Funding for Early Retirement Window - Revisited

[LIBOR]

Utilizing Rev. Ruling 77-2 and recognizing the impact of the window in the next valuation is a clean approach ; but if you wanted to reflect the window in the current year and if the window opens after the beginning of the year and closes before the end of the year and if you have a choice to perform the valuation either before the window opens or after it closes then I was wondering how practitioners are handling it ? i.e. are there any compelling reason(s) why doing the val. pre-window with appropriate assumptions is preferred over waiting until you know the outcome of the window ? or vice-versa ??

There have been discussions in the past on this and I was just wondering what the current thinking is ?

[david rigby]

I see no "compelling reasons", just practicalities. Perhaps I am misreading your situation; are you suggesting waiting until the window closes in order to have a final value, or are you suggesting the possibility of including the window now with an estimated value? My initial preference is to wait until I know the value of any amendment before I try to amortize it.

But if you are using the Aggregate method, and are comfortable with a good estimate, it might be OK to include it right away.

However, the issue also gets at the definition of your funding method. If you have a census snapshot, then using data collected after that date might violate your method.

[LIBOR]

here's my thinking : suppose I'm getting ready for a 1/1/2004 val. ; a window program is designed late in 2003 and enhanced annuity as well as lump sum options; let's also assume the window opens 3/1/04 and closes 4/1/04; I could do the val before 3/1 with an assumption as to (1) how many opt for the window and (2) of those, how many opt for the lump sum.

Or I could wait until 5/1/04 to do my 1/1/04 valuation at which time the results of the window are known ( i.e who opts for it & what their selections are) and I could set my assumpitons ( i.e. number opting & what options) to actual experience.

I was just wondering if, given the above choices, what practitioners are doing ??

Or are they doing something different ??