Using Benefit Formula Results
This section provides an overview of benefit formula results, and discusses how to:
Set up multiple formulas in a single function result.
Set up multiple function results.
The benefit formula produces a dollar amount and a description of what that amount represents. The description consists of a payment frequency and normal (not default) forms of payment for single and married participants.
You use the result for reporting, primarily within the benefit statements you give your employees. You also reference the result when you use the optional forms of payment function to create the form set that goes with the benefit formula. Only forms in the optional form set are offered to employees. The normal form of the benefit, as defined in the benefit formula, is only offered if it is repeated in the optional forms of payment function.
Processing for the 415 limits function also looks at benefit results.
If you use different formulas for different retirement benefits (normal retirement, early retirement, disability retirement, or others), you can still incorporate all these formulas into a single benefit formula function result. You create groups based on benefit eligibility and associate each group with the appropriate formula. Every employee thus automatically uses the right formula.
|
Group Criteria |
Definition |
|---|---|
|
Benefit eligibility = normal retirement |
Regular plan benefit |
|
Benefit eligibility = early retirement |
Reduced benefit |
You can similarly use grouping to distinguish between retirement benefits and ancillary benefits for death and disability.
|
Group Criteria |
Definition |
|---|---|
|
Event reason = termination |
Regular plan benefit |
|
Event reason = death or disability |
Regular plan benefit with 100 percent vesting |
Grouping also enables you to use different formulas for employees and for QDRO alternate payees. This is important because an employee's formula is based on various calculated elements, such as service and final average earnings, whereas a QDRO alternate payee's benefit is simply stored in the database. Although you do not need a benefit formula to give you that stored value, you need a benefit formula to multiply that value by an early retirement factor and to feed that amount into the payment process.
|
Group Criteria |
Definition (Early Retirement Benefit) |
|---|---|
|
Employees with no QDRO offset |
Regular plan benefit x early retirement factor |
|
Employees with a QDRO offset |
(Regular plan benefit minus offset) x early retirement factor |
|
QDRO alternate payees |
Stored QDRO amount x early retirement factor |
All the reasons for setting up multiple benefit formula function results are about seeing before and after values, rather than just presenting a final amount without the intermediate values. For example, you can create separate function results to show benefits before and after applying:
Vesting
Early or late retirement factors
A QDRO offset
Contributory plans offer another reason for setting up multiple benefit formula results. You set up one function result for the total benefit and another for the employer-paid portion of the benefit. By law, you can only apply vesting rules to the employer-paid portion. You then need a third function result that adds the employee-paid benefit back to the employer-paid portion after you apply vesting.
In certain cases you can use a standalone custom statement, rather than an additional benefit formula function result. Use the benefit formula if you want to:
See the intermediate results (the system doesn't show you results of standalone custom statements).
Feed through to optional forms so you can pay employees based on that amount.
Note: When you use multiple function results, enter useful descriptions so that users can understand what each value represents.