In most countries, deductions for savings and retirements receive favorable tax treatment and special rules are applied. You set up these deductions within the Pre-tax or Voluntary Deduction element classifications.
In the UK you can use a pensions template to generate all the elements, balances, and formulas you require to process a range of pension categories, including occupational pension schemes, additional voluntary contributions, stakeholder pension schemes, free standing AVCs, and personal pension plans. There are predefined pension extract definitions to assist you to extract the data you may require to send to third parties.
In the education sector, you can use predefined system extract definitions to create the reports required by the Teachers Pension Agency for teachers in England and Wales. Similarly, in the local government sector, you can use predefined system extract definitions to create files for transfer to Lynx Heywood pension administration systems (Class CPX and AXIS).
You select options on the Pensions page to determine the sort of pension scheme you require, such as whether it is an occupational scheme, how contributions are calculated (percentage or flat rate), and whether there is an employer contribution. When you save the scheme, the system generates the payroll components you require. You can configure these in the professional user interface if required. Once you have linked the elements, you are ready to enroll employees in the scheme.
The payroll formulas perform a number of checks, such as verifying opt out dates, age limits, capping limits, and membership of other pension schemes.
When you set up a pension scheme, you can specify whether to create an arrears balance for the scheme, and whether to take a partial deduction if there are insufficient earnings to take the full amount. You can also specify Iterative Processing, to ensure that tax and court orders are paid before the payroll run attempts to deduct the pension contribution.
You can enter an override pension contribution for an employee for any payroll period, and you can also manually adjust the arrears balance if necessary.
You can use the System Extract feature to retrieve the data you require to a file for transfer to another agency. There are generic predefined extracts that you can configure, as well as specific extracts to retrieve the data required by the Teachers Pensions Agency (for teachers in England and Wales) and for Lynx Heywood pensions administration systems.
In Oracle HRMS, you can set up pension schemes within the following categories:
Retirement Benefit Scheme (RBS)
Retirement Benefit Schemes Additional Voluntary Contribution (RBS AVC)
Personal Retirement Savings Account (PRSA)
Personal Retirement Savings Account Additional Voluntary Contribution (PRSA AVC)
Retirement Annuity Contracts (RAC)
The pension deductions are pre tax and pre Pay Related Social Insurance (PRSI) and are subject to contribution limits expressed as a percentage of pensionable pay. These limits are dependent on an employee's age Oracle also enables reporting the number of employees participating in each scheme and the total amount of employee and/or employer contributions within the P35 Reports.
This section briefly describes each of the categories listed above.
Employees contribute towards a retirement benefit scheme and receive tax benefits. Employees and employers contribute either a percentage or a flat rate amount to this fund.
Employees can contribute additionally to a RBS. These additional contributions must be associated with the RBS scheme the employee contributes towards. These schemes depend on an employee's age. The maximum lump sum amount and pension amount are according to the scheme rules.
Employees can join a Personal Retirement Savings Account and the contributions paid to PRSA benefit from tax relief at an individual's marginal income tax rate. Employees also receive a Pay Related Social Insurance (PRSI) relief. The maximum annual tax-deductible contributions are based on a percentage of the individual's net relevant earnings. Employees and employers contribute either a percentage or a flat rate amount to this fund. The employer contribution is taxable as a benefit in kind. The maximum contribution rate (as a percentage of total pay) on which an employee can receive tax relief depends on an employee's age.
Employees can also make additional voluntary contributions to a PRSA and receive tax benefits. The maximum contribution rate (as a percentage of total pay) on which an employee can receive tax relief depends on an employee's age.
Employees can join the Retirement Annuity Contract by contributing a fixed amount as approved by the Revenue. Employees are eligible for tax benefits on their contributions. The contributions which are over the limits set out in a tax year can be carried forward and allowed, subject to the overall annual limits, in following years. If an employer pays contributions to an RAC, employees are taxed on these as a benefit in kind.
