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 annuity 100% of males and females are assumed married (Funding \ BENFORM screen) REA Percent to Survivor = 50% (Benefits \ DEATHBEN screen) Testing method = Annual Accrual Actuarial equivalence (AEQ) = 5%, GA2002U post only Testing assumptions (T) = 8.5%, UP-84 post only Testing age (TA) = 62 Participant: Current age (AA) = 54 Participant assumed married to spouse of same age since no spouse DOB in participant record Monthly Testing compensation = 10,000 DB Benefit accrual during the year = 1,000 DC Employer Contribution = 8,400 Factors: Actuarial Equivalence (AEQ): LA 62 = 152.1573 J&S 50% 54/54 = 187.8445 Testing (T): LA 62 = 101.8294 J&S 50% 54/54 = 123.7670 Normal form = Life Annuity and Testing Age = DB Retirement Age so Normal Form Factor = 1.00000 Most 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 / 101.8294 x 123.7670 / 187.8445 x (1.085/1.05)^8 = 1.2798 DB Normal Accrual Rate (NAR): Accrual / Monthly Comp x 100 1,000 / 10,000 x 100 = 10.00 Most Valuable Accrual Rate (MVAR): Accrual x MVFF / Monthly Comp x 100 1,000 x 1.2798 / 10,000 x 100 = 12.80 DC NAR and MVAR: DC Cont x (1 + Test i)^(TA - AA) / T-LA62 / Monthly Comp x 100 8,400 x (1.085)^8 / 101.8294 / 10,000 x 100 = 1.58 Total NAR: = 10.00 + 1.58 = 11.58 Total MVAR: =12.80 + 1.58 = 14.38