; FAQ 937: Cash Balance - Assumed Future Interest Rate field

 FAQ 937: Cash Balance - Assumed Future Interest Rate field Problem: How does the Cash Balance Assumed Future Interest Rate affect the calculation of benefits? Solution: The field Assumed Future Interest Rate allows users to project the future accumulation in cash balance accounts at a different rate than the Current Interest Rate field.In order for calculations to work properly a value MUST be entered in this field. Therefore, if you don't plan to assume a different rate than the Current Interest Rate value, enter the Current Interest Rate value in the Assumed Future Interest Rate field.The following examples show how the calculation of the accrued annuity benefits is determined in a beginning of year and an end of year valuation.Example 1 - Begin of Year ValuationValuation Date - 1/1/2021Cash Balance Assumptions - 2.80% / RP21C U, Conversion factor at 62 - 202.663Current Interest Rate - 2.80%Assumed Future Interest Rate - 3.50%Disregard Prior Accrued - YesAttained Age on valuation date - 56Future Years of Interest Credit - 6Retirement Age - 62Participant information:Prior Balance - \$11,080.39Prior Contribution - \$944.00Earnings - \$310.25Total - \$12,334.64 (11,080.39 + 944.00 + 310.25)BOY Accrued Benefit: 12,334.64 x 1.0280 x 1.0350 ^ 5 / 202.663 = \$74.31For a BOY valuation, the first year of the projection period would be credited at the Current Interest rate since that rate is known for the plan yearExpected contribution - \$944.002021 Expected Benefit Accrual: 944.00 x 1.0350 ^ 5 / 202.633 = \$5.53Total EOY benefit: \$74.31 + \$5.53 = \$79.84Example 2 - End of Year ValuationValuation Date - 12/31/2020'Use BOY accrued benefit for funding target' is set to 'No' (Found on FUNDMETH screen)Cash Balance Assumptions - 5.50%/RP20C U, Conversion factor at 62 - 153.832Current Interest Rate - 2.88%Assumed Future Interest Rate - 4.50%Disregard Prior Accrued - YesAttained Age on valuation date - 55Future Years of Interest Credit - 7Retirement Age - 62Participant information:Prior Accrued Benefit - \$34.36Prior Balance - \$3,720.56 Expected Contribution - \$1,200.00Earnings - \$107.15Total - \$5,027.71 (3,720.56 + 107.15 + 1,200.00)EOY Accrued Benefit - 5,027.71 x 1.045 ^ 7 / 153.832 = \$44.48Accrual for 2020 (EOY Accrued Benefit - Prior Accrued Benefit) = \$44.48 - \$34.36 = \$10.12