The Contribution Change Threshold allows for automatically changing the assumptions for an illustration when the funding change falls outside of specific limits.
| Note: | The Contribution Change Threshold options only impacts the Batch Gap |
| For example: | An illustration requires a participant to increase their deferrals from their current 4% contribution to 27% contribution. A dramatic increase in the participant's contribution typically will alienate the participant and disengage them from any further conversation. This problem may be overcome by using the Contribution Change Threshold. TRAK can automatically alter the client's assumptions to reduce the significant increase to a more reasonable value. (Similarly if a client is over-funded, the illustration can alter the assumptions so that they can show a minimum increase in deferrals). |
The changes to the scenario can be any of the following items
1.Change reliance on Social Security
Especially relevant for over-funded participants, this will alter the percent of the estimated Social Security the client will receive.
2.Change retirement age
The illustrated retirement age can be altered by the client. For example, for an under-funded client
3.Change percent of income needed in retirement
The illustrated percent of income needed can be altered
Data Input
Modify client scenarios that illustrate construction increases outside of the threshold limits
Determines if the funding threshold option(s) are active.
Threshold Limits
The following values are related to the solution that will be provided to the participant. The Minimum Increase Threshold and Maximum Increase Threshold values are limits relative to the current contribution. The Minimum Value and Maximum Value values are absolute limits and do not take the current contribution into account.
Minimum Increase Threshold
The minimum change in funding before the steps in the "Changes to over funded scenarios" are taken.
| For example: | A value of 1% would require that the illustration at least increase the client's contribution by 1%, i.e. if a client was current contributing 4%, the proposed scenario would have to at least be 5%. |
| Note: | To use the Minimum Increase Threshold a value greater than zero must be entered otherwise over funded clients will not have their data changed. |
Minimum Value
The minimum value that the report will illustrate for the new contribution.
| For example: | A value of 3% would require that the illustration at least increase the client's contribution to 3%. This would only affect solutions that had less than a 3% contribution. |
Maximum Increase Threshold
The maximum change in funding before the steps in the "Changes to under funded scenarios" are taken.
| For example: | A 10% value would require that the illustration be altered if the proposed scenario increased the current contribution by more than 10%. I.E. if a client's contribution was currently 4%, the proposed contribution could not exceed 14% without the under funding changes to be implemented. |
Maximum Value
The maximum contribution value that the solution will illustrate for the participant. A value of zero ("0%") will mean there is no maximum value.
Changes to over funding scenarios and Changes to under funded scenarios
Include Footnote in Report Indicating Changes
If changes are made by TRAK because of the threshold exception, checking this box will include a footnote indicating what changes were made.
If an illustration falls outside of the funding threshold, the data will be changed per the steps shown in the relevant grid. Each step is taken in order. For example, in the following over funded grid:
the scenario will be altered first by reducing the current illustrated retirement age by one year. The scenario will be re-run to check if the minimum funding threshold is met. If it is not, the process is repeated until the client's age is 60. If at age 60, the minimum funding threshold is not met, the second step, and if required, the third step are taken. (Note: that additional steps may be added. For example, after the above three steps, if the scenario still has not met the funding requirements, an additional reduction in the retirement age may be illustrated).
The under funding grid below shows the steps taken when a client's proposed scenario exceed the maximum increase threshold.
| Technical Note: | Altering a client's scenario may result in the scenario falling outside of the other funding threshold limit. If this should occur, the other threshold will not be checked. |
| For example, when a client's retirement age is increased from 65 to 66 because of underfunding, and the change results in the client being outside of the over funded scenario, the over funding threshold is not checked. |
