Creating an Employee-Paid Benefit

To create an employee-paid benefit definition, use the Employee Paid Benefit (PA_EEBENEFIT_P1) component.

This topic discusses how to create an employee-paid benefit.

Page Name

Definition Name

Usage

Employee Paid Benefit Page

PA_EEBENEFIT_P1

Enter the parameters to calculate appreciated value of contributions.

Use the Employee Paid Benefit page (PA_EEBENEFIT_P1) to enter the parameters to calculate appreciated value of contributions.

When an employee withdraws contributions, you need to calculate the appreciated value of the contributions until the withdrawal date. The employee accounts function provides the balance as of the event date, and an interest method determines any interest applied from then until the date contributions are refunded.

The employee-paid benefit function tells you what portion of the total benefit is attributable to employee contributions and interest. In order to compare the employee-paid benefit to the total benefit, this amount must be as of the same date (normal retirement date) and in the same form of payment.

Navigation

Set Up HCM > Product Related > Pension > Components > Employee Paid Benefit > Employee Paid Benefit

Image: Employee Paid Benefit page

This example illustrates the fields and controls on the Employee Paid Benefit page.

Employee Paid Benefit page

Field or Control

Definition
Employee Contribution Account

Enter the name of an account to establish the beginning balance.
Refund of Contribution Date

There are two components to the interest basis: the date up to which interest accrues and the interest rate.

The date up to which interest accrues is called the "refund of contribution date" or the ("date of determination"). This is normally the benefit commencement date, but if you use a different lump sum date, you might use that as the refund of contribution date.
Table Lookup for Interest Rate

The interest rate is determined by a table lookup. You set up your lookup basis on the Table Lookup page. Enter the name of your table lookup rule.

This lookup returns a single interest rate that will be applied over all periods. The employee-paid benefit function does not permit an interest rate that varies over time (for example, the federal midterm rate for each month).
Projection Date Option

Select Project to NRD to project the employee-paid benefit to the normal retirement date (NRD), or select Use Lump Sum Date to project the benefit using the lump sum date. The NRD is established on the Plan Aliases page. The lump sum date comes from the calculation page.

Note: The lump sum date isn't a required field on the calculation page, but it is needed if you project to the lump sum date. Therefore, if you choose to project to the lump sum date, you may want to make the lump sum date a required field on the calculation page.

The system will only project when the selected date is later than the refund of contribution date on the Employee Paid Benefit page.

Project Using

If the refund of contributions date is before the normal retirement date, the employee account balance has to be projected to the date when the employer would normally expect to start paying pension benefits. This ensures that you compare equivalent numbers when you compare the employee-paid benefit result to the normal benefit amount.

Specify the rules for the projection in the Project Using group box.

Field or Control

Definition
Projection Option

To use only one interest method, select Single Lookup Table.

To compare two interest methods, select either Less Valuable of 2 Selected or More Valuable of 2 Selected.

Lookup Table and Lookup Table 2

If you selected Single Lookup Table, enter the name of one table lookup method; otherwise, enter two method names.

Note: In the Table Lookup for Interest Rate field, you use a table lookup to find a rate to use up to the refund of contributions date. Here, you use a table lookup to find the rate to use after the refund of contributions date.
Use PBGC Grading

Select this option to use Pension Benefit Guaranty Corporation (PBGC) grading. The PBGC graded structure includes an immediate annuity rate (the rate provided by the table lookup), an interest rate used for a defined period prior to the normal benefit commencement date, another interest rate for a defined period prior to that, and a third rate for all other years back to the event date.

Convert to Annuity Using

To compare the employer-paid portion of a benefit to the total benefit, both portions have to be for the same form of payment, typically some sort of annuity. The system includes a factor utility that calculates conversion factors for different forms of payment. When you set up the factor, specify that you're converting from a lump sum to your plan's normal form.

Note: The factor alias references actuarial assumptions, including an assumption as to whether the benefit is paid annually, monthly, or in some other frequency. Be sure the payment frequency in the referenced actuarial assumptions matches the payment frequency of your normal form of benefit.

Field or Control

Definition
Conversion Option

To use only one factor, select Single Factor.

To compare two factors, select either Less Valuable of 2 Selected or More Valuable of 2 Selected.

Factor Definition andFactor Definition 2

If you selected Single Factor, enter one factor definition; otherwise, enter two method names.