Understanding General Rules of Retroactive Processing

Example 1: Corrective Retro—No Exceptions

In this example, Earning 1 rate changes from 100 to 120; effective date is in period 1; notified in period 2:

This table shows the processing results:

In this example, only Earning 1 generates a retro delta. The segment accumulator (Net Pay) is updated. No element is forwarded for processing in the current period, and the new value of Earning 1 replaces its old value. The banking process determines the difference between the net pay from the prior calculation (70) and the recalculation (90) and manages the retro delta (20).

Example 2: Forwarding Retro—No Exceptions

In this example, Earning 1 rate change from 100 to 120; effective date in period 1; notified in period 2:

This table shows the processing results:

In this example, the system forwards the retro delta for Earning 1 to the current period (period 2), where it is recorded as an adjustment to Earning 1.

Even though the retro method is forwarding, the system does not forward all elements from the first period to the second period:

• The system does not forward the Net Pay accumulator because it already contains the value of Earning 1.

  If the Net Pay accumulator had been forwarded along with Earning 1, Earning 1 would have been counted twice in the current period.

• Global Payroll does not forward balance accumulators. This is because they sum the values of elements that have potentially already been forwarded, so moving them into the current period would generate incorrect results.

Version and Revision Numbers Used When Calculating Retro on Retro

When the system calculates retro on retro—that is, when a period is recalculated more than once—and the retro method changes, the numbering scheme becomes more complicated. In the following example, Global Payroll recalculates five consecutive periods using the forwarding method on the first pass, and a combination of forwarding and corrective retro on the second pass.

Scenario:

The retro method changes from corrective to forwarding in period 3 when retro is first processed. The second time that retro is processed, the method changes from forwarding to corrective in the same period.

In the following table, P1 to P6 represent periods 1 to 6.

When forwarding follows corrective retro, the revision number increases by 1, and the version number remains the same as it was in the last maximum corrective run. However, when corrective retro follows forwarding, the version number increases by 1, and the revision number goes back to 1. This has important consequences for how the system calculates retro deltas.

See Calculating Retro Deltas and Processing Adjustments.

Version and Revision Numbers in Retro Adds

A retro add is a situation in which a previous gross-to-net does not exist for a payee, and retroactivity calls for a Pay Process Stat record to be created for the first time. For example, suppose that a payee initially thought to have been hired in February was actually hired in January. There is no gross-to-net for January, so when January is processed for retro, the system must create a Pay Process Stat record for the period and assign version and revision numbers to it.

The system assigns version and revision numbers as follows:

• Numbering retro adds when the retro method is forwarding.

  When the retro method is forwarding, the revision number must be greater than 1. If a previous gross-to-net calculation does not exist, and a retro add results in a gross-to-net for the first time, the system labels this calculation V1R2 even though it is technically the first gross-to-net. The reason for this is that forwarding retro does not replace the original results of a calculation with new ones, but uses them to generate retro deltas. V1R2 is created only to calculate the deltas to bring forward to the current period. V1R1 is not used because it does not contain the true results for the period.

• Numbering retro adds when the retro method is corrective.

  When the retro method is corrective, a previous gross-to-net does not exist, and a retro add results in a gross-to-net for the first time, the system labels this first calculation V1R1. The reason for this is that corrective retro replaces the results of the prior pay calculation (it does not use them only to create retro deltas), so when a period is added, it treats this period as if it were the original one.

The following tables illustrate how the system numbers Pay Process Stat records in retro add situations using forwarding and corrective retro.

Scenario:

In the following retro add situations, it is discovered that a payee who was calculated in period 1 should not have been processed in that period. The calculations for the payee are therefore reversed in Recalc No. 2. When it is later discovered that the payee belongs in that period after all, the system produces a new gross-to-net calculation using the version and revision numbers associated with Recalc No. 3:

Example 1

Example 2

Example 3

Example 4

Calculating Retro Deltas

In forwarding retro, the Delta = New Value - Old Value (where the old value is the value from the last revision of the previous calculation [maximum revision]).

