Segment Rate Present Value Calculator

 

The opening screen has the following default entries. Whenever you click on  it will go back to this screen.

 

 

Currently, the only available option is Life Only annuities and only rounded ages are accepted.

 

CALCULATION TYPE is “Funding for Lump Sum @ 100%”

 

The default CALCULATION TYPE is “Funding for Lump Sum @ 100%”. This assumes that all the participants will elect lump sum payments at normal retirement.

 

Proposal Yes/No defaults to “No”. Note that for proposals you cannot use transitional funding segment rates.  When you select proposal, it will only display the non-transitional rates. However, you can enter any rates you want using the Override Rates.

 

The PRE-RETIREMENT MORTALITY YES/NO DEFAULTS TO “No”. When used, it does not add back the cost of death benefit for those people who do not survive to retirement. When PRE-RETIREMENT MORTALITY is “YES” you can either use the COMBINED ANNUITANT/NON-ANNUITANT mortality rate or the NON-ANNUITANT MORTALITY RATE.

 

Enter your ACTUARIAL EQUIVALENT ASSUMPTIONS. Currently, no pre-retirement mortality assumption is allowed.

 

“Funding for Lump Sum @ 100%”will ignore the pre-retirement interest assumption. The lump sum value at retirement is calculated using the post retirement mortality and interest assumption. It is then discounted back to attained age using the applicable segment rate.

 

The step by step calculation is as follows:

 

STEP ONE - Calculate the Present Value of the Accrued Benefit using the 2021 Applicable 417(e) Mortality rate and the funding segment rates -  $78,206.66  in the above example.

 

STEP TWO  - Calculate the equivalent lump sum of the accrued benefit at retirement age using the Actuarial Equivalent Post- Retirement mortality & interest. In this example, the Annuity Purchase Rate at 62 based on 5% and 94GAR is $152.16. The lump sum at retirement is $152,160.

 

STEP THREE - Discount the lump sum at retirement to attained age using the applicable segment rate – 5.72 % in this example. 152,160 1.0572^12 = $82,720.52

 

FINAL ANSWER  - THE GREATER OF THE TWO: $82,720.52

If you want to see the commutation functions used in the calculations, check on the show generated tables and

click on .

 

 

CALCULATION TYPE is “Funding for Life Annuity"

 

 

With this calculation type, the section on ACTUARIAL EQUIVALENT ASSUMPTIONS is not applicable and grayed out.  The 2021 Applicable Mortality for Funding is used in conjunction with the current funding segment rates.

 

Notice that the FUNDING FOR LUMP SUM produces a 15% higher cost: $82,720.52 vs. $76,328.70