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Calculating Normal Cost -- Which Segment Rate to Use?
BenefitsLink Message Boards Link to more items from this source
Sept. 30, 2021

"I'm wanting to make sure we are using the correct segment rate for the calculation of the Normal Cost. The calculation should be:

Contribution Credit <multiplied by> the Assumed Interest Rate (to the power of the number of years until retirement)

<divided by>

Segment Rate (to the power of the number of years until retirement)

For the segment rate being used, it should be:

  • First segment rate: 0-5 years from retirement
  • Second segment rate: 6-20 years from retirement
  • Third segment rate: More than 20 years from retirement

Thanks in advance for confirming!"

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