QUESTION: I have a plan with a benefit formula of $25 times years of service, where service is capped at 35 years. At 1/1/2005, the dollar multiplier will increase from $25 to $30. Once a person exceeds 35 years of service, a year of service credited at $25 from 35 years ago is “replaced” by a year of benefit service at $30. How can I code this in ProVal?

(By the way, I also have a plan with a benefit service cap and a percent of pay benefit formula, where the percent increases and early years of service are dropped, so that the latest, not the earliest, years of service are credited in the benefit formula. How do I code that?)

ANSWER: This benefit can be expressed as $25 per year of service plus an additional $5 for each year of service after 1/1/2005. (The percent of pay benefit can be coded, similarly, as the initial percent for service since hire and the differential percent for years since the increase went into effect.) Therefore, use a benefit formula that adds together two benefit formula components. For example:

BASE25 + ADDL5

Where the components are coded as:

Component name	BASE25			ADDL5
Description	$25 x (service from hire < 35)			Add’l $5 x (service from later of 1/1/2005 and hire <35)
Component type	Accrual definition			Accrual definition
Accrual format	Final average (or career average)			Final average (or career average)
Basis formula	1			1
Accrual rates
Benefit service field	DOH			DOH2005
Rates	Varies by years of service			Varies by years of service
	From	Up To	Rate	From	Up To	Rate
	0	35	25	0	35	5
	35	-	0	35	-	0

The key difference between the two components is the benefit service field – the starting point from which service and the 35 year cap are measured. For BASE25, the benefit service field is date of hire – named “DOH” in this example. For ADDL5, the benefit service field is the later of date of hire and 1/1/2005 – named “DOH2005” in this example.

To calculate DOH2005,

1. Go to Input > Census Specifications > Data Defaults.

2. Click New to create a new default.

3. Select DOH2005 as the Field to define (or, if you haven’t yet added it to the data dictionary, click the New… button and define a Date field named DOH2005).

4. Type in a Default value or expression of “DOH #max 1/1/2005”.

5. Click Save As New.

Alternatively, you may create DOH2005 in the database by using Define Field by Expression on the Database menu.

The following examples illustrate how accrued benefits are determined for three sample participants: one with more service at 1/1/2005 than the 35 year cap, one with less service at 1/1/2005 than the 35 year cap and one hired after 1/1/2005.

Example #1: Participant with more than 35 years of service at 1/1/2005:

Year	Service from hire	BASE25	Service from 1/1/2005	ADDL5	Total
1998	34	850	0	0	850
1999	35	875	0	0	875
2000	36	875	0	0	875
2001	37	875	0	0	875
2002	38	875	0	0	875
2003	39	875	0	0	875
2004	40	875	0	0	875
2005	41	875	0	0	875
2006	42	875	1	5	880
2007	43	875	2	10	885
2008	44	875	3	15	890
2009	45	875	4	20	895
2010	46	875	5	25	900

 

Example #2: Participant with less than 35 years of service at 1/1/2005:

Year	Service from hire	BASE25	Service from 1/1/2005	ADDL5	Total
2004	2	50	0	0	50
2005	3	75	0	0	75
2006	4	100	1	5	105
2007	5	125	2	10	135
2008	6	150	3	15	165
2009	7	175	4	20	195
2010	8	200	5	25	225
2011	9	225	6	30	255
2012	10	250	7	35	285
2013	11	275	8	40	315
2014	12	300	9	45	345
2015	13	325	10	50	375
2016	14	350	11	55	405
2017	15	375	12	60	435
2018	16	400	13	65	465
2019	17	425	14	70	495
2020	18	450	15	75	525
2021	19	475	16	80	555
2022	20	500	17	85	585
2023	21	525	18	90	615
2024	22	550	19	95	645
2025	23	575	20	100	675
2026	24	600	21	105	705
2027	25	625	22	110	735
2028	26	650	23	115	765
2029	27	675	24	120	795
2030	28	700	25	125	825
2031	29	725	26	130	855
2032	30	750	27	135	885
2033	31	775	28	140	915
2034	32	800	29	145	945
2035	33	825	30	150	975
2036	34	850	31	155	1,005
2037	35	875	32	160	1,035
2038	36	875	33	165	1,040
2039	37	875	34	170	1,045
2040	38	875	35	175	1,050
2045	39	875	36	175	1,050
2046	40	875	37	175	1,050

 

Example #3: Participant hired after 1/1/2005:

Year	Service from hire	BASE25	Service from 1/1/2005	ADDL5	Total
2006	0	0	0	0	0
2007	1	25	1	5	30
2008	2	50	2	10	60
2009	3	75	3	15	90
2010	4	100	4	20	120
2011	5	125	5	25	150
2012	6	150	6	30	180
2013	7	175	7	35	210
2014	8	200	8	40	240
2015	9	225	9	45	270
2016	10	250	10	50	300
2017	11	275	11	55	330
2018	12	300	12	60	360
2019	13	325	13	65	390
2020	14	350	14	70	420
2021	15	375	15	75	450
2022	16	400	16	80	480
2023	17	425	17	85	510
2024	18	450	18	90	540
2025	19	475	19	95	570
2026	20	500	20	100	600
2027	21	525	21	105	630
2028	22	550	22	110	660
2029	23	575	23	115	690
2030	24	600	24	120	720
2031	25	625	25	125	750
2032	26	650	26	130	780
2033	27	675	27	135	810
2034	28	700	28	140	840
2035	29	725	29	145	870
2036	30	750	30	150	900
2037	31	775	31	155	930
2038	32	800	32	160	960
2039	33	825	33	165	990
2040	34	850	34	170	1,020
2041	35	875	35	175	1,050
2042	36	875	36	175	1,050
2043	37	875	37	175	1,050
2044	38	875	38	175	1,050