; FAQ 901: DB/DC Combo - NAR & MVAR calculation with J&S normalization

 FAQ 901: DB/DC Combo - NAR & MVAR calculation with J&S normalization Problem: How are the normal accrual and most valuable accrual rates calculated when the Qualified J&S benefit at current age option is chosen? Solution: In general, a participant's accrual is multiplied by their normal form factor and Most Val Form Factor, and the result is divided by comp and multiplied by 100 to get the MVAR.Following is a simple example:Plan normal form of benefit = Life annuity100% of males and females are assumed married (Funding \ BENFORM screen)REA Percent to Survivor = 50% (Benefits \ DEATHBEN screen)Testing method = Annual AccrualActuarial equivalence (AEQ) = 5%, GA2002U post onlyTesting assumptions (T) = 8.5%, RP21C U post onlyTesting age (TA) = 62Participant:Current age (AA) = 54Participant assumed married to spouse of same age since no spouse DOB in participant recordMonthly Testing compensation = 10,000DB Benefit accrual during the year = 1,000DC Employer Contribution = 8,400Factors:Actuarial Equivalence (AEQ):LA 62 = 152.1573J&S 50% 54/54 = 187.8445Testing (T):LA 62 = 119.3170J&S 50% 54/54 = 134.7789Normal form = life annuity so Normal Form Factor = 1.00000Most Valuable Form Factor (MVFF):AEQ-LA62 / T-LA62 x T-J&S54 / AEQ-J&S54 x [(1 + testing interest/ (1 + AEQ interest)] ^ (TA-AA) =152.1573 / 119.3170 x 134.7789 / 187.8445 x (1.085/1.05)^8= 1.18943DB Normal Accrual Rate (NAR):Accrual / Monthly Comp x 1001,000 / 10,000 x 100 = 10.00Most Valuable Accrual Rate (MVAR):Accrual x MVFF / Monthly Comp x 1001,000 x 1.18943 / 10,000 x 100 = 11.89DC NAR/MVAR:DC Cont x (1 + Test i)^(TA - AA) / T-LA62 / Monthly Comp x 1008,400 x (1.085)^8 / 119.3170 / 10,000 x 100= 1.35Total NAR:= 10.00 + 1.35 = 11.35Total MVAR:=11.89 + 1.35 = 13.24