In corrective retro, the Delta = New Value - Old Value (where the old value is the value from the previous version, Revision 1).

When calculating deltas, the system includes in the old value of an element (earning or deduction) any adjustments that were forwarded to it from recalculated periods. Similarly, the new value of an element calculated for the current period includes adjustments that were forwarded to it as a result of a recalculation in previous periods.

Calculating Deltas When Corrective Follows Forwarding

In the case of corrective retro—or when corrective follows forwarding—the system defines the old value as the previous version, Revision 1. Take the following example of a period which is recalculated twice due to retro—first using forwarding retro, and again using corrective retro. If the value of earning E1 equals 20 in period 1 (V1R1), increases to 30 in the first recalculation (V1R2), and increases again to 40 in the last recalculation (V2R1), the system derives the deltas as follows:

To calculate the second retro delta in V2R1, when the retro method changes from forwarding to corrective, the system subtracts the value of E1 in the previous version, revision 1 (20) from the new value of E1 (40). It ignores E1 in V1R2 (the previous version, Revision 2) because V1R2 is a virtual calculation and doesn't represent the last true value.

Processing Adjustments

When the retro method is forwarding, the system calculates the adjustment to carry forward by summing the deltas for an element across all of the recalculated periods. If you have defined payment keys, the system sums the calculated deltas by payment key rather than creating a single adjustment amount.

See Payment Keys with Forwarding Retro.

Example 1: Processing Deltas and Adjustments in Forwarding Retro

The following example of retro on retro illustrates how the system calculates deltas and processes adjustments when using the forwarding method.

Scenario:

• In period 2, E1 changes from 10 to 20. The first retro calculation involves retro in period 2 back to period 1.

• In period 3, E1 changes from 20 to 30. The second retro calculation involves retro in period 3 back to period 1.

In this example, the system calculates retro deltas by subtracting the old value of E1 from the new value of E1 (the old value is defined as the last revision of the previous calculation).

First retro calculation:

• Period 1 (V1R2): E1 = 20.

  Delta = 10 [20 (V1R2) - 10 (V1R1)]. Pulled in to period 2 (V1R1) as an adjustment.

• Period 2 (V1R1): E1 = 30 (20 + 10 Adj). Adjustment from period 1 (V1R2).

Second retro calculation (retro on retro):

• Period 1 (V1R3): E1 = 30.

  Delta = 10 [30 (V1R3) - 20 (V1R2)]. Pulled in to period 3 (V1R1) as an adjustment.

• Period 2 (V1R2): E1 = 40 (30 + 10 Adj). Adjustment carried forward from period 2 (V1R1).

  Delta =10 [40 (V1R2) - 30 (V1R1)]. Pulled in to period 3 (V1R1) as an adjustment.

• Period 3 (V1R1): E1 = 50 (30 + 10 Adj + 10 Adj). Adjustments from period 1 (V1R3) and period 2 (V1R2).

  The adjustment is the sum of all retro deltas. In P2 (V1R1), the adjustment to E1 is 10. In P3 (V1R1), the adjustment to E1 is the sum of the adjustments from the recalculation of periods 1 (V1R3) and 2 (V1R2), or 10 + 10.

Example 2: Processing Deltas in Corrective Retro

The following example of retro on retro illustrates how the system calculates deltas when using the corrective method.

Scenario:

• In period 2, E1 changes from 10 to 20. The first retro calculation involves retro in period 2 back to period 1.

• In period 3, E1 changes from 20 to 30. The second retro calculation involves retro in period 3 back to period 1.

In this example, the system calculates retro deltas by subtracting the old value of E1 from the new value of E1 (the old value is defined as the value of the previous calculation [previous version, Revision 1]). The deltas of E1 are not marked for forwarding.

There are no adjustments to the value of E1 (as in forwarding retro) because corrective retro replaces the old value with the new value.

First retro calculation:

Period 1 (V2R1): E1 = 20

• Delta = 10 [20 (V2R1) - 10 (V1R1)]. New value replaces old value.

• Net Pay = The banking process determines if any difference exists between the net pay from the prior calculation and the recalculation. In this instance, the difference is 10.

