COLA assumptions determine how benefit payments increase after commencement. The applicable increase can come from Sponsor Assumptions or a benefit-item override and enters the Benefit Payment Form as a cumulative increase factor.
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.
Override Assumed COLA Parameters allows one benefit item to use a different increase pattern from the Sponsor COLA. The selected Annuity Factor supplies only that item’s COLA assumptions; it is separate from the Annuity Factor selected for each form of benefit payment.
Override Assumed COLA Parameters — Replaces the Sponsor COLA for this benefit item.
Annuity Factor — Supplies the item’s increase rate, cap, deferral or start age, frequency, and simple or compound treatment from the factor’s Advanced screen under Cost of Living Adjustment.