Projected Unit Credit (PUC) projects the decrement-age benefit base and attributes it through the valuation date. Normal cost reflects the attributed PUC benefit allocated to the next year.
PUC attribution determines the portion of each projected benefit assigned through the valuation date. Each method develops the attributed benefit used in liability calculations and the one-year increase used in normal cost.
Accrual Proration – Formula
Multiplies the benefit projected to each decrement date by the valuation-date Base Formula result divided by its result at the decrement date, capped at 1. In the formula, A is the result of the selected Base Formula. If the valuation-date result is zero, DB Precision uses the decrement-date result so the projected benefit is fully attributed. This ratio affects the attributed benefit; the one-year increase is the change in the Benefit Formula result between the valuation date and next valuation anniversary.
Accrual Proration – Components
Applies the valuation-date Accrual Rate for each Formula Derived Item to its Benefit Base projected to the decrement date. The projected Benefit Base remains fixed while the Accrual Rate advances to the next valuation anniversary for the one-year increase.
Linear using Service Definition
Multiplies the benefit projected to each decrement date by the valuation-date service divided by service at the decrement date, capped at 1. The one-year increase is the change in the benefit between the valuation date and next valuation anniversary.
- S(b)x, S(b)x+t
- are the selected Service Definition results at the valuation date and decrement age for benefit b.
PUC comparison selections may replace the attributed benefit with the UC benefit or prevent it from falling below the UC benefit. See PUC Attribution Configuration.
- tp(τ)x
- is the probability that a participant aged x remains active for t years under all active decrements.
- q(d)x+t
- is the probability of decrement d at age x+t.
- vt
- is the discount factor from duration t back to the valuation date.
- PF(b)x+t
- is the value of the applicable Benefit Payment Form for benefit b at decrement age x+t.
- Δ BPUC(b)x+t
- is the method-specific one-year benefit increase defined above and used for PUC normal cost.
At-Risk Liability is calculated using assumptions defined by ERISA §303(i) and Internal Revenue Code §430(i). Participants already eligible at the valuation date are assumed to retire immediately during the year following the valuation year. Participants who become eligible within 10 years following the valuation year are assumed to retire on their first eligibility date.