QUESTION: My pension plan has a maximum dollar benefit of $26,400, which will be increased twice by plan amendment during the 10 years of my forecast. My baseline year is 1998. I'd like to run a projection that reflects the following amendment schedule:

Year	Cap
Current	$26,400
2000	29,040
2005	34,848

Can I code this in ProVal?

ANSWER: Yes. You'll need to code the following:

1. Benefit Definitions:0

Create two benefits capped at different amounts. For example, "Ret - Amended cap" where the formula is BENEFIT #MIN AMENDCAP and "Ret - Current Benefit" where the formula is BENEFIT #MIN CAP. Note that AMENDCAP and CAP are components equal to $26,400, with applicable increase rates.

2. Plan Benefit Definition:

Add "Ret - Current Benefit" to the Plan Benefit Definition; "Ret - Amended cap" should NOT be included.

3. Valuation Assumptions - Increase Rates:

Set the valuation increase rates on the caps AMENDCAP and CAP to 0.

4. Projection Assumptions - Inflation Experience Assumptions:

Set the projection increase rates on the caps AMENDCAP and CAP according to the scheduled increases. Lag the increase for CAP by one year to properly measure the change due to the amendment in all years. For example:

AMENDCAP

Effective Period
From	To	Low	Medium	High
-	1998	0	0	0
1999	1999	0.1	0.1	0.1
2000	2003	0	0	0
2004	2004	0.2	0.2	0.2
2005	-	0	0	0

CAP

Effective Period
From	To	Low	Medium	High
-	1999	0	0	0
2000	2000	0.1	0.1	0.1
2001	2004	0	0	0
2005	2005	0.2	0.2	0.2
2006	-	0	0	0

 

5. Projection Assumptions - Valuation Assumption Sensitivities

Set the Valuation Assumption Sensitivities for AMENDCAP and CAP to 0.

6. Projection Assumptions - Plan Amendments:

Enter the years to amend the retirement benefit: Ret - Current Benefit

Year	Benefit Definition	Type of Change
2000	Ret – Amended Cap	Unit benefit update
2005	Ret – Amended Cap	Unit benefit update

For another example, see Projecting multiple plan amendments, example 2.