How Defined Rate Frequency Works with Communicated Rate Frequency

The defined rate frequency and communicated rate frequency values establish the time basis for rate amounts that are either used internally or displayed to participants.

The defined rate frequency determines the time basis of rates used in calculations or stored for other internal use.
The communicated rate frequency determines the time basis of rates that appear to participants.

Defined rate frequency, communicated rate frequency, and program default currency are program-level attributes. An exception occurs in plan configuration. Setting the plan usage field to Not in program causes the defined rate frequency, communicated rate frequency, and plan default currency fields to appear. In that special case, these attributes are required to be specified as part of the plan-not-in-program configuration. First, configure the defined rate frequency, communicated rate frequency, and currency for benefits programs or plans not in program. Then, you can use the Create Rates page to define named rates for specific objects within those hierarchies.

Defined Rate Frequency

The time basis of costs defined in the Additional Information section of the Create Rates page is always determined by the relevant defined rate frequency.

This figure illustrates an example program with the associated plan type, plans, and plan options. — The following figure shows an example partial benefits offering. The health and welfare program includes the dental plan type. The dental plan type includes the dental preferred provider organization (PPO) plan and the dental health maintenance organization (HMO) plan. The dental PPO plan includes options for covering the employee, employee plus spouse, and so on.

The default program currency for the health and welfare program, is set to US Dollars. The defined rate frequency of the health and welfare program is Monthly. On the calculation tab of the Create Standard Rates page for the dental PPO plan, employee plus spouse option, the calculation method is set to Flat amount. That flat amount value is set to 32.50.

The rate inherits the currency defined for the programs or plans not in program with which the benefits object is associated. In this example, the currency for the health and welfare program is US Dollars. Therefore the defined rate is the flat amount: 32.50 USD monthly. That defined rate is stored for use in subsequent calculations.

Communicated Rate Frequency

The communicated rate frequency determines the time basis of costs that appears to participants. The rate communicated to participants differs from the defined rate if the communicated rate frequency is different from the defined rate frequency. For example, the defined rate frequency is monthly, with 12 monthly periods in a year. The communicated rate has the frequency of the participant's payroll period, such as 26 biweekly periods in a year.

Sequence	Calculation	Explanation
1	(32.50 US Dollars per month) * (12 months per year) = 390 US Dollars per year	To convert from the defined rate to the communicated rate, the annual cost is first calculated. This calculation is for the annual cost for employee plus spouse participation in the dental insurance plan.
2	(390 US Dollars per year) / (26 payroll periods per year) = 15.00 US Dollars per payroll period	The communicated rate is the annual cost divided by the number of periods in a year at the communicated rate frequency. Dental insurance costs are deducted from participants' biweekly paychecks. The communicated rate frequency is set to Per pay period. The plan year period contains 26 payroll periods.

Sequence

Calculation

Explanation

(32.50 US Dollars per month) * (12 months per year) = 390 US Dollars per year

To convert from the defined rate to the communicated rate, the annual cost is first calculated. This calculation is for the annual cost for employee plus spouse participation in the dental insurance plan.

(390 US Dollars per year) / (26 payroll periods per year) = 15.00 US Dollars per payroll period

The communicated rate is the annual cost divided by the number of periods in a year at the communicated rate frequency.

Dental insurance costs are deducted from participants' biweekly paychecks. The communicated rate frequency is set to Per pay period. The plan year period contains 26 payroll periods.