Creating the Benefit Formula Definition
To define the benefit formula, use the Benefit Formula (BENEFIT_FORMULA) component.
When defining a benefit formula, you must explicitly state what the form of payment is—for example, a single life annuity. Then you must create the mathematical equation that defines the benefit formula. This formula yields the amount for the normal form of payment.
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Page Name |
Definition Name |
Usage |
|---|---|---|
|
PA_FORMULA_PNL |
Explicitly define the normal form associated with a particular formula. |
|
|
PA_CUSTOM_PNL |
Create the mathematical formula that defines the benefit. |
Use the Normal Form of Payment page (PA_FORMULA_PNL) to explicitly define the normal form associated with a particular formula. The normal form data is used as a basis for converting to optional forms.
Navigation:
This example illustrates the fields and controls on the Normal Form of Payment page.
Field or Control |
Description |
|---|---|
Payment Frequency |
Select from: Lump Sum (Single), Annual (1), Semi-Annual (2), Quarterly (4), Monthly (12), Semi-Monthly (24), or Bi-Weekly (26). |
Automatic Benefit for Survivor |
Certain plans, most commonly public plans, offer an automatic benefit for surviving spouses. For example, Plan A specifies an automatic 25 percent benefit. The normal form of Fred's benefit is 1000 USD per month as a single life annuity, but even if he selects a single life annuity, his wife Norma is entitled to 250 USD per month after Fred dies. Any actuarial reductions for other benefit forms, such as joint and survivor, level income option, and certain and continuous, only apply to the remaining 750 USD of his benefit. So if Fred chooses a 50 percent joint and survivor form, the 750 USD is actuarially reduced, say to 700 USD, and Fred's benefit is 950 USD. After Fred dies, his joint and survivor beneficiary receives 350 USD per month. This beneficiary could be Norma, but could also be a child, a trust, or another person. If he does name Norma as his beneficiary, she gets the 350 USD in addition to the automatic 250 USD, for a total benefit of 600 USD per month. When a plan offers this benefit, specify the automatic continuation percentage here. The benefit is only offered if the employee has a spouse and if spouse eligibility conditions specified in the plan aliases page are met. |
Single Participant and Married Participant
Field or Control |
Description |
|---|---|
Form Code |
Regardless of whether there is an automatic continuation, enter information about the normal payment form for both a single participant and a married participant. Select from Certain Only Installment, Joint and Survivor Annuity, Life Annuity, Level Income Option, Last to Survive Annuity, Lump Sum, Pop Up Annuity, or Reversionary Annuity. You do not normally select a form with survivor benefits (for example, a joint and survivor annuity) as the normal form for single participants. Note: Do not select Spouse J&S Demonstration, which is used for optional forms pages only. Use Joint and Survivor Annuity. |
Years Certain |
Enter the guaranteed number of years to set up a term certain or a certain and continuous form. |
Percentage Continued |
If you chose a payment form that offers payments to a survivor (for example, Joint and Survivor or Last to Survive), use this field to indicate what percent of the initial payment the survivor will continue to receive after the death of the joint annuitant. |
Use the Benefit Formula page (PA_CUSTOM_PNL) to create the mathematical formula that defines the benefit.
You create the mathematical formula that defines your benefit by creating a custom statement. The Benefit Formula page is therefore identical to the Custom Statement page.
This topic provides information specific to benefit formula custom statements. For general information about custom statements, see Using the Custom Statement Page.
Navigation:
This example illustrates the fields and controls on the Benefit Formula page.
Field or Control |
Description |
|---|---|
Statement Type |
When you access this page through Define, Benefit Formula, this will always be B - Benefit Calculation. |
Operand1 and Operand2 |
Enter your benefit components in the Operand1 and Operand2 fields. |
Op1 (operator 1) and Op2 (operator 2) |
Enter the mathematical operations or the Boolean operators that join them in the Op1 and Op2 fields. |
Note: Be sure your formula corresponds to the payment frequency you entered on the Normal Form of Payment page. For example, if your annual benefit is 2 percent x average earnings x service, and you entered a payment frequency of monthly, you must include a "divided by twelve" clause in the formula.
You may want to create temporary variables within your benefit formula. For example, you could create two variables, TEMP01 and TEMP02, that you could then compare to find the actual benefit.
Temporary variables are very useful in complex statements, as they enable you to isolate distinct portions of the calculation and then bring them together later. For example, the following statement establishes up front that TEMP01 is average earnings up to covered compensation and TEMP03 is average earnings over covered compensation. Once the temporary variables are set, the formula can reference them to determine a benefit of 2 percent of earnings up to covered compensation plus 3 percent of earnings over covered compensation multiplied by service and by the vesting factor.
|
Key |
Operand1 |
Op1 |
Operand2 |
Op2 |
Operand3 |
Type |
|---|---|---|---|---|---|---|
|
MIN |
FAE |
|
COVER_COMP |
= |
TEMP01 |
Function |
|
|
FAE |
- |
COVER_COMP |
= |
TEMP02 |
Operation |
|
MAX |
TEMP02 |
|
0 |
= |
TEMP03 |
Function |
|
|
.02 |
X |
TEMP01 |
|
|
Operation |
|
|
.03 |
X |
TEMP03 |
x |
|
Operation |
|
|
SERVICE |
X |
VESTING |
= |
BENEFIT |
Operation |