Periodic Processing and Benefits Calculation

This section discusses periodic processing and benefits calculation.

Periodic processes are run on a regular basis to preprocess certain calculation data and perform housekeeping tasks. Preprocessing not only saves time, it also enables you to readily access up-to-date information when researching issues for employees.

Pension Administration handles all the data involved in pension calculations. In a single step, you can estimate benefits for any combination of employees and plans or plan components.

Periodic processing enables consolidating payroll data for use by the calculation process. Periodic processing also keeps certain plan information up to date and available for review in the employee inquiry pages.

It is possible to run processes for all employees, for individual employees, or for groups of employees, and for one plan or all plans.

To run periodic processes, select Pension > Periodic Processes > Request Process.

Periodic pension processes enable you to:

  • Establish history for plan eligibility and participation.

  • Consolidate payroll data:

    • Earnings

    • Hours

    • Contributions

  • Maintain balances:

    • Service.

    • Cash balance accounts.

    • Employee (contributory) accounts.

  • Update pension statuses.

  • Update plan dates.

  • Archive payroll data.

  • Delete calculations.

Periodic processes, by definition, run on regular cycles. Several (or even all) processes can be run as a single job as long as they use the same cycle. To run some processes monthly and others annually, run them as two different jobs.

When the system detects erroneous data for an employee, periodic processing stops for that employee and restarts with the next employee. The system checks for valid data, such as date of birth, date of hire, and date aliases. Erroneous data is written to the table PS_PA_EE_ERR_TBL. Use this table to examine the erroneous data.

One of the most important aspects of administering a pension plan is calculating pension benefits. You use periodic processing to keep certain plan information up to date, then you run calculations to calculate benefits, based on specific termination or retirement dates, known as event dates.

Calculations determine the benefits owed to pension plan participants. Running a calculation applies all your plan rules to a specific employee base for a specific event date. The "event" can be preretirement, termination, retirement, or in-service death or disability. It has a specific benefit commencement date. The calculation produces a final benefit amount in all the available optional forms.

You can run estimates based on projected data: projected hours and earnings, specific assumptions for increasing the rate in an employee's salary, the taxable wage base, and other pension data.

You can get immediate results for small calculation runs, or schedule large runs for later. If you save a calculation, you can rerun the process either with a revised set of assumptions or for a final calculation.

If you want to run calculations for several employees in one batch job—for example, to produce annual benefit statements or notices for a special early retirement window—you can create calculation groups and run several calculations at once.

You can look at the calculation results online or print worksheets showing results for individual employees.

This section discusses:

  • Retirement processing

  • Payee setup

  • Pension payment processing

Retirement Processing Overview

Before an employee can receive pension payments, a number of steps are required. These steps include verifying birth dates and marital status, producing and verifying a final calculation, and obtaining spousal waivers and payment elections. After these preretirement tasks are complete, you can tell the system to begin making pension payments.

Using Pension Administration, you can:

  • Track all preretirement tasks.

  • Indicate the calculation on which you base payments.

  • Indicate an employee's optional form selections.

  • Create the payment record that will be the basis for making payments.

  • Schedule payment instructions as far ahead as desired.

    Payment instructions include:

    • Start payments.

    • Stop payments.

    • Payment adjustments.

Pension Administration assumes that retirees are paid by an external trustee and that the trustee handles all W-2P and 1099-R reporting.

Payee Setup

Three types of people might receive a benefit under a pension plan:

  • Retirees (who were once employees).

  • Their beneficiaries.

  • QDRO alternate payees, former spouses who have a court-ordered right to a portion of an employee's benefit.

You already track employee data by using an employee ID and all its associated data, such as personal data and job data. To track pension payee data, you also use the employee ID and the personal and job records.

For retirees, you use the existing employee ID. For beneficiaries and QDRO alternate payees, who start out as dependents or beneficiaries of employees, you select an existing employee ID if this person already has an employee ID, or create a new employee ID based on the person's existing dependent or beneficiary data.

All three types of payees require new job records reflecting their roles as pension payees. You create a concurrent job for each plan under which a person is receiving a benefit. You do not use existing employee job records; all payee jobs are specific to pension processing.

Pension Payment Processing

The system provides a trustee extract, with all the information a third-party needs to produce the check and tax reports. This includes the check date and pay period, the payment amount, the tax elections, and any benefit deductions.

To set up the system for payment processing, you create a retiree payment calendar where you create run control IDs for each pension check run.

To prepare payments for individual pension payees:

  1. Record a payee's check information, including tax elections, direct deposit information, and any deductions.

  2. Record the payee's optional form selection, except for beneficiaries, who use the same optional form as the original employees whose beneficiaries they are.

  3. Schedule recurring payments, using an effective date and status to indicate when the payments should start and stop.

    You can also schedule one-time payments or adjustments as needed.

During a pension pay run, the system gathers payment-related information for all the scheduled payments. This information includes not only payment amounts, but also the tax elections, deduction information, direct deposit information, and funding providers for the payment. The payment process writes all this information to payment records, which you can review online or in a report before making a final "confirmation" pay run.

When you process a confirmation pay run, the system creates a trustee extract to put all the payment information in a file that you can then transfer to the third-party trustee who produces the pension checks. There are pages and a report for viewing the contents of the trustee extract.

This section discusses:

  • Payee event administration

  • Non-employee payee administration

  • QDRO administration

Payee Event Administration

Certain events in the lives of pension payees require you to perform specific tasks. After employees retire and begin receiving payments, many things can still happen to affect their pensions. If a payee dies, you may need to stop making payments. Depending on the payment form, you may also need to begin payments to a beneficiary. If the payee chose a level income option, you may need to decrease payments when the retiree attains social security retirement age. Also, retirees may receive cost of living adjustments.

You manage most of these tasks by modifying the payment schedule to stop, start, or change payments.

Non-employee Payee Administration

In addition to employees and former employees, there are two other types of plan participants: pension beneficiaries and QDRO alternate payees, former spouses who have obtained a right to a pension benefit as part of a court-ordered divorce settlement. With Pension Administration, you enter both types of payees into the system as plan participants and store personal and payment-related information for them.

Pension Administration can automatically determine beneficiary payment amounts based on a retiree's payment amount (including cost-of-living adjustments) and the selected form of payment.

Pension Administration tracks both types of non-employees through their IDs, and cross-references non-employees with the employees who originally earned the benefit.

QDRO Administration

When a Qualified Domestic Relations Order from the court instructs you to pay a specified portion of an employee's benefit to an alternate payee, a number of things must be tracked, including information about the alternate payee and the benefit owed to that payee.

The system enables tracking QDRO information and communications from the first time you receive notification that a divorce settlement may include a division of pension benefits. After you have recorded the amount due to the alternate payee, you can apply early commencement reductions and convert the amount into the optional forms of payment available to the alternate payee.

There are two aspects to the system's QDRO capabilities. On the administrative side, the system tracks information about the Domestic Relations Order (DRO), determines if it is, in fact, qualified and therefore a QDRO, determines the benefits due to the alternate payee, establishes the alternate payee in the system, and pays them through the same trustee extract used to pay retirees.

On the implementation side, you must ensure that you have set up plan rules in such a way that the QDRO calculations work correctly.

Pension Administration provides a number of sample participant letters, including a benefit selection letter outlining the available optional forms of payment.

The system also provides a calculation worksheet to use in detailing how a pension benefit was determined and a social security worksheet with similar information for detailing social security benefits.

To help you administer your plan, the system also includes a participant count report for the Form 5500 and an actuarial valuation extract, a data extract with information that the actuary can use to determine the plan's liabilities.