German Pensionskassen are pension plans funded by both employer and employee contributions. They have special funding methods and reporting requirements. If the Pensionskasse checkbox is checked in a funding Valuation Assumption set, the following new output items will be calculated, or existing ones modified:

 

Pensionskasse Reserve

​The Pensionskasse reserve will be calculated using the prospective method:

Reserve = BK + SK - PVEEC - PVERC 

where:

BK = the present value of accrued benefits (Pure Unit Credit liability)

SK = the present value of future benefit increases (Present Value of Future Benefits - Pure Unit Credit liability)

PVEEC = the present value of future employee contributions

PVERC = the present value of future employer contributions

All four of these results (Reserve, BK, SK, PVEEC and PVERC) are available as both individual result fields and output variables. In both places, the BK and SK results can be further split by member and spouse portions. All active benefits with “Death” contingency and all benefits with life insurance contingency are added to the spouse portion, regardless of whom they are payable to.

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Risk Capital

The risk capital is a present value measure that represents a worst-case scenario for the plan. It is equal to the greatest of A, B and C, where:

A) For actives: The present value if assumed to become disabled immediately and live to the last age in the mortality table. The disability is assumed to occur exactly on the valuation date, and payments start at that point as well (if there is no deferral period). For retirees: The present value if assumed to live to the last age in the mortality table. 

B) For actives only: The present value if assumed to live to actuarial retirement age, retire at that age and live to the last age in the mortality table. Under Valuation Assumptions > Other Valuation Parameters > Method for calculating risk capital for retirement benefits, users can select one of the following method for calculating Part B:

1) Pure Unit Credit (accrued benefits on the valuation date are used)

2) Present Value of Future Benefits - Present Value of Future Employee and Employer Contributions. 

C) For all members: The present value if assumed to die immediately and spouse lives to last age in the mortality table. The member is assumed to die exactly on the valuation date, and payments to the spouse start at that point as well (if there's no deferral period). ProVal currently ignores Part C for decrementing actives, since it would rarely win over Part A for retirees, and the liability of decrementing actives is expected to be a small portion of the liability in a Pensionskasse run (there are usually no termination rates, just death and disability in experience).    

Parts A and B above ignore spouse benefits.

For actives, benefit eligibility is taken into account when calculating all three parts.

The liability of current survivors is added to Part A.

This maximum is taken by individual based on the total present value across all benefits, not separately for each benefit.

The risk capital is available as both an individual result field and an output variable. Part A, B and C detail is only available in sample lives.

PSVaG Liability

The PSVaG liability for a Pensionskasse is calculated as:

(RETBEN_EE + RETBEN_ER * VST) * TBLFACT

where:

RETBEN_EE = Benefit attributable to employee contributions projected to PSVaG retirement age

RETBEN_ER = Benefit attributable to employer contributions projected to PSVaG retirement age

TBLFACT = Age-related present value factor from a statutory table looked up at the PSVaG retirement age. The underlying statutory table is hard-coded in ProVal and doesn't have to be specified by the user. For lump sum benefits, the factor is set to 0.1 regardless of age. For actives and terminated vested, temporary annuities are ignored if the temporary period is less than 12 years. For retirees, the factor from the table is multiplied by 2% * remaining temporary period in years. For actives, ProVal also ignores optional payment forms, election probabilities, post-termination benefits and life insurance benefits. Spouse benefits are ignored for both actives and retirees. 

PSVaG retirement age = For actives and terminated vested, the earlier of the the plan normal retirement age and the State Pension normal retirement age. For retirees, the current age on the valuation date. For both, attained age basis is used. 

Please note that ProVal doesn't distinguish between benefits attributable to employer and employee benefits. We recommend placing the benefits attributable to employee contributions in a Deferred Compensation promise, where immediate vesting is assumed. All benefits attributable to employer contributions should be placed in a Pension promise, where ProVal will automatically apply legal vesting (ignoring any contractual vesting specified at Benefit Component level).

When calculating the PSVaG liability for active members, ProVal considers all retirement contingency benefits and ignores all other benefits. For both active and retired members, ProVal will honor the "Include in PSVaG liability" checkbox, which is available in both active and inactive Benefit Definitions.  

No interest or mortality discounting applied from the PSVaG retirement age back to the valuation date.

All parameters under Valuation Assumptions > PSVaG Liability are available in a Pensionskasse run and will be applied as normal.

 

Age Method

All liability measures above will be calculated using the Age Method for calculating the mid-year benefit amounts for risk benefits (death-in-serve and disability). The Age Method is identical to the Valuation Date method, except that there’s no averaging of the benefits and beginning of year benefit amounts and eligibilities are used.