Calculating Retro Deltas and Processing Adjustments
This topic provides information about how the system calculates retro deltas and processes adjustments.
Calculating Retro Deltas
In forwarding retro, the Delta = New Value - Old Value (where the old value is the value from the last revision of the previous calculation [maximum revision]).
| Period 1 | Value of Earning 1 (E1) | Delta |
|---|---|---|
|
V1R1 |
20 |
Not applicable |
|
V1R2 |
30 |
E1 (V1R2) - E1 (V1R1) = 10 |
|
V1R3 |
40 |
E1 (V1R3) - E1 (V1R2) = 10 |
In corrective retro, the Delta = New Value - Old Value (where the old value is the value from the previous version, Revision 1).
| Period 1 | Value of E1 | Delta |
|---|---|---|
|
V1R1 |
20 |
Not applicable |
|
V2R1 |
30 |
E1 (V2R1) - E1 (V1R1) = 10 |
|
V3R1 |
40 |
E1 (V3R1) - E1 (V2R1) =10 |
When calculating deltas, the system includes in the old value of an element (earning or deduction) any adjustments that were forwarded to it from recalculated periods. Similarly, the new value of an element calculated for the current period includes adjustments that were forwarded to it as a result of a recalculation in previous periods.
| Period 1 | Value of E1 | Delta |
|---|---|---|
|
V1R1 |
25 (20 + 5 Adjustment) |
Not applicable |
|
V1R2 |
35 (30 + 5 Adjustment) |
E1 (V1R2) - E1 (V1R1) = 10 |
|
V1R3 |
45 (40 + 5 Adjustment) |
E1 (V1R3) - E1 (V1R2) = 10 |
Note:
There is an exception to the rule that the new value of an element always contains adjustments that were forwarded to that element when it was calculated in a previous run. This exception is discussed in Example 3 under Deltas and Adjustments When The Retro Method Changes.
Calculating Deltas When Corrective Follows Forwarding
In the case of corrective retro—or when corrective follows forwarding—the system defines the old value as the previous version, Revision 1. Take the following example of a period which is recalculated twice due to retro—first using forwarding retro, and again using corrective retro. If the value of earning E1 equals 20 in period 1 (V1R1), increases to 30 in the first recalculation (V1R2), and increases again to 40 in the last recalculation (V2R1), the system derives the deltas as follows:
| Retro Method | Period 1 | Value of E1 | Delta |
|---|---|---|---|
|
Not applicable |
V1R1 |
20 |
Not applicable |
|
Forwarding |
V1R2 |
30 |
E1 (V1R2) - E1 (V1R1) = 10 |
|
Corrective |
V2R1 |
40 |
E1 (V2R1) - E1 (V1R1) = 20 |
To calculate the second retro delta in V2R1, when the retro method changes from forwarding to corrective, the system subtracts the value of E1 in the previous version, revision 1 (20) from the new value of E1 (40). It ignores E1 in V1R2 (the previous version, Revision 2) because V1R2 is a virtual calculation and doesn't represent the last true value.
Processing Adjustments
When the retro method is forwarding, the system calculates the adjustment to carry forward by summing the deltas for an element across all of the recalculated periods. If you have defined payment keys, the system sums the calculated deltas by payment key rather than creating a single adjustment amount.
Example 1: Processing Deltas and Adjustments in Forwarding Retro
The following example of retro on retro illustrates how the system calculates deltas and processes adjustments when using the forwarding method.
Scenario:
-
In period 2, E1 changes from 10 to 20. The first retro calculation involves retro in period 2 back to period 1.
-
In period 3, E1 changes from 20 to 30. The second retro calculation involves retro in period 3 back to period 1.
| Ver/ Rev # | Load YTD Balances (load year-to-date balances) | Period 1 | Load YTD Balances | Period 2 | Load YTD Balances | Period 3 |
|---|---|---|---|---|---|---|
|
V1R1 |
Load 0 |
E1 = 10 |
Load 10 |
E1 = 30 (20 + 10) |
Load 40 |
E1 = 50 (30 + 0 + 10) |
|
Net Pay = 10 |
Net Pay = 30 |
Net Pay = 50 |
||||
|
YTD E1 = 10 |
YTD E1 = 40 |
YTD E1 = 90 |
||||
|
V1R2 |
Load 0 |
E1 = 20 Delta = 10 |
Load 10 |
E1 = 40 (30 + 10) Delta = 10 |
||
|
YTD E1 = 10 |
YTD E1= 40 |
|||||
|
V1R3 |
Load 0 |
E1 = 30 Delta = 10 |
||||
|
YTD E1 = 10 |
In this example, the system calculates retro deltas by subtracting the old value of E1 from the new value of E1 (the old value is defined as the last revision of the previous calculation).
