Administering Terminated 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:

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:

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: