Using Employee Accounts Function Results
You need to keep track of employee contributions and the interest they earn. The employee accounts function keeps track of pre-tax and post-tax contributions, interest (which is always pre-tax), and total balance. Employee accounts keeps periodic subtotals and running balances.
When you set up the employee account function result, you specify the account type. There are three types of employee accounts:
The function result for a plan's main contribution account is the final dollar amount of the account as of the event date.
The function result for a withdrawal subaccount tracks amounts that employees withdraw and repay from the plan contributory account.
The function result for a purchase subaccount tracks amounts that employees pay into the main contribution account to buy service for specific time periods.
Note: Do not use purchase accounts to track repayment of withdrawn amounts.
All transactions in withdrawal and purchase subaccounts roll up to the main contribution account and to one or more service function results that you identify when you set up the employee account function result.
Because employees already own the amounts in their contributory accounts, there are special considerations for incorporating the amount into a final pension calculation. Also, a plan must always pay back all of an employee's contributions and interest, so it's important to record final account balances and track pension payments against those final balances.
Note: If you create subaccounts, put them before the main account when you set up the job stream on the Plan Implementation page.
When employers use employee contributions to offset employer contributions to the plan, part of the employee's eventual benefit is attributed to the contributions. The employee paid benefit function calculates the employee-paid portion of a benefit by projecting the final employee account balance to the normal retirement date and then converting it to an actuarially equivalent annuity.
The employee-paid portion of a benefit is not subject to vesting rules or 415 limits. You therefore use the employee-paid benefit result to separate the employee-paid and employer-paid portions of the total benefit before you apply vesting and 415.
When employee contributions are post-tax, the portion of the final benefit attributable to the contributions is not considered taxable income to the employee. Because the employee accounts function tracks post-tax and pre-tax contributions separately, you can use the post-tax balance information in determining the pre-tax and post-tax breakdown of a pension check.
For example, if Erika's post-tax contributions total 21,000 USD and you calculate that she should recover that amount over 210 payments, then 100 USD per month of Erika's pension is treated as nontaxable income. If her total pension is 1,500 USD per month, then 1,400 USD is taxable.
The system ensures that you don't pay out more than 21,000 USD of nontaxable income by copying the final account post-tax balance to a payment summary record. The system identifies the correct account balance based on the employee account function result you enter in the Plan Aliases page.
The summary record also keeps a running total of nontaxable benefits paid. Each time the system processes a payment, it updates the running total and checks that it doesn't exceed the final post-tax balance. If the scheduled nontaxable amount would bring Erika over the limit, the payment process automatically reduces the amount as necessary.
The total account value, pre-tax and post-tax, is also copied to the summary record. Because this is all Erika's own money, if she dies before recovering the entire amount, the plan owes the remainder to her heirs. When Erika dies, you can compare the total account value to her lifetime benefit payments to see whether a death benefit is owed.
The system uses withdrawal subaccounts to track amounts that employees withdraw from and repay to the plan contributory account. It uses purchase subaccounts to track amounts that employees pay into the system to purchase service for leave periods or other periods when they were not contributing to the plan.
Withdrawal and purchase subaccounts are associated with the plan’s main employee account and with one or more service function results. This architecture enables the system to make a simultaneous adjustment to the employee account and the service accrual.
Important! Always use a withdrawal account when withdrawing contributions. This prepares the system to for administering repayment of the withdrawn contributions and the corresponding service buyback.
If using withdrawal accounts, you can use the Withdraw Contribution page to pay out withdrawn contributions through the trustee extract.
When you set up the service purchase process in PeopleSoft Pension Administration, you associate the purchase and withdrawal subaccounts with the appropriate service purchase types so that the system can post payments to the appropriate accounts.
The service purchase process uses each subaccount only once per employee. So when you set up your employee accounts for service purchase or service buyback, the best practice is to create a set of identical accounts where the base account name has at most eight characters, and the additional accounts have the same name with sequential two-digit suffixes, starting with 01. Then, if an employee enters into more than one service purchase arrangement using the specified account, the system automatically looks for the next unused account in the set.