6 Configuring Different Benefit Types
6.4 Create Pensions, Saving Plans or Retirement Plan
Pension is a retirement benefit that an employee is entitled to at the time of retirement.
The following pension plans are available:
● Occupational/ Employer Pensions- It is a defined contribution (DC) pension plan. The formula for computing the employer's and employee's contributions is defined and known in advance, but the benefit to be paid out is not known in advance.
○ Contributory pension schemes: Both the employer and employee contribute to pensions
○ Non-contributory: Only the employer contributes to pensions
● State Pensions- Many countries have created funds for their citizens and residents to provide income when they retire. It is a defined contribution based pension plan, and depends on an individual's contribution history.
Employees pay a fixed percentage towards this pension fund- this contribution will usually be deducted from the taxable income. The percentage contribution is legally defined value.
The following image displays the fields that require your input while creating the pension.
See Steps to Set up Pensions/ Retirement Plan [page 12], to get an overview of system configurations required to create a pension plan.
To configure the pension plan in your system, perform the following steps:
1. Go to Admin Center and in the Tools Search field type Benefits Admin Overview.The system opens the Benefits Admin Overview screen. Select Create New - Benefit.
2. In the Benefit Type field, select Pension.
3. Enter the generic data such as benefit name, type and so on. For more information, see Create Benefit - Generic Data [page 55]. In addition to the generic fields, the following fields are also available:
○ Pension Type: Select either State Pension or Employer Pension. If you select State Pensions, you must maintain the following field.
○ Statutory Minimum Lookup: Indicates the minimum amount/percentage that an employer and employee is supposed to contribute as per the law. The system fetches this value from the Statutory Minimum Lookup object Statutory Minimum Lookup Object [page 73]
○ Retirement Age: Enter the retirement age only if the retirement age type is fixed. If the retirement age is conditional, that is, in case the retirement age is different for different employees, do not enter the retirement age.
Note
Changing retirement age is not supported as of current release.
○ Deduction Start Date: Select the required value. This field has the following values:
○ As of Date: Here, the system creates both the enrollment and deduction entries effective from the date the employee enrolls into the benefit.
○ Next Pay Period: Here the system creates only the enrollment entries effective from the date the employee enrolls into the pension plan. However, the deduction entries will be created effective from the start date of the next pay period till the enrollment validity end period, as maintained in the schedule. Note that if you choose next pay period, ensure that you define the pay calendar.
The following example illustrates how the system creates deduction records.
If an employee contributes to 2 or more funds that have different pay components, the system creates a deduction entry for each fund individually. For example, Carla Grant wants to enroll for a pension plan on 04/01/2015. In this plan, she is required to contribute 6000 INR to Fund A and 2000 INR to Fund B. She is on a monthly payroll, and the next payroll period starts from 01/02/2015.
The benefit schedule includes the following details:
○ Enrollment validity period: 01/01/2015 to 31/12/9999
○ Enrollment opens on 01/01/2015 and Enrollment closes on 31/03/2015 The system creates the following deduction records:
Table 15: Fund A
Deduction Start Date 01/02/2015
Deduction End Date 31/12/9999
Frequency Monthly
Deduction Value 6000
Table 16: Fund B
Deduction Start Date 01/02/2015
Deduction End Date 31/12/9999
Frequency Monthly
Deduction Value 2000
○ Multiple Fund Selection: Choose either Yes or No. If you choose Yes, the employee can distribute their contributions to more than one fund.
○ Country: Select the relevant country for which you want to create pension plan.
○ Pension Fund
○ Fund Name: Enter the fund name.
○ Fund Agency ID: Enter the agency ID corresponding the fund that you have entered.
○ Fund Number: Enter the fund number corresponding the fund that you have entered.
○ Employee Contribution Pay Component: Select the relevant pay component.
○ Employer Contribution Pay Component: Select the relevant pay component.
○ Fund Agency's Link
○ Employer Contribution Details
○ Employer Contribution Type: Select either Percentage or Amount. Based on this contribution type, the system displays either Contribution Percentage fields or Contribution Amount.