Second retro calculation (retro on retro):

• Period 1 (V3R1): E1 = 30.

  • Delta = 10 [30 (V3R1) - 20 (V2R1)]. New value replaces old value.

  • Net Pay = The banking process determines if any difference exists between the net pay from the prior calculation and the recalculation. In this instance, the difference is 10.

• Period 2 (V2R1): E1 = 30.

  • Delta = 10 [30 (V2R1) - 20 (V1R1)]. New value replaces old value.

  • Net Pay = The banking process determines if any difference exists between the net pay from the prior calculation and the recalculation. In this instance, the difference is 10.

Example 3: Processing Deltas and Adjustments When the Retro Method Changes

When calculating retro deltas, the system generally defines the new value of an element as containing the same adjustments as the old value. However, when a period is processed using forwarding retro and reprocessed using corrective retro (the retro method changes from forwarding to corrective), the procedure for calculating deltas becomes more complicated.

This example shows what happens when the method for calculating retroactivity changes from forwarding to corrective.

Scenario:

• Retro in period 3 back to period 1 due to a change in E1 from 10 to 30. Retro method is forwarding.

• Retro in period 4 back to period 2 due to a change in E1 from 30 to 40. Retro method changes to corrective for period 2 and then back to forwarding for period 3. E1 is defined as a forwarding exception (it is forwarded to E2 in period 4).

First retro calculation:

• Period 1 (V1R2): E1 = 30.

  Delta = 20 [30 (V1R2) – 10 (V1R1)]. Pulled in to period 3 (V1R1) as an adjustment.

• Period 2 (V1R2): E1 = 30.

  Delta = 20 [30 (V1R2) - 10 (V1R1)]. Pulled in to period 3 (V1R1) as an adjustment.

• Period 3 (V1R2): E1 = 70 (30 + 20 Adj + 20 Adj). Adjustments from period 1 (V1R2) and period 2 (V1R2).

Second retro calculation (retro on retro):

• Period 2 (V2R1): E1 = 40.

  Delta = 30 [40 (V2R1) - 10 (V1R1)]. Pulled in to period 4 (V1R1) as an adjustment to E2.

• Period 3 (V1R2): E1 = 60 (40 + 20 Adj). Adjustment carried forward from period 1 (V1R1).

  Delta = <10> [60 (V1R2) - 70 (V1R1)]. Pulled in to period 4 (V1R1) as an adjustment.

• Period 4 (V1R1): E1 = 30 (40 - 10 Adj). Adjustments from period 3 (V1R2) and E2 = 30 adjustment from Period 2 (V2R1).

In this example, the first retro calculation in period 2 involves a change in the value of E1 from 10 to 30, resulting in a delta of 20. When period 2 is recalculated using corrective retro, the value of E1 increases from 30 to 40. Note that the system does not calculate the new delta as 40 (E1, V2R1) - 30 (E1, V1R2), as it would if the method were forwarding, but as 40 (E1, V2R1) - 10 (V1R1). This is because the old value in corrective retro is defined as the previous calculation (previous version, Revision 1), not as the previous revision.

This creates the following problem, which the system must resolve:

• The first retro calculation results in a delta of 20 being forwarded to period 3.

• The second, corrective calculation results in a delta of 30 being pulled into period 4. This delta includes not just the difference between the value of E1 in V2R1 (40) and the previous value of E1 in V1R2 (30), but the already forwarded difference between the value of E1 in V1R2 and V1R1 (30 - 10 = 20). Consequently this difference (20) is counted twice.

How does the system compensate for this? The answer depends on how the delta for period 3 is recalculated. The new value of an element is normally defined as containing the same adjustments as those in the old value. However, when the retro method changes from forwarding to corrective, the delta that appears to be "double-counted" (the delta from period 2 V1R2 in this example) is not included in the new value of E1 when the period to which it was forwarded is recalculated. When the system calculates the delta for period 3, the new value does not contain the adjustment to E1 from period 2, V1R2, but only the adjustment from period 1, V1R2.