Setting Up Step Rate Plans
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Step rate certificate processing automates the manual process many credit unions use to keep track of each step certificate type and update rates at the member-level on each step. With step rate certificates, you can set up multiple rate change tables for one certificate type, eliminating the need to open multiple certificate types for each step program. One rate plan can hold up to 9 steps. Step certificates are based on the number of days from the purchase date. You can define the number of days from the purchase date and the corresponding rate that should be implemented for the certificate.
To use step rate processing, the Rate Change field on the Certificate Profiles – Dividends tab must be S-Step Rate Processing to indicate if the certificate type supports step rate processing. The Step Rate Plan drop-down list lets you select a default rate plan. You can set up your step rate plans. A new fly-out menu under Rate Changes – Certificates allows access to the existing certificate rate change functionality and the new Step Rate Plan – List window.
How does it work?
Every night, the Portico back-office cycle reviews the certificate records to determine if the rate change date is the current date. When the dates match, the following will occur:
- The back-office cycle executes a rate change.
- Interest is calculated at the old rate and stored in the Unpaid Interest Rate field on the Certificates - Interest tab.
- The current date is moved to the Interest Calculated to Date Rate field on the Certificates - Interest tab.
- The back-office cycle reviews the certificate rate change table.
- The new rate is moved to the Rate field on the Certificates - Interest tab.
Example:
| Step | Days from Purchase Date |
Rate |
|---|---|---|
| 1 | 1.00 | |
| 2 | 45 | 1.10 |
| 3 | 60 | 1.30 |
| 4 | 90 | 1.40 |
| 5 | 120 | 1.50 |
| 6 | 150 | 1.60 |
| 7 | 180 | 1.70 |
| 8 | 210 | 1.80 |
| 9 | 240 | 1.90 |
Once the step rate plan is selected for the new certificate purchase, Portico will use the rate in the 1st step. Using our example, the rate would be 1.00.
The Days from Purchase Date column are through dates. To calculate the next step change date, Portico will use the following calculation: (purchase date + days from purchase date – 1).
On the night of the next step change date, dividends will be calculated at the 1.00 rate and paid (depending on dividend frequency) or added to the interest calculated but not paid bucket. The calculate-to-date is changed to the following day (the first date of the new rate) and the rate is changed to 1.10 (the rate for the second step).
This process will continue for each step until Portico reaches the last step. For the last step, the calculate-to-date is changed to 999999 and the rate is changed to 1.90 (the final rate in the step rate plan).