Imputing Disparity

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I am trying to understand the computation involved in a regular cross-tested plan versus a cross-tested plan that is imputing disparity. Can anyone explain this to me? I can get the computer to do it but I want to understand this additional concept.

Basically I want to know how the EBAR is calculated differently with imputed disparity.

[Tom Poje]

hopefully this will be translatable.

take a look and then ask questions.

the terms C and D rate are what the govt uses

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I am using the ERISA Outline Book as my source of guidance.

1. Is there a Permitted Disparity Factor table in the book for step 2?

2. I don't quite understand step 4 or step 6. I think I may use different terms for these but I am not sure. Can you explain these a little further?

Other than that, I think I understand the rest of the worksheet.

[Tom Poje]

Table adjustments are as follows:

SSRA = 67

Disparity

NRA factor

70 1.002

69 0.908

68 0.825

67 0.750

66 0.700

65 0.650

64 0.600

63 0.550

62 0.500

61 0.475

60 0.450

59 0.425

58 0.400

57 0.375

56 0.344

55 0.316

SSRA = 66

Disparity

NRA factor

70 1.101

69 0.998

68 0.907

67 0.824

66 0.750

65 0.700

64 0.650

63 0.600

62 0.550

61 0.500

60 0.475

59 0.450

58 0.425

57 0.400

56 0.375

55 0.344

SSRA = 65

Disparity

NRA factor

70 1.209

69 1.096

68 0.996

67 0.905

66 0.824

65 0.750

64 0.700

63 0.650

62 0.600

61 0.550

60 0.500

59 0.475

58 0.450

57 0.425

56 0.400

55 0.375

step 4 is simply applying interest to the contribution over the number of years left to retirement. or, if you put the money in the bank at 8.5% interest, how much would it grow to by retirement.

step 6 is simply the APR (Annuity Purchase Rate)

for example 1983 IAF at age 65, 8.5% interest = 115.39

in other words, if you will, I have figured out a 'lump sum' on my contribution, now how much will I get monthly based on that amount and the mortality table chosen.

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Okay, I am a little dense today. For step 4, if I have an HCE with comp of $132,000, covered comp of $64,248, 11 years to T.A.,and a contribution of $41000 (2003 figures), how do I come up with the accum factor of 2.453?

[Tom Poje]

1.085 ^ 11 = 2.453

(please note that the spreadsheet was an explanation of Relius printout, so any terms (e.g. accum factor) match their print out. you might be calling them something else.

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Is step 16 just filling in the number from step 15 or setp 12?

[Tom Poje]

man, it has been too long since I have done this, and I can see the notes aren't great (I deleted all references to Quantech/Relius) on this spreadsheet)

Steps 1 - 9 calculates the E-Bar (without disparity) for the profit sharing only.

step 12 or step 15 is the E-Bar w/ disparity (profit sharing only)

I stink therefore I exist...

oh wait, I think

step 16 - 18 was a verification of the data on the report.

step 16 would have been the E-Bar from the printed report (all contributions, no disparity)

step 17 backed out the profit sharing E-Bar (no disparity) This would be the E-Bar on deferral and match only

step 18 adds back the E-Bar (profit sharing only w disparity)

I am not sure why I did that. I must have been checking something.

sorry, my brain just doesn't function real well at times!