First retro calculation:
-
Period 1 (V1R2): E1 = 20.
Delta = 10 [20 (V1R2) - 10 (V1R1)]. Pulled in to period 2 (V1R1) as an adjustment.
-
Period 2 (V1R1): E1 = 30 (20 + 10 Adj). Adjustment from period 1 (V1R2).
Second retro calculation (retro on retro):
-
Period 1 (V1R3): E1 = 30.
Delta = 10 [30 (V1R3) - 20 (V1R2)]. Pulled in to period 3 (V1R1) as an adjustment.
-
Period 2 (V1R2): E1 = 40 (30 + 10 Adj). Adjustment carried forward from period 2 (V1R1).
Delta =10 [40 (V1R2) - 30 (V1R1)]. Pulled in to period 3 (V1R1) as an adjustment.
-
Period 3 (V1R1): E1 = 50 (30 + 10 Adj + 10 Adj). Adjustments from period 1 (V1R3) and period 2 (V1R2).
The adjustment is the sum of all retro deltas. In P2 (V1R1), the adjustment to E1 is 10. In P3 (V1R1), the adjustment to E1 is the sum of the adjustments from the recalculation of periods 1 (V1R3) and 2 (V1R2), or 10 + 10.
Note:
Because periods 1 and 2 are processed using forwarding retro, the YTD accumulator is not updated each time these periods are recalculated. When the balances are loaded before each recalculation, the system uses the YTD balance from the prior period, V1R1. Revision 1 is always loaded when the method is forwarding.
Example 2: Processing Deltas in Corrective Retro
The following example of retro on retro illustrates how the system calculates deltas when using the corrective method.
Scenario:
-
In period 2, E1 changes from 10 to 20. The first retro calculation involves retro in period 2 back to period 1.
-
In period 3, E1 changes from 20 to 30. The second retro calculation involves retro in period 3 back to period 1.
| Version/ Revision Number | Load YTD Balances | Period 1 | Load YTD Balances | Period 2 | Load YTD Balances | Period 3 |
|---|---|---|---|---|---|---|
|
V1R1 |
Load 0 |
E1 = 10 |
Load 20 |
E1 = 20 |
Load 60 |
E1 = 30 |
|
Net Pay = 10 |
Net Pay = 20 |
Net Pay = 30 |
||||
|
YTD E1 = 10 |
YTD E1 = 40 |
YTD E1 = 90 |
||||
|
V2R1 |
Load 0 |
E1 = 20 Delta = 10 |
Load 30 |
E1 = 30 Delta = 10 |
||
|
Net Pay = 20 |
Net Pay = 30 |
|||||
|
YTD E1 = 20 |
YTD E1 = 60 |
|||||
|
V3R1 |
Load 0 |
E1 = 30 Delta = 10 |
||||
|
Net Pay = 30 |
||||||
|
YTD E1 = 30 |
In this example, the system calculates retro deltas by subtracting the old value of E1 from the new value of E1 (the old value is defined as the value of the previous calculation [previous version, Revision 1]). The deltas of E1 are not marked for forwarding.
There are no adjustments to the value of E1 (as in forwarding retro) because corrective retro replaces the old value with the new value.
First retro calculation:
Period 1 (V2R1): E1 = 20
-
Delta = 10 [20 (V2R1) - 10 (V1R1)]. New value replaces old value.
-
Net Pay = The banking process determines if any difference exists between the net pay from the prior calculation and the recalculation. In this instance, the difference is 10.
Second retro calculation (retro on retro):
-
Period 1 (V3R1): E1 = 30.
-
Delta = 10 [30 (V3R1) - 20 (V2R1)]. New value replaces old value.
-
Net Pay = The banking process determines if any difference exists between the net pay from the prior calculation and the recalculation. In this instance, the difference is 10.
-
-
Period 2 (V2R1): E1 = 30.
-
Delta = 10 [30 (V2R1) - 20 (V1R1)]. New value replaces old value.
