Understanding Death Coverage History
When plans require employees to pay for their preretirement survivor annuity (PRSA) coverage, employees can waive the coverage. Employees who change their coverage election can end up with a history of covered and not covered periods.
Note: If there is no coverage history, the system assumes that the employee has never had PRSA coverage, that is, the employee waived such coverage at all times. However, the Internal Revenue Code requires plan sponsors to assume that employees are covered by PRSA benefits unless they have elected otherwise. You should, therefore, record coverage as a workflow process that initiates whenever you hire an employee or change an employee's marital status from single to married.
The system builds a history of covered and not covered time segments based on employee elections. Two other elements can impact the coverage history: Both the employee's group affiliation and the definition used for the employee's group can change. When either event occurs, the coverage history begins a new segment.
The system calculates a reduction for each segment; the final reduction is the sum of all the reductions. For example, if you change your plan rules in 2000 and an employee has a 1 percent reduction for the time before 2000 and a .5 percent reduction for the time after, the final reduction is 1.5 percent and the final factor is .985.
Coverage segments don't have fixed lengths. They are determined by dates when the coverage election changes, the plan rules change, or the employee changes group affiliation. Only segments where the employee has elected death coverage become part of the reduction calculation.