Understand the Set Rate Distribution Process

Owned by Nancy Cohn (Deactivated)
Last updated: Mar 29, 2024
5 min read

You submit the CALC_SETRATE_DIST event through the Post Set Rate Distributions panel to calculate a daily set rate and post the distribution amount to the ledger. The following steps describe how Eagle's processing works when it calculates set rate distributions. 

Step 1. Resolve Entity Reference Data

The procedure first needs to resolve all entity and date information to use within the process. It first checks to ensure the fund is set up with a Set Rate distribution method. If not, it does not proceed. If yes, it also retrieves the base class here.

Step 2. Determine Earn Thru Dates.

The procedure queries the earn thru rule information to determine how many earn thru dates to run the procedure against for a given accounting date. This is required for holiday/weekend processing.

Step 3. Distribution versus Non-Distribution Date

For each date from Step 2, the system makes a check to the distribution schedule setup to determine if the date being passed is a non-distribution date.

  • If the date falls within a non-distribution day schedule, but is not the end date of that distribution schedule, then the procedure quits. The procedure does not need to post anything on non-distribution days not equal to the end date.

  • If the date falls within a non-distribution day schedule and is the end date of that schedule, then the Set Rate procedure calls the Expense Absorption procedure to calculate the expense absorption value to absorb in the next distribution period. For details, see Understand the Expense Absorption Process.

Step 4. Calculate Base Class Daily Distribution

The system calculates the distribution amount for the base class by taking the stored daily distribution rate (created through the Create Set Rate Distribution panel and multiplies it by the distribution shares (outstanding or settled based off the entity-level election) for the earn thru dates found by Step 2.

Earn Thru Example. If the earn thru date is not a business date, the procedure stales the distribution shares used in the calculation and uses the prior business day’s shares.

Earn Thru Date

Daily Accounting Date

Business Day

Earn Thru Date

Daily Accounting Date

Business Day

1/7/11 (Friday)

1/7/11

Yes

1/8/11 (Saturday)

1/7/11

No

1/9/11 (Sunday)

1/7/11

No

In this example, distributions trigger on Friday 1/7/11 and the earn thru rule setup processes 1/7/11, 1/8/11, and 1/9/11(for weekend) on 1/7/11. Only 1/7/11 is a business day. To determine the distribution shares for 1/8/11 and 1/9/11, the system uses the 1/7/11 accounting date shares.

Last Day of Distribution Period Exception. If you are on the last day of the distribution period, then the procedure checks to ensure that the base class daily distribution rates for the period sum to the total rate distribution for the period. If there is a difference (possibly due to rounding) then the system adjusts the final day rate by the difference.

Step 5. Class Level Expenses

The system retrieves the class-level expense deltas from the expense logs. It excludes the Total Fund expenses from the calculation of the expense differential. Moreover, it includes all class-level expenses as well as any class-level reimbursements or expense reclassifications.

Step 6. Class Specific Expense Per Share

After the system calculates a Total Class Level Expense Delta for each class, as described in Step 5, the procedure then calculates the Class Specific Expense Per Share by taking the Total Class Level Expense Delta (Step 5) and dividing by the Distribution Shares (Step 4) for each share class.

Total Class Level Expense Delta / Distribution Shares = Class Specific Expense Per Share

Step 7. Class Specific Expense Differentials

The system determines the Class Specific Expense Differentials for all non-base classes by taking the base class specific expense per share minus each share class’s specific expense per share (Step 6).

Base Class Specific Expense per Share – Non-base Class Specific Expense per Share = Class Specific Expense Differential

Step 8. Expense Absorption Check

The system then checks the expense absorption table to see if the accounting date submitted falls within an absorption date range. For more information, see Understand the Expense Absorption Process. If so, the system adds the daily absorption value to the class specific expense differential.

Class Specific Expense Differential + Expense Absorption Per Day = Total Class Expense Differential

Step 9. Daily Distribution Rate and Amount

The procedure then adds the total class differential (Step 8) to the base class distribution rate for each effective date to get each non-base class’s daily distribution rate.

For each class:

ROUND((Base Class Daily Distribution Rate + Total Class Expense Differential), in_precision) = Non-Base Class Daily Distribution Rate

For each class:

Non-Base Class Daily Distribution Rate * Distribution Share = Distribution Amount

Step 10. Negative Rate Absorption Process

There are instances where a non-base class’s set daily distribution rate calculation is a negative value, resulting in a negative g/l posting. If this occurs, the procedure does the following

For all other classes (including base class), where rate is a positive value, calculate the weighted shares allocation percentage.

(1) Take each positive rate share class’s distribution shares and divide it by the summed distribution share amount (above) to calculate the weighted shares allocation percentage:

Class’s Distribution Shares / sum(distribution shares) = Weighted Shares Allocation Percentage

(2.) The system takes each share class’s weighted share allocation percentage and multiplies it by the calculated negative income amount of the negative rate class to get the allocated negative income value.

For each positive rate share class:

Negative Rate Class’s distribution amount * positive class’s weighted shares allocation % = Reallocated Negative Income

(3.) The system calculates the per share amount of the allocated negative income for each class by dividing the dollar amount of the allocated negative income by the distribution shares for each share class.

For each positive rate share class:

Reallocated Negative Income / Class’s Distribution Shares = Reallocated Negative Income per Share

(4.) Finally, the procedure calculates the new daily distribution rate of the remaining share classes with the positive distribution rate by adding the allocated per share negative income to the daily distribution rate previously calculated for the share class.

For each positive rate share class:

Class’s Distribution Rate + Reallocated Negative Income per Share = Adjusted Daily Distribution Rate

If any of the positive classes result in a negative distribution rate after the allocations, the procedure loops back and reapplies the negative allocation steps from that share class to other remaining share classes with a positive income/distribution. This process needs to continue until all share classes have a positive (or zero) distribution rate. 

This procedure also handles the occurrence of multiple share classes with negative rates. In these cases it loops back and processes all share classes with a negative rate in no specific order.

Step 11. Ledger Postings

The general ledger posting is the distribution amount calculated on Step 9. The G/L posting is dependent on the tax exempt setting. (You set the Taxable Indicator option value within the Create Set Rate Distribution panel.)

General Ledger Postings

Taxable (tax_indicator = Y):

3004000101 - TAX ABLE INCOME DISTRIBUTION        DR

2006000700 - DISTRIBUTION PAYABLE                                  CR

Tax Exempt (tax_indicator=N):

3004000102 - TAX EXEMPT INCOME DISTRIBUTION   DR

2006000700 - DISTRIBUTION PAYABLE                                  CR

If the tax_indicator = NULL, the system processes the general ledger posting as it currently posts to the 3004000100 Income Distribution account.

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