Sponsor COLA assumptions define the default way benefit payments increase after commencement. The resulting cumulative increase factor enters the Benefit Payment Form.
The Sponsor COLA is the default increase assumption for benefit streams valued under the provision. A benefit item can replace it with its own configured Annuity Factor. Tax-Max and PBGC use the Sponsor COLA from the funding assumption provision.
Fixed / Table-based — Uses either one annual increase or the rate from a COLA Table at the applicable payment age.
Start Age — Age after which COLA increases begin. For an active participant, increases begin after the later of decrement age and Start Age; an existing inactive stream uses valuation age in place of decrement age.
Maximum Benefit Ratio — Caps the increased payment as a multiple of the starting benefit. Zero applies no cap.
Compound / Simple — Compound applies each increase to the prior increased payment; Simple applies each increase to the original payment.
Apply COLA to inactive participants — Applies the Sponsor COLA to existing inactive streams unless the benefit item has its own override.
No benefit increases if only beneficiary is alive — Preserves increases already earned but stops additional increases after the stream becomes beneficiary-only.
- In
- is the cumulative COLA increase factor after n applicable increases.
- I*n
- is the cumulative increase factor after applying the Maximum Benefit Ratio.
- c
- is the annual COLA rate.
- n
- is the number of applicable COLA increases since the COLA start point.
- M
- is the Maximum Benefit Ratio.
The resulting cumulative increase factor is incorporated into the applicable Benefit Payment Form.
A COLA Table supplies annual increases that vary by payment age instead of using one fixed rate.
Rates Base — Valuation COLA calculations retrieve the rate by payment age.
Minimum Age / Maximum Age — Defines the table range. A lookup outside the range uses the applicable endpoint rate.
Annual Rates — Annual increase applied at each payment age.