Oracle enables you to set up pension providers, which are external organizations that collect the contributions provided by employees and allocate the money to a particular pension. For each provider, you specify a name, location, and the pension types it offers. Use the Pension page to create a pension provider. The application automatically attaches the Pension Provider organization classification to the pension provider.
In Oracle HRMS, you can set up as many pension types as you require, within the categories described above. For each pension type, you can enter values for contribution rates.
Oracle Payroll automatically creates the elements, input values, balances, formulas, and formula results required to process pension contributions.
Contributions are either a fixed rate or a percentage of pay, depending on the scheme rules. You can override the contributions at the assignment level. Employees and employers can choose to make additional voluntary contributions to the Retirement Benefit Schemes and Pay Related Savings Agreement which are taxable.
Follow these steps if you want to set up pension schemes, enroll employees in the relevant schemes, and process contributions in the payroll run. Use the Pension pages to create pension schemes and types.
UK only: If you are setting up an occupational pension scheme, ensure you have recorded the employer's contracted out number (ECON) in the Tax Details References window for the business group. See: Business Groups: Entering Tax Details, Oracle HRMS Enterprise and Workforce Management Guide
Create a location for each pension provider. See: Setting Up Locations
Enter your pension types. Choose the Pensions option in the Navigator then click on the Pension Types tab.
Enter your pension providers and assign pension types to the providers. Choose the Pensions option in the Navigator then click on the Pension Providers tab.
Important: Use the Pension pages - not the Organization window - to create pension providers, and assign pension types to each provider. The pages provide the required validation.
Generate the payroll objects required for your pension schemes. Choose the Pensions option in the Navigator then click on the Schemes tab.
Link the generated elements. The names of all generated elements begin with the scheme prefix you entered on the Schemes tab.
See: Defining Element Links, Oracle HRMS Compensation and Benefits Management Guide
Review the generated formula(s). Formula names begin with the scheme prefix you entered on the Schemes tab. You can configure the formula(s) and the generated formula(s) result rules, if required.
If you have set up the pension provider as a Payee organization, create a third party organizational payment method, enter it as a valid payment method against your payrolls, and select it as a personal payment method for your employees. In the Personal Payment Method window, you select the pension provider as the Payee for this payment method. See: Entering Payment Methods for an Employee Assignment, Oracle HRMS Workforce Sourcing, Deployment, and Talent Management Guide
If you are using element link criteria to establish eligibility for pension schemes, your setup is complete and you are ready to enroll employees using BEE or the Element Entries window.
UK only: If you are using eligibility profiles to establish eligibility, you must set up a pension plan, and related items, following the usual procedures for Standard and Advanced Benefits.
Ireland only:Before you use your Pension elements and run the Payroll, ensure you specify the balance feeds for the IE Pensionable Pay seeded balance.
You enroll employees in pension schemes by entering the appropriate elements as element entries.
Use the Element Entries window (or Batch Element Entry).
To enroll a person in pension scheme
Set your effective date to the day when the person's enrollment in the scheme should begin.
In the Element Name field, select the element for this pension scheme, <base name> Pension Deduction.
Choose the Entry Values button to open the Entry Values window.
Enter a percentage or amount. For a percentage-based scheme or a flat amount scheme, if you do not enter any value, then the application considers the value entered while creating the pension type.
Save your work.
To enable employer contributions to a scheme:
Set your effective date to the day when the person's enrollment in the scheme should begin.
In the Element Name field, select the employer contribution element for this pension scheme, <base name> ER Contribution.
Enter a percentage or a flat amount depending on the type of contribution. For a percentage-based scheme or a flat amount scheme, if you do not enter any value, then the application considers the value entered while creating the pension type.
Save your work.
To enable employee contributions:
Set your effective date to the day when the person's enrollment in the scheme should begin.
In the Element Name field, select the employee's taxable contribution element, <base name> EE Taxable Contribution.
Save your work.