-
Net Pay = The banking process determines if any difference exists between the net pay from the prior calculation and the recalculation. In this instance, the difference is 10.
-
Note:
Because periods 1 and 2 are processed using corrective retro, the YTD accumulator is updated each time a period is recalculated. When balances are loaded before each recalculation, the system uses the balance from the calculation with the highest version number, Revision 1 in the previous period.
Example 3: Processing Deltas and Adjustments When the Retro Method Changes
When calculating retro deltas, the system generally defines the new value of an element as containing the same adjustments as the old value. However, when a period is processed using forwarding retro and reprocessed using corrective retro (the retro method changes from forwarding to corrective), the procedure for calculating deltas becomes more complicated.
This example shows what happens when the method for calculating retroactivity changes from forwarding to corrective.
Scenario:
-
Retro in period 3 back to period 1 due to a change in E1 from 10 to 30. Retro method is forwarding.
-
Retro in period 4 back to period 2 due to a change in E1 from 30 to 40. Retro method changes to corrective for period 2 and then back to forwarding for period 3. E1 is defined as a forwarding exception (it is forwarded to E2 in period 4).
| Version / Revision Number | Period 1 | Method | Period 2 | Method | Period 3 | Period 4 |
|---|---|---|---|---|---|---|
|
V1R1 Forwarding |
E1 = 10 |
E1 = 10 |
E1 = 70 (30 + 20 + 20) |
E1 = 30 (40 - 10) E2 = 30 |
||
|
V1R2 Forwarding |
E1 = 30 Delta = 20 |
E1 = 30 Delta = 20 |
||||
|
V2R1 Method Corrective |
E1 = 40 Delta = 30 |
V1R2 Method Forwarding |
E1 = 60 (40 + 20) Delta = <10> |
First retro calculation:
-
Period 1 (V1R2): E1 = 30.
Delta = 20 [30 (V1R2) – 10 (V1R1)]. Pulled in to period 3 (V1R1) as an adjustment.
-
Period 2 (V1R2): E1 = 30.
Delta = 20 [30 (V1R2) - 10 (V1R1)]. Pulled in to period 3 (V1R1) as an adjustment.
-
Period 3 (V1R2): E1 = 70 (30 + 20 Adj + 20 Adj). Adjustments from period 1 (V1R2) and period 2 (V1R2).
Second retro calculation (retro on retro):
-
Period 2 (V2R1): E1 = 40.
Delta = 30 [40 (V2R1) - 10 (V1R1)]. Pulled in to period 4 (V1R1) as an adjustment to E2.
-
Period 3 (V1R2): E1 = 60 (40 + 20 Adj). Adjustment carried forward from period 1 (V1R1).
Delta = <10> [60 (V1R2) - 70 (V1R1)]. Pulled in to period 4 (V1R1) as an adjustment.
-
Period 4 (V1R1): E1 = 30 (40 - 10 Adj). Adjustments from period 3 (V1R2) and E2 = 30 adjustment from Period 2 (V2R1).
In this example, the first retro calculation in period 2 involves a change in the value of E1 from 10 to 30, resulting in a delta of 20. When period 2 is recalculated using corrective retro, the value of E1 increases from 30 to 40. Note that the system does not calculate the new delta as 40 (E1, V2R1) - 30 (E1, V1R2), as it would if the method were forwarding, but as 40 (E1, V2R1) - 10 (V1R1). This is because the old value in corrective retro is defined as the previous calculation (previous version, Revision 1), not as the previous revision.
This creates the following problem, which the system must resolve:
-
The first retro calculation results in a delta of 20 being forwarded to period 3.
-
The second, corrective calculation results in a delta of 30 being pulled into period 4. This delta includes not just the difference between the value of E1 in V2R1 (40) and the previous value of E1 in V1R2 (30), but the already forwarded difference between the value of E1 in V1R2 and V1R1 (30 - 10 = 20). Consequently this difference (20) is counted twice.
How does the system compensate for this? The answer depends on how the delta for period 3 is recalculated. The new value of an element is normally defined as containing the same adjustments as those in the old value. However, when the retro method changes from forwarding to corrective, the delta that appears to be "double-counted" (the delta from period 2 V1R2 in this example) is not included in the new value of E1 when the period to which it was forwarded is recalculated. When the system calculates the delta for period 3, the new value does not contain the adjustment to E1 from period 2, V1R2, but only the adjustment from period 1, V1R2.