the current project. The field(s) you select will be used later as the key field(s) for the Merge Individual Aggregate command (see step 5).

2. Run a Valuation. Click the View button to see the present values and allocation basis for each participant. These results are not saved to the Census Database or available from Individual Results. However, they will be available to the Valuation Set referencing this Valuation. Once you run the Valuation Set, you can merge the final individual aggregate results of each database record into the Census Database that you will (update and) use for next year’s valuation, as indicated in step 5. The output variables available in the final results that ProVal calculates for each record are listed in the discussion of “Individual Aggregate Calculations” below.

3. Under the Contribution Policy topic of your Asset & Funding Policy, specify the “Individual Aggregate, % of Salary” or “Individual Aggregate, Level $” Actuarial Cost Method.

4. Run a Valuation Set. Initially, ProVal will allocate net assets (i.e., assets that remain after allocating assets to inactive participants) to active participants in proportion to the selected asset allocation basis. However, the final asset allocation may differ, if necessary to avoid negative normal costs. That is, if the calculated normal cost for a record is negative (before addition of any assumed administrative expenses and/or term cost for any benefits valued under the term cost method), the normal cost is set equal to zero (and then assumed administrative expenses and/or term costs are added) and assets are reallocated. Click the View button to see the individual aggregate results. In addition, a detailed calculation (on both the minimum and maximum contribution bases in U.S.qualified mode) of normal cost for each participant is available in the Valuation Set Exhibits. (See “Individual Aggregate Calculations” below for details.)

5. Next year, merge the final allocated assets and normal costs into the database to be used as the census database for next year’s valuation, using the Merge Individual Aggregate command, found under the Import / Export Data section of the Database menu. Then perform steps 1-4 above.

Individual Aggregate Calculations

First, ProVal allocates assets to inactive participants and to active participants who have reached, as of the Valuation Date, the “100% retirement age”, i.e., the age at which this active record is assumed to retire or, if retirement rates are assumed at various ages, the age at which this active record leaves active status completely. Assets for inactive participants are set equal to the present value of the participant’s benefit (even if the total present value of benefits for these participants exceeds total plan assets). Any remaining assets (whose value could be negative) are allocated to active participants not yet at 100% retirement age (on the valuation date) in proportion to the allocation basis selected (see step 1 above). Finally, individual normal costs are determined for these active participants.

Remaining assets are defined as:

A = Actuarial Value of Assets minus Present Value of Future Benefits for inactives and for actives at 100% retirement age. In the U.S. qualified mode, the Funding Standard Account Credit Balance and OBRA bases, if any, also are subtracted to compute the asset value on the minimum required contribution basis. In the U.S. qualified mode, the (tax) Carry Forward, if any, also is subtracted to compute the asset value on the maximum tax deductible contribution basis.

Normal cost is computed for each active participant not yet at 100% retirement age as:

A[i] =   A * (ALLOC[i] / Σ ALLOC[i])

NC[i] = (PVFB[i] – A[i] – PVFEC[i]) / PVFS[i] * S[i].

Thus assets are allocated in the proportion that the active record’s value of the selected item bears to the total value of the item for all active participants.

ALLOC[i], PVFB[i], PVFEC[i], PVFS[i], and S[i] are each active participant’s allocation basis, present value of future benefits, present value of future employee contributions (if any), present value of future salaries (or present value of future service if the actuarial cost method variation is level $), and valuation salary (or valuation number if the actuarial cost method variation is level $).

If this results in a negative normal cost, NC[i], for any participant, then ProVal reallocates assets. That is, it lowers the value of A[i] for participants with a negative normal cost to PVFB[i] – PVFEC[i] (i.e., those participants with excess assets are given a 0 normal cost). These excess assets are then reallocated to participants whose normal cost is positive, raising their A[i] value. If a participant’s normal cost had been calculated as exactly 0, it is not changed. ProVal then recalculates NC[i], using the formula above. This process is repeated until no negative normal cost results for any participant.

The total normal cost for the plan is the sum of the individual normal costs:

NC = Σ NC[i]

The available variables, whose output values are written to individual aggregate results for each participant, are allocated assets (prior year, preliminary allocation this year and final allocation this year), normal cost, present value of future benefits, present value of future working lifetimes (if the level dollar variation of entry age normal had been selected as a liability method), present value of future salaries (if the level percent variation of entry age normal had been selected as a liability method), valuation number, valuation salary and count (1 for each record unless the Valuation is performed on grouped data). In the U.S. qualified mode, the allocated assets and normal cost values are calculated on both the minimum required contribution and maximum tax deductible contribution bases, except for valuation years for which PPA funding rules apply (in which case, values are calculated on only the minimum required contribution basis).