Administering Pension Payees

This chapter discusses how to:

• Administer terminated employees.

• Administer retiree deaths.

• Administer employee deaths.

• Change payment amounts.

Note. Make sure that your organization's requirements become part of the Pension Administration system by setting up pension activity lists.

See Also

Maintaining Public Tables

Using Activity Lists

Administering Terminated Employees

This section discusses how to:

• Terminate employees.

• Terminate deferred-vested employees.

• Pay terminated vested employees.

Terminating Employees

When an employee terminates, you first determine whether the employee has a vested benefit. Run periodic processing or a calculation to make this determination. If there is no vested benefit, your organization may still have some paperwork to complete (perhaps a notification letter), or you may be done.

If the employee is vested, you have to run a calculation and provide the departing employee with a statement of benefits. This is considered a final calculation, so be sure to run periodic processes through the termination date so that the calculation has the most up-to-date consolidation information available. If there are additional earnings or hours after the termination date, you manually override the consolidated amounts on the Review Consolidation Results (CONS_HOURS_HIST) pages.

After you produce an acceptable final calculation, be sure to protect the calculation used to produce the benefits. Protecting a calculation prevents the system from deleting the calculation or its results during periodic processing. It also prevents anyone from changing the calculation parameters and running the calculation with different assumptions.

After an employee has terminated, the benefit stops accruing and the actual amount of the benefit is then known. This information is important for your plan's annual actuarial valuation. In order to include the known benefit amount in Pension Administration's actuarial valuation extract, set up a payment schedule based on this amount.

Of course, at this point you do not know what optional form of payment the employee will choose, nor do you know when the employee will elect to start receiving payments. The payment schedule should therefore use the normal form of payment (typically, a single life annuity) scheduled to start on the normal benefit commencement date.

To ensure that you do not use this schedule as the basis for real pension payments, set up the schedule with a deferred status. This prevents the system from including payment instructions in the Trustee Extract process.

Scheduling a payment requires that you complete several steps: establishing the payee record, recording an optional form of payment selection, and setting up the actual schedule. These are the same steps that you would perform if the employee were retiring—except that you do not manually update the pension status. Your next periodic processing job automatically sets the status to Terminated Deferred Vested.

The following table summarizes the tasks you perform to terminate an employee:

See Also

Protecting a Calculation

Establishing Pension Payees

Preparing Pension Payments

Recording Communications

Terminating Deferred-Vested Employees

When an employee terminates with a vested benefit, you perform most of the tasks that you perform when an employee retires. You perform these tasks at two different times: at termination and at benefit commencement.

The following table shows the activities required to retire an employee and to terminate a deferred-vested employee:

Paying Terminated Vested Employees

You establish the payee record for a terminated vested employee at the time of the termination, so you do not need to perform this task when the employee is ready to start receiving payments.

You usually run a new calculation for a terminated vested employee. There are at least two reasons to do this: First, depending on when the employee elects to retire, there may be early or late retirement adjustments. Second, if an employee's marital status has changed, the optional forms of payment calculations are affected.

After you run a retirement calculation, you complete the steps for retiring the employee: protect the calculation, select the optional form of payment, and schedule the payment. You can delete the optional form of payment selection and payment schedule that you set up at the time of termination. These are placeholders that were set up so that the actuarial valuation extract could access the benefit information. After you enter the actual payment information, the placeholders are no longer necessary.

Remember to record tax, direct deposit, and deduction information, and to use activity lists to monitor the flow of retirement paperwork.

The following table summarizes the actions you perform when a terminated vested employee retires:

Administering Retiree Deaths

This section provides an overview of retiree death administration and discusses how to:

• Stop payments when a retiree dies.

• Update pension status when a retiree dies.

• Set up beneficiary payments.

Understanding Retiree Death Administration

When a pension payee dies, you need to stop payments and possibly begin beneficiary payments. For contributory plans, you need to check that the retiree recovered all contributions, and that all posttax contributions were recovered as nontaxable benefits.

Stopping Payments When a Retiree Dies

You use the Payee Payment Schedule page to stop payments to a retiree who dies. You do this by changing the Payment Status field value to Stopped.

You need to record tax, direct deposit, and deduction information on the Identify Payment-Related Info page.

You may need to make a partial payment for the month of death, recover overpayments for time since the death, and adjust the payee's balances to reflect any recovered money so that the amount does not appear on the payee's 1099-R. You do this on the Make One-Time Adjustments page.

The following table summarizes the actions you perform to stop a retiree's payments:

See Also

Establishing Pension Payees

Defining a Payee Payment Schedule

Preparing Pension Payments

Updating Pension Status When a Retiree Dies

To manually update the pension status of a participant who dies, access the Identify Pension Status page.

Set the status to either Deceased-With Beneficiary or Deceased-No Benefit/Beneficiary.

If you fail to update the status, the payment process automatically sets the status to Retired-Payment Complete the next time it runs. This affects the Form 5500 Participant Count report, which is based on pension statuses.

See Also

Using Pension Statuses

Maintaining Pension Status Codes

Setting Up Beneficiary Payments

Depending on the optional form of payment selected by a payee, there may be a survivor benefit due to a beneficiary when a retiree dies.

You can find information about this on the Payee Payment Schedule page:

• The payee's payment schedule shows the form of payment.

• A non-zero value in the Percent Continued field indicates that there is a survivor benefit.

• The system-calculated benefits show the beneficiary amount on the original payee's schedule.

If there is a survivor benefit and the beneficiary is still alive, you need to set up the beneficiary as a pension payee and start making survivor payments. You do this on the Create Payee and Payee Pension Status pages.

