Establishing Actuarial Assumption Sets

To set up actuarial assumption sets, use the Actuarial Assumptions (ACTUARIAL_FACTORS) and Mortality Rates (MORTALITY_RATES) components.

Page Name

Definition Name

Usage

Mortality Basis Page

PA_FACTORS_MORT

Set up the mortality basis table to use and any adjustments you make.

Interest Basis Page

PA_FACTORS_INT

Set up an interest rate assumption.

Payment Information Page

PA_FACTORS_PAYMT

Set up the payment timing assumptions.

Mortality Rates Page

PA_MORT_RATES

Set up the assumed death rates by age.

Use the Mortality Basis page (PA_FACTORS_MORT) to set up the mortality basis table to use and any adjustments you make.

Mortality tables include assumptions about annuitants' life expectancies. You set up the mortality tables before you establish the assumption sets.

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Set Up HCM > Product Related > Pension > Calculation Rules > Actuarial Assumptions > Mortality Basis

Image: Mortality Basis page

This example illustrates the fields and controls on the Mortality Basis page.

Mortality Basis page

Employee Mortality Basis and Beneficiary Mortality Basis

An annuity provides an ongoing benefit for the life of a participant. Some payment forms also provide a continuing annuity for a beneficiary. Your actuarial assumption set must therefore have both an employee mortality basis and a beneficiary mortality basis. The parameter sets are identical, but they are applied to different individuals.

Field or Control

Definition
Unisex or Sex Distinct

Select Sex Distinct to use one table, and select the table name in the Table 1 / Male Tablefield.

Select Unisex to use a blend of male and female mortality tables. Then select the table names in the Table 1 / Male Table and Table 2 / Female Tablefields. In the % of Table 1 Rate field, enter a percentage that indicates the weight to assign to Table 1 in determining the final rate. For example, if you enter 75, the system computes the blended rate by adding 75 percent of the Table 1 rate and 25 percent of the Table 2 rate.

Some tables—for example, the GAR94 and the GATT_GAM83 tables, which are supplied with the system—already include blended rates.

Note: You only use sex distinct tables for reproducing historical calculations. It is currently illegal to use sex distinct mortality tables.
Age Offset

Select this option to use the mortality rate for an age which is a specified number of years older or younger than the actual age of the participant or beneficiary. Enter the number of years to adjust by, and select either Back or Forward to indicate whether the adjustment is to a younger or older age.
Age Difference Duration

This options appears only in the Beneficiary Mortality Basis group box. Enter a duration that measures the difference between the employee and beneficiary ages. This enables the system to more efficiently access the appropriate mortality information.

Note: You do not need the actual employee and beneficiary ages at this point. You put those in the definitions of the functions that use actuarial assumptions.

Use the Interest Basis page (PA_FACTORS_INT) to set up an interest rate assumption.

An actuarial assumption set must include an interest rate assumption. This enables the calculation to consider the potential gain or loss of interest resulting from an early or late benefit commencement.

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Set Up HCM > Product Related > Pension > Calculation Rules > Actuarial Assumptions > Interest Basis

Image: Interest Basis page

This example illustrates the fields and controls on the Interest Basis page.

Interest Basis page

Interest Basis

Select one of the following options, and enter information in the associated field or fields.

Field or Control

Definition
Use Flat Rate of

Select this option to use a specified interest rate, and enter the assumed interest rate in the adjacent % field.
Use Custom Table Lookup

Select this option to use a Table Lookup to get the interest rate from a standard rate table. In the Table ID field, enter the name of a table lookup alias to reference the table.

Note: PeopleSoft delivers a rate table for 30-year treasury bond rates. If you use this table, you still need to set up a table lookup alias to reference it.
Use PBGC Grading Structure (use Pension Benefit Guaranty Corporation grading structure)

Select this option to use the PBGC grading structure. This grading structure applies interest over a number of years, typically from the event date to the benefit deferral date if, for example, an employee terminates at age 40 but does not receive a benefit until age 65. The PBGC grading structure includes:

  • An immediate interest rate after the deferral date.

  • An interest rate for a defined period prior to the deferred age (for example, the first seven years before the deferral date).

  • An interest rate for a defined period prior to that.

