Attribution
(See also Attribution - OPEB mode.)
The Attribution button (accessible except for a Benefit Definition exclusively for the "vested valued through active" status) of a Benefit Definition leads to parameters that pertain to the (pure) unit credit and projected unit credit liability methods (only) and define the allocation of growth in the benefit to years of service, as well as, in the U.S. qualified and universal pension modes, overrides that may be applied to attributed PPA target liabilities, other unit credit and projected unit credit (denoted as “actuarial”) liabilities, accounting liabilities, and CAS liabilities.
ProVal follows a few basic rules when processing benefit formulas under the different families of liability methods:
For the calculation of present value of future benefits under the entry age normal methods, all components of the benefit formula are projected.
For projected unit credit accrued liability calculations, accrual definitions receive special treatment. The basis of an accrual definition usually contains a salary-related expression, so it is projected. The summation implicit in an accrual definition, however, will not reflect any additional service after the valuation date. See the Technical Reference article entitled PUC and UC Attribution for details.
For unit credit accrued liability calculations, accrual definitions are “frozen” at the valuation date. No future salary growth or service accumulation is reflected. Future interest credits are reflected, however, for cash balance format accrual definitions. In addition, tables found in the Benefit formula (specified by reference to a Benefit Component Table in the definition of the Benefit Formula Component) may optionally be frozen for vested liability calculations or for all unit credit liability calculations. Again, see the Technical Reference article entitled “PUC and UC Attribution” for details.
When ProVal performs unit credit and projected unit credit calculations, the attribution parameters determine how growth in the Benefit formula is allocated to years of service for purposes of Attribution for unit credit and Attribution for projected unit credit cost methods, including attribution of projected unit credit liabilities used in attained age liability method calculations (available in pension modes other than U.S. qualified). There are three choices for attribution in the pension modes (four in U.K. mode) specified separately for unit credit and projected unit credit calculations (see the Technical Reference article entitled “PUC and UC Attribution” for details about the calculation methodology):
Accrual rate proration, by component attributes the benefit separately for each Benefit Formula Component. If there are no accrual definitions in the Benefit formula, then the entire projected benefit is assigned to past service (and considered fully attributed as of the valuation date). For an accrual definition type of component, attribution is determined by the parameters of the Accrual Rates topic contained in the component. (If there is no Accrual Rates topic, that is, the accrual format is “Basis only”, the entire projected benefit is assigned to past service and considered fully attributed as of the valuation date.) This results in “natural”, or “direct differencing”, attribution. The service basis for attribution of each Benefit Formula Component is the Benefit service selected under the Accrual Rates topic of the accrual definition (perhaps overridden by custom attribution). For details, see the discussion of attribution under the Accrual Rates topic.
Linear proration to decrement spreads the projected benefit as of each decrement age linearly over attribution service until the decrement age. The attribution service basis is specified under the Liability Methods topic of the Valuation Assumptions. See Liability Methods - Funding or Liability Methods - Accounting for more information about attribution service.
Linear proration to benefit eligibility spreads the projected benefit as of each decrement age linearly over attribution service until the earlier of the decrement age or the first age at which the employee is eligible for the benefit. The service basis is Eligibility service, as selected under the Eligibility section of the Benefit Definition.
Linear proration to age x (available in U.K. mode) multiplies the projected benefit as of each decrement age by the current attribution service as of the valuation date and divides by projected attribution service projected to the later of the specified age or the decrement age. The attribution service basis is specified under the Liability Methods topic of the Valuation Assumptions. See Liability Methods - Funding or Liability Methods - Accounting for more information about attribution service.
In addition, in the U.S. qualified and universal modes, there is an option to override the above attribution methods for selected liabilities:
In the U.S. qualified mode, check the Override attribution above for PPA liabilities and box if benefits should be attributed for PPA liabilities using the method described in the U.S. Internal Revenue Code Regulation 1.430(d)-1. This attribution is most frequently used when a portion of the attributed benefit is a function of the accrued benefit and a portion is not. If this box is checked, not-at-risk and at-risk target liabilities, including PPA PBGC variable premium liabilities, will be calculated based on the sum of the accrued benefit and a linear proration of the excess portion (excess of projected benefit over accrued benefit). Note that the setting of this box is relevant for law selections other than “PPA”: attribution of current liabilities, multiemployer vested liability and, for a law selection other than “Multiemployer”, pre-PPA PBGC variable premium liability will be overridden if this box is checked, although these specialized liabilities are not based on target liability (and thus are not “PPA liabilities”).