○ Contribution Amount or Contribution Percentage: Enter the amount/ percentage that the employer must contribute in the corresponding pension fund. Contribution amount/percentage is fixed for all the employees for a particular pension type. The amount/ percentage the you enter here will be displayed for all the employees in Employer Defined Contribution Amount/ Employer Defined Contribution Percentage field on enrollment screen.
○ Contribution Rule: Select the relevant rule. This rule determines the employer contribution percentage or amount for a particular employee. This rule looks up a custom object which has the criteria specific to that country/ legal entity and the employee.
○ Employee Can Edit Employer Contribution: Choose either Yes or No. If you choose Yes, the employee can edit the employer's contribution percentage or amount, at the time of enrollment. If you choose No, the system displays the defaulted contribution amount or percentage split that you entered during benefit creation.
○ Employee Contribution Details
○ Employee Contribution Type: Select either Percentage or Amount. Based on this contribution type the system displays either Contribution Percentage fields or Contribution Amount.
○ Contribution Amount or Contribution Percentage: Enter the amount/percentage that the employee must contribute in the corresponding pension fund. The amount/percentage the you enter here will be displayed for all the employees in Employee Defined Contribution Amount/ Employee Defined Contribution Percentage field on enrollment screen.
○ Contribution Rule: Select the relevant rule. This rule determines the employee's contribution percentage or amount for a particular employee. This rule looks up a custom object which has the criteria specific to that country/legal entity and the employee.
○ Employee can Edit Employee Contribution: Choose either Yes or No. If you choose Yes, the employee can edit the contribution percentage or amount, at the time of enrollment. If you choose No, the
system displays the defaulted contribution amount or percentage that you entered during benefit creation.
Note
Points to remember while Creating Pensions:
● Pay component's currency and the Benefit's currency that you entered while benefit creation must be the same.
● All legal entities should belong to the same country specified in benefit pension object.
● Employer Defined Contribution Amount or Percentage should not be less than the value of Statutory Minimum Amout or Percentage, that you enter for an employee.
● Employee Defined Contribution Amount or Percentage should not be less than the value of Statutory Minimum Amount or Percentage, that you enter for an employee.
Note
To default enrollment as Yes for all benefits of type pensions, set up the rule as shown in the below image and then assign this rule in the Benefit Object Definition.
Process for Assigning Rule to Benefit Object Definition
1. Go to Admin tools and choose Configure Object Definition. You will see the Object Definition screen. Select Benefit object from the drop down list.
2. Click on Take Actions and choose Make Corrections.
3. In the benefitType field, click on Details and under Rule section attach the rule that you have created above.
Related Information
Quick Steps to Get Going [page 9]
6.4.1 Statutory Minimum Lookup Object
In this lookup object you enter the minimum amount/ percentage that an employer and employee is supposed to contribute towards a pension as per the law.
To create statutory minimum lookup object, perform the following steps:
1. In Admin Tools, click Benefits Admin Overview under Benefits Management. The system opens the Benefits Admin Overview screen. Select Create New - Benefit Pension Statutory Minimum Lookup Object.
2. Enter data in the following fields:
1. Lookup ID: Enter the ID.
2. Effective Start Date: Select the date from which the statutory contribution is valid.
3. Pension Type: Select either State Pension or Employer Pension.
4. Country: Select the relevant country for which you want to maintain details about statutory contribution.
5. Employer Statutory Minimum Amount: Enter the minimum amount that an employer is supposed to contribute as per the law.
6. Employer Statutory Maximum Amount: Enter the maximum amount that an employer is supposed to contribute.
7. Employer Statutory Minimum Percentage: Enter the minimum percentage that an employer is supposed to contribute as per the law.
8. Employer Statutory Maximum Percentage: Enter the maximum percentage that an employer is supposed to contribute.
9. Employee Statutory Minimum Amount: Enter the minimum amount that an employee is supposed to contribute as per the law.
