Understanding Employee-Paid Benefits

Contributory plans present special considerations that require you to separate the total benefit amount into employee-paid and employer-paid portions. In a contributory plan:

• Employees are always 100 percent vested in their contributions, while the employer-paid portion of a benefit is subject to plan vesting rules.

• If employees are entitled to withdraw contributions as a lump sum at benefit commencement, you pay the employee-paid and employer-paid portions separately.

• 415 limits on total benefits only apply to the employer-paid portion.

The employee-paid benefit function calculates the total value of employee contributions and converts that amount to a single life annuity as of a specified date, usually the normal retirement date.