Note. Even if the beneficiary is also an employee of the company, you need to set up a separate payee record.

You do not have to record an optional form of payment selection because the payment amount is determined by the original retiree's payment form.

You need to set up the beneficiary payment information:

1. Access the Make One-Time Adjustments page.

   1. Enter the benefit plan from the retiree's benefit.

   2. Enter the payment number from the retiree's benefit.

      The system automatically fills in the payment information, using appropriate amounts from the retiree's payment schedule.

2. Access the Payee Payment Schedule page.

   1. Enter a payment status: Active, Deferred, Stopped or Suspended.

   2. Set the payment choice to the appropriate beneficiary payment.

The following table summarizes the actions you perform to set up beneficiary payments:

Administering Employee Deaths

All qualified plans must offer a preretirement survivor annuity (PRSA). Therefore, if an employee dies before retiring, there may be a benefit due to a surviving spouse. Depending on your plan, this may also apply when a terminated vested employee dies.

When an employee dies before retiring, first determine whether there is a benefit payable. To do this, run a calculation with the calculation reason Death. Depending on how you set up your system, the optional forms of payment results for this calculation include a joint and survivor form, where the survivor benefit is the death benefit.

If there is a benefit due, establish the beneficiary's payee record, enter the beneficiary's tax, direct deposit, and deduction information, then schedule the payments.

To use Pension Administration's automatic payment scheduling, you have to go though the same steps that you do when an employee retires: Create a payee record for the employee, select the appropriate optional form of payment, and schedule a payment (tax and direct deposit records are not necessary because there are no actual payments.) You can then schedule the beneficiary's payments, and the system automatically gets the beneficiary amount from the optional forms of payment results.

Note. Use the Payee Manual Schedule page to schedule beneficiary payments manually if there is not already a retiree payment schedule. The Payee Manual Schedule page is discussed in detail in "Preparing Pension Payments."

See Also

Preparing Pension Payments

Changing Payment Amounts

This section provides an overview of reasons for changing payment amounts, lists the page used to define changes in payment amounts, and discusses how to:

• Adjust level income forms of payment.

• Administer pop-up and last to survive options.

• Define retiree COLA (cost of living adjustment) information.

Understanding Reasons for Changing Payment Amounts

Individual pension payments can change for various reasons. A retiree may have elected a form of payment that provides for a different amount under specific circumstances. For example, a level income option provides for a reduced payment when the retiree attains social security retirement age, a pop-up payment provides for an increased benefit if the beneficiary predeceases the retiree, and a last to survive annuity provides for a reduced benefit when the beneficiary predeceases the retiree.

A plan can also grant a cost of living adjustment that increases pension benefits for all pension payees who meet specified criteria.

Use the Calculate COLA and Payee Payment Schedule pages to change payment amounts.

Page Used to Change Payment Amounts

Note. The Payee Payment Schedule page is discussed in detail in "Preparing Pension Payments." This section only discusses the fields on that page that relate to changing payment amounts.

Adjusting Level Income Forms of Payment

If a retiree selects a level income form of payment, you need to decrease payments when the retiree reaches the level income age, normally the social security retirement age (SSRA). Use the Payee Payment Schedule page to adjust the payments.

The level income form of payment has both pre-SSRA and post-SSRA retiree amount options. Because you already know an employee's SSRA, you do not need to wait for the employee to attain that age in order to set up the payments. Instead, you can set up both the pre- and post-SSRA payments when you initially schedule payments. The effective date controls the amount that the retiree receives and ensures that payments automatically decrease at the right time.

To change a retiree's regularly scheduled payment amount, modify the fields described below:

Administering Pop-up and Last to Survive Options

Under the pop-up form of payment, a retiree has a joint and survivor annuity with an extra provision: If the beneficiary predeceases the retiree, the retiree's pension payment pop ups to an equivalent single life annuity amount (normally there is a penalty for the pop-up insurance).

Under the last to survive form of payment, when either the retiree or the beneficiary dies the annuity is reduced to the specified percentage.

The pop-up form of payment has retiree amount and pop-up amount options. When a beneficiary predeceases a retiree, you change the retiree's payments from the retiree amount to the pop-up amount.

For a last to survive annuity, there are retiree and survivor amounts. If the retiree dies first, set up the beneficiary just as you would for a normal joint and survivor annuity. If the beneficiary dies first, change the retiree's schedule so that the retiree receives the beneficiary amount.

To change a retiree's regularly scheduled payment amount, modify the fields described below:

See Also

Defining a Payee Payment Schedule

Preparing Pension Payments

Defining Retiree COLA Information

A COLA for a retiree typically takes the form of a percentage increase in a benefit. Pension Administration enables you to calculate and schedule the new payment amount for all employees receiving benefits from a particular plan.

Access the Calculate COLA page (Pension, Payments, Calculate COLA, Calculate COLA).

COLA Run Parameters

Click Run to run this request. The Process Scheduler runs the COLA Program (PASCOLA) SRQ process at user-defined intervals.

After you run the COLA Program process, you can see the COLA for any individual payee in that person's payment schedule. To do this, access the Payee Payment Schedule page.

This page contains a new row with an effective date that matches the COLA date. The Payment Reason field contains the value Result of COLA Adjustment. Both the retiree amount and any additional amounts—for example, a beneficiary amount—reflect the new, higher pension payment.

Because the beneficiary amount has been adjusted, if the retiree dies and you schedule payments to the beneficiary, the system automatically copies the adjusted amount to the beneficiary's schedule.