If the Override attribution above for PPA liabilities and box is checked, the Actuarial Liabilities, Accounting Liabilities, and CAS Liabilities checkboxes become accessible. If this (IRS) override method should be used to calculate Projected Unit Credit and Pure Unit Credit Actuarial Liabilities, check the Actuarial Liabilities box. Liability values under the unit credit and projected unit credit cost methods thus will be calculated based on accrual rate proration of the accrued benefit formula amount and linear proration of the excess amount. Again, note that the setting of this box is relevant for law selections other than “PPA”: attribution of unit credit and projected unit credit funding liabilities (if these methods are selected, in the Valuation Assumptions, for calculation) for years before PPA funding rules apply to the plan under the “Pre-PPA and PPA” law selection, or for all years under the “Multiemployer” and the “Pre-PPA” law selections, will be overridden if this box is checked (as will unit credit and projected unit credit “actuarial liabilities” for years subject to PPA funding rules under the “Pre-PPA and PPA” law selection).
If this override method, selected for PPA liabilities, should be used also to calculate:
To tell ProVal how to compute the accrued benefit for purposes of the override option, you must enter a Benefit formula expression for the with accrual rate proration on accrued benefit formula below and linear proration on excess parameter. The total benefit amount, however, will be based on the formula defined in the Benefit formula section of the Benefit Definition. If the accrued benefit formula you enter produces benefit values that exceed the total benefit amount as defined under the Benefit formula, then:
for participants whose status is mapped to the ProVal “Active” status, the accrued benefit will be used in place of the total benefit. Please note that this may cause inconsistencies in liability values (for example, U.S. target liability, accrued liability under the unit credit cost method) greater than the present value of benefits.
for participants whose status is mapped to the ProVal “Vested valued through active” status, any liability value (for example, U.S. target liability, accrued liability under the unit credit cost method) will be coerced to equal the present value of benefits. Thus the total benefit will be used, not the accrued benefit.
If the Override attribution above for box is checked, the Component Library button is accessible. Click it to access the Benefit Formula Component Library dialog box, by means of which you can create, unhide and edit Benefit Formula Components.
In Universal mode, there are additional options available to control the Projected Unit Credit attribution start age when linear proration is selected. These options were added to support guidance issued by IFRS in 2021 related to attributing benefits to periods of service. These options may only be used if the applicable service has constant accruals of 1 per year. To use these parameters, first check the box Attribution begins at the later of hire age and then select an option for determining the attribution start age. You may either set the age to be a constant age for all participants, a numeric database field that contains the age for each participant, or age based on eligibility. Age based on eligibility is only available if you select linear proration to benefit eligibility. If you select age based on eligibility, ProVal will calculate the start age based on the eligibility requirements for the benefit definition. The hire age will be based on the applicable service definition: the eligibility service in the benefit definition when linear attribution to benefit eligibility is used; or the full eligibility service in the plan definition when linear attribution to full eligibility is used.
If calculating the start age based on benefit eligibility, ProVal will adjust the start age so that the benefit is attributed over only the service needed to meet the eligibility requirement. If meeting an age/service requirement first, this age will be the age when the requirement is met minus the service requirement. If meeting a points or age only requirement first (or simultaneously), it will be the hire age.
Example:
Benefit Eligibility Requirements: Age 60 and 10 years of service, or 80 points.
Participant 1:
Hire Age: 45
This participant will meet the age/svc criteria first, at age 60.
Attribution start age = age at eligibility – service requirement = 60 – 10 = 50
Participant 2:
Hire Age: 30
This participant will the points criteria first, at age 55.
Attribution start age = hire age = 30.