10. Employee Statutory Maximum Amount: Enter the maximum amount that an employee is supposed to contribute.
11. Employee Statutory Minimum Percentage: Enter the minimum percentage that an employee is supposed to contribute as per the law.
12. Employee Statutory Maximum Percentage: Enter the maximum percentage that an employee is supposed to contribute.
Once you create this lookup object, the system displays the data that you maintain here in the Create Pension screen under Statutory Minimum Lookup Object section. The system displays these details based on the selection of Pension type and Country made while creating pensions.
6.4.2 Create Savings Plan
To create the savings plan, perform the following steps:
1. Go to Admin Center and in the Tools Search field type Benefits Admin Overview. The System opens the Benefits Admin Overview screen. Select Create New - Benefit.
2. In the Benefit Type field, choose Pension.
3. In Plan Type field, choose Savings Plan.
4. Select a country from Country field. The Plan SubType will display selection based on the chosen country. For more information, see Benefit Savings Plan Subtype Object [page 77]
5. Enter the required data. For more information, see Create Pensions.
6. Create the funds for saving plan by specifying the fund details such as fund name, fund agency ID, fund number.
If you choose Yes in the Is Default field, during enrollment, the system defaults the particular fund in Pension Fund field.
Note
Employer contributions for 401K / or any other saving plans will not be set up in EC. It needs to be directly configured in the respective payroll system (EC Payroll or 3rd Party payroll)
When to use the savings plan type in global benefits
To process savings plan the system requires some additional information as compared to the existing plan type benefit. The existing pensions benefit type in the global benefits framework has only Employee and Employer contribution. However, there is a need for some savings plans to capture pre and Post tax contributions. One example is the 401K retirement benefit for US.
To maintain such additional data, you must choose Benefit type as pension/savings plan and select savings plan in Plan Type field. The system displays the additional pre and post-tax fields on the enrollment screen as input fields.
Employee can then specify his contribution amounts or percentages.
For example, In case you want to configure the 401K plan, which is a type of saving plan in the United States, you must choose the benefit type as savings plan, which allows you to capture details like Regular Salary Contribution, Bonus Salary Contribution, Pre Tax Contribution and Post Tax contributions that are required during enrollment processing.
The data that is captured during savings plan enrollment would be replicated to EC payroll Infotype169. However the replication to Infotype 169 is on the roadmap, and yet not supported as of release b1602.
There could be two ways to capture and process US savings plan data:
● Employee specifies his contributions in Employee Central (EC) using EC benefits and the same then either replicated to EC Payroll ( infotype 169) or extracted out of EC via integration center or ODS reports and sent to 3rd party payroll systems , depending on which payroll the customer is using.
● Employee specifies his contributions in the 3rd party 401k provider. The 3rd party provider manages the funds for the employee. The customer choses to show the employee contribution as an info in EC, and thus would import the data from 3rd party provider in EC benefits 401k object.
6.4.2.1 Benefit Savings Plan Subtype Object
In this object you can create the plan sub type for savings plan an employee can enroll for.
To create benefit savings plan subtype object, perform the following steps:
1. In the Admin Tools, click Benefits Admin Overview under Benefits Management. The system opens the Benefits Admin Overview screen. Select Create New- Benefit Savings Plan Subtype object.
2. Enter data in the following fields:
1. Effective From: Enter the date from which the plan subtype is valid.
2. Subtype Name: Enter the name of the plan subtype.
6.4.2.2 Benefit Savings Plan Subtype Lookup Object
In this lookup object you can enter the plan sub type for savings plan an employee can enroll for. The system displays these details based on the effective date and country made while creating savings plan subtype.
To create benefit savings plan subtype lookup object, perform the following steps:
1. In the Admin Tools, click Benefits Admin Overview under Benefits Management. The system opens the Benefits Admin Overview screen. Select Create New- Benefit Savings Plan Subtype lookup object.
2. Enter data in the following fields:
1. Effective From: Enter the date from which the plan subtype lookup is valid.
2. Country: Select the country for which the supported plan subtype is to be added.
3. Saving Plan Subtype: Select the savings plan subtype for the entered country from the list.