Returns the total reserve for employee insurance contracts defined in the Plan Definition (universal mode only).

In universal mode, under Plan Definitions > Insurance Reserves > Employee Contracts, if the box indicating that an employee insurance contract exists is checked, then an employee contract reserve will be calculated and returned by this operator.

Attribution:

The employee insurance contract reserve actually will be calculated several times for purposes of attribution. The first calculation made is the total reserve (e.g., for Present Value of Future Benefits purposes), and the details of this calculation are available in the Sample Lives. Additional calculations are made for unit credit and projected unit credit accrual rate proration at the beginning and the end of the year. The Benefit Formula Components and Accrual Basis Components of the premium formula for these calculations are at their “PUC b.o.y”, “PUC e.o.y.”, “UC b.o.y.” and “UC e.o.y.” sample life values.

If the user selects a linear attribution for a benefit formula that references #ReserveEE, then ProVal will linearly attribute the total reserve per the calculation shown in the sample lives.

Calculation Details:

The employee insurance contract reserve is calculated using the following steps and formulas:

1. The premium is determined based on the change in the accrued benefit under the specified premium formula. Typically this represents a formula based on the employee’s salary and the plan’s employee contribution rate. Any premium attributable to prior contracts is subtracted from this total premium amount before moving on to the next steps.

2. The increase in premium over the prior year is used to determine the additional capital funded by the premiums, using the contract’s assumptions.

Change in capital = (Change in prem) * (annuity to 65) / (PV single pmt 65).

3. The additional capital is added to the prior year’s premium to determine the current capital.

4. For an active participant on the initial valuation date, the calculated capital is compared to the specified empirical capital, and all past and future capital amounts are adjusted for the difference in euros of these two amounts at the initial valuation date.

5. The capital and premium are used to calculate the primary reserve (before participation). The basic form of the formula for reserves is,

in which V is the reserve, KL is the capital, p is the premium, and the E and a are from standard actuarial notation.

If no prior contracts exist, or if the contract change was under the Generations method, this formula will be correct (although we can use the more general form below). If the contract was changed in previous years using the Delta Capital or Delta Premium method, then one of the inputs with those names will not be zero, and the following general form must be used:

Regardless of the method of contract change, the general formula can always be used. Inputs of zero for Delta Capital and Delta Premium will result in a formula identical to the basic form.

6. If this is not a participating contract, then STOP HERE. Otherwise, calculate the dividend using the following formula:

Dividend = r1 * V0 + r2 * [(V1 – V0) / (2 if average, 1 if total)], in which

V1 is the total reserve (basic contract + participation), before dividend. Exception: On the initial valuation date, V1 will include the dividend as of that date if the capital (or reserve) on the data includes the dividend (indicated by the field “Calculate first year dividend” being unchecked).

V0 is the same as V1 as of one year prior. Each V1 will become the next year’s V0. Exception: On the initial valuation date, ProVal will calculate V0 as the sum of the inputs “Prior year participation reserve” and “Prior year basic contract reserve” if “Calculate first year dividend” is checked, and V0 will not be calculated if “Calculate first year dividend” is unchecked.

7. Calculate the increase in participation capital due to the dividend using the following formula:

Increase in participation capital = Dividend / (PV single pmt 65)

The factor “PV single pmt 65” is calculated using the mortality specified in the “Mortality” field, that is, either “same as basic contract” or “no mortality”.

8. Add increase in participation capital to prior year’s participation capital to determine end of year participation capital.

9. Calculate end of year participation reserve using the following formula:

Participation reserve = (Participation capital) * (PV single pmt 65)

If there are prior contracts, they are evaluated first using the steps above. This facilitates the step 1 adjustment to the total premium for the premium(s) related to any prior contracts.