  • An interest rate for all other years back to the event date.

If you use PBGC grading, also enter information in these fields:

  • Table ID: Enter the name of a table lookup alias for a table that provides the "immediate rate." The system then derives the additional rates that make up the graded structure. Normally, you reference the PBGC rate table, although theoretically you can use any rate table.

  • Deferred to Age: Enter the age at which the benefit is assumed to commence. You can enter either a constant age, such as age 65, or an alias, such as the benefit commencement date.

  • Scaled by Percentage: To scale the PBGC rates by a factor, enter an annual scaling percentage. For example, enter 120 to increase the immediate rate and any applicable deferred rates by 20 percent.

    Enter 100 as the default rate.

See PBGC Rates Page.
Use Segment Rates

Select this option to use the Segment Rate table. Segment rates are based on the yields on high quality corporate bonds as determined by the Internal Revenue Service. Different rates apply to different time periods; up to three different interest rates can be used depending on the duration of the liability.

If you use segment rates, you can optionally enter information in these fields:

  • Effective Date Alias: The segment rate table is effective dated. You can enter an effective date alias to determine which effective-dated set of rates to use. If you leave this field blank, the calculation process uses the calculation as-of date to determine which effective-dated set of segment rates to use.

  • Valuation Date Alias: Each effective-dated set of segments rates consists of different sets of rates for different valuation dates. You can enter a valuation date alias to specify the date to use as the valuation date. If you leave this field blank, the calculation process uses the benefit commencement date as the valuation date.

See Maintaining Interest Rate Tables.

Options

Select one or more of the following options, and enter information in the associated field or fields.

Field or Control

Definition
Discount with Interest Only

Select this option to disregard the mortality rates for employees under a certain age and instead use the interest assumptions. Specify the cutoff age in the Prior to Age field.
Include Cost of Living

Select this option if you want the assumption set to take into account an assumed cost of living adjustment (COLA).

In the Adjustment of field, enter the adjustment percentage.

In the Commencing with Age field, enter the age when you assume the adjustment is to occur.

Use the Payment Information page (PA_FACTORS_PAYMT) to set up the payment timing assumptions.

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Set Up HCM > Product Related > Pension > Calculation Rules > Actuarial Assumptions > Payment Information

Image: Payment Information page

This example illustrates the fields and controls on the Payment Information page.

Payment Information page

Payments Per Year

Select the assumed number of payments per year.

Note: Most pension plans make 12 monthly payments.

Payment Timing

Select either Beginning of Period or End of Period to indicate when the period payments occur.

Use the Mortality Rates page (PA_MORT_RATES) to set up the assumed death rates by age. These rates support the mortality assumptions in your actuarial assumption set.

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Set Up HCM > Product Related > Pension > Calculation Rules > Mortality Rates > Mortality Rates

Image: Mortality rates page

This example illustrates the fields and controls on the Mortality rates page.

Mortality rates page

Field or Control

Definition
Effective Date

If the mortality rates for a particular mortality table change, create a new effective-dated row in the table definition.

The following mortality tables are delivered:

  • PPAMORT: Mortality Table for the Pension Protection Act of 2006.

    The IRS will provide a new updated Mortality table annually to account for the improved mortality. PeopleSoft Pension Administration will deliver this table annually to its customers.

  • GA71M: Male GAM71 table

  • GA71F: Female GAM71 table

  • GA83M: Male GAM83 table

  • GA83F: Female GAM83 table

  • GATT_GAM83: The blended table using 50 percent of the GAM83 male mortality rates and 50 percent of GAM83 female mortality rates published by the IRS. As a result of the General Agreements on Tariffs and Trade (GATT), this table is used when actuarially increasing or reducing 415 limits and for determining the present value of lump sum payments.

    Note: GAR94, the 1994 Group Annuity Reserving Table, described below, has replaced the GATT_GAM83 table.

  • GAR94: The blended table using 50 percent of the male mortality rates and 50 percent of the female mortality rates from the 1994 Group Annuity Reserving Table projected to 2002. This table replaces the GATT_GAM83 table when actuarially increasing or reducing 415 limits and when determining the present value of lump sum payments as a result of IRS Revenue Ruling 2001-62.

  • UP1984: Unisex table.