Configure Negative Fund Values

This feature allows funds to contain negative cash value and negative deposits in the valuation processing for fixed funds. When the Removals from a fund are larger than the fund's value, OIPA represents this deficiency as a negative fund value; and daily interest, expense and costs are added as additional deficiencies to this negative fund value. Various removals continue to reduce the cash value of a single or multiple fixed funds to negative values. In OIPA, the Fixed Fund type ('01') is allowed to contain negative values.

Fund level tracking

The value of a single fund is an accumulation of the fund's multiple money types with each having a positive value. As money is removed, it is removed from the fund's money type code in a code value order. The fund's cash value cannot reach 0 until the value of all the fund's money types become 0. It is at this point that a fixed fund can begin to take on a negative cash value. Continued removals from the fund will further reduce the value of the fund. Payments into the fund increase the fund's value until its value reaches 0. The amount of payment exceeding the negative cash value will establish a positive cash value defined by the assignment's money type as the system had prior to this feature.

Negative fund cash values accumulate interest at the same rate as positive cash values. This is negative interest and further reduces the negative cash value of the fund. Interest rate changes are unaffected by a fund's negative cash value. Money applied to funds with negative cash value increases a fund's cash value and can optionally generate different accounting than when the fund has positive cash value.

A Policy's cash value is the sum of the cash value of all invested funds including funds with negative cash value and can never be negative; minimum Policy cash value is 0. The system segregates the sum of funds with positive cash value and the sum of funds with negative cash value. A Policy Cash Value becomes less than 0 when the total positive fund value is less than the total absolute value of the negative funds.

Example: positive CV = 100, negative CV = -10, Policy CV = 90

Example: positive CV = 40, negative CV = -45, Policy CV = 0

AllowNegativeValues Field

From the Rules Palette Fund Plan list and Product list screens, a user can define a value in the Allow Negative Values at the plan and product levels. The AllowNegativeValues column in the AsPlanFund and AsProductFund tables are updated accordingly. The possible values allowed by this column are Y, N and Null.

  • If "Y" is specified, the fund used by policies of this plan or product are allowed to contain negative cash value.
  • If "N" is specified, the fund used by policies of this plan or product are not allowed to contain any negative cash value. This is the default option.
  • If an empty value "Null" is specified, the default behavior is applied to the fund (i.e. the fund used by policies of this plan or product are not allowed to contain any negative cash value).
Important   This adds a field to Palette's plan copy and also adds additional data to examine in detailed diff reporting.

Funds and Allocations

If a request attempts to withdrawal a fund amount that is greater than the fund's cash value and if the AllowNegativeValues for the fund is set to N or Null, the system displays an 'Insufficient Funds' error message. This is applicable for all removal Assignment types.

Allocations have methods that are used to interpret the data in the allocation. The Pro-rata method calculates a ratio for each fund in the allocation as the absolute Cash Value of each Fund divided by the sum of the absolute Cash Values of all funds in the allocation. LIFO and FIFO methods are unaffected at fund level tracking.

In general, the Pro-rata allocation method calculates ratios for funds with negative and positive cash value as described above. Funds with negative cash value can be removed from the calculation with an Assignment attribute IGNORENEGATIVECASHVALUES="Yes". This attribute is applicable only for allocation method Pro-rata and assignments that naturally use the Pro-rata method.

Assignment Processing

The following assignment types are affected in assignment processing by negative fund values:

  • Apply: The assignment adds money to the policy's fund using a set of allocations. The assignment increases policy value by directly increasing fund value. If the fund's value is negative at the start of the assignment, fund value is increased by the applied amount. If the resulting fund value is positive, it obtains the money type code supplied by the assignment.
  • ApplyByFund: The assignment increases policy value by adding fund deposits or by directly increasing fund value. If the fund's value is negative at the start of the assignment, fund value is increased by the applied amount. If the resulting fund value is positive, it obtains the money type code supplied by the assignment.
  • GrossFullWithdrawal: The assignment generates its own Pro-rata allocation. The assignment reduces policy value by removing the calculated Pro-rata amounts from fund cash values. A fund's value may be reduced to a negative value, if the amount of removal is greater than the fund's positive value at the start of the assignment. If the fund's value is negative at the start of the assignment, the fund's value will continue to decrease.
  • GrossFullWithdrawalWithAllocations: The assignment removes money from the policy in 2 steps.
    • Step 1: Money is removed based on allocations to distribute fund removal. When one or more funds in the allocation reaches a 0 Cash Value before the completion of all removals from those funds, the unmoved amounts are accumulated for Step 2.
    • Step 2: The monies that could not be removed by Step 1 are removed from the remaining Funds Cash Value in a Pro-rata allocation. A fund's value may be reduced to a negative value, if the amount of removal is greater than the fund's positive value at the start of this step. If the fund's value is negative at the start of this step, the fund's value can continue to decrease.
  • RemoveByFund: The assignment generates its allocation based on information that activity math passes to the assignment. It then removes money from fund values as directed by that information. Positive fund value can be completely consumed and possibly reduced to a negative value. If the fund's value is negative at the start of the assignment, the fund's value will continue to decrease.
  • Transfer: The assignment completes two types of money movements, a withdrawal and an application of the withdrawn money. Both steps require an allocation. The withdrawal step cannot reduce a fund's positive case value below 0 nor can it further increase a fund's negative cash value. The application step can affect funds of either positive or negative value.

Activity Results Screen

The Valuation tab in Activity Results screen displays the sub-totals of positive fund values and negative fund values and the total Policy Cash Value.

Value Screen

The <Graphs> element allows a pie chart to represent the Policy's assets along with the positive and negative fund values. The chart displays a section for each fund represented in its size as a percentage of the fund's value compared to the policy's cash value. When the user hovers over the fund, the fund name and the value of the fund are displayed. The center of the doughnut chart displays the Policy Cash Value. When the user hovers over it, the Policy Cash Value with a breakdown of Positive Cash Value and the Negative Cash Value are displayed.

Configuration Dependencies

  • Negative fund values can be applied to the fixed funds only.
  • The fixed fund's cash value is not affected by the logic that determines the interest rate or if there are any changes to the interest rate. A negative interest accumulates a negative cash value and further decreases the value of the fund.
  • The Policy's reported cash value never goes less than zero even when its actual value (sum of all invested funds) is less than 0.
  • A negative cash value can never be a source of money for transfers or non-required withdrawals.
  • Pro-rata formula uses absolute values to determine ratios.