Retirement Calculations

2 Calculating Retirement    

The basic values of the retirement calculation are:

• Report compensation as earned rather than when paid

• Follow the reporting rules of the Department of Retirement Systems

• Create a ‘self-balancing’ system, i.e. the system will ‘make-up’ for previous under or over reporting

• Provide the client with guidance through on screen messages or errors and warnings

• Provide the client with reports to help analyze current calculations and/or  historical calculations

• Allow the client the ability to create transmittals to DRS as often as desired and transmit to DRS in an electronic fashion

• Support the following systems and plans:

• • Teachers’ Retirement System (TRS) Plans 0, 1, 2, 3

  • Public Employees’ Retirement System (PERS) 0, 1, 2, 3

  • School Employees’ Retirement System (SERS) 0, 2, 3

• Allow for expansion of future systems, plans, status and type codes

The WESPaC Retirement Calculations run during the Payroll Calculation process.  The retirement calculation process populates the WA001RetTransactions, retirement transaction table, with detailed records to support deductions, benefits, retirement reports and transmittals.

If anomalies are encountered by the retirement calculation program, the process will attempt to display all error or warning messages applicable in the Exception Report following the calculation.  The program may not display all errors or warnings for a person because of previous errors within the person. These previous errors may mean that the program does not have sufficient data to complete the process for the person and display all messages.  A list of all errors and warning with associated suggestions for correction can be found in documentation under the subject of HR Messages.

Basic Requirements to Report Retirement for an Employee

Employee Type Codes

Each employee must be assigned an Employee Type code.  The employee type code is important for employees on TRS, plan 1.  Since TRS, plan 1 service credit is reported in days rather than hours; the employee type code provides a conversion factor to translate hours into days.

TRS – 1 Hours per Day:  7.00

Pay Codes

The pay code not only describes the pay for each pay record, but also defines the retirement status code.  Commonly the status code is ‘A’ for normal/regular compensation.  The client should have additional pay codes for unusual compensation, e.g. vacation pay out.  Not all status codes are valid in all retirement systems and plans.  The calculation will validate the status code against a list of valid system/plan/status codes.

Pay codes also determine if a code is a ‘(hourly) Rate’ or ‘Contract’ type.  

Calendars

Calendars are used to calculate earnings over a range of time for each contract.  Each payroll contract must be associated with a current year calendar.  Each calendar is associated with a ‘processing year’ or fiscal year, start date, end date, and default hours per day.

Each day may be denoted as either:

Work day (default)

Non-work day

Days Different from Default  (DDD)

DDD may be different by:

Having a description/note

Different hours per day than the default – different hours per day will override the employee’s contract hours per day for the calculation of earning period hours.

Being denoted as a paid holiday – if a day is denoted as a holiday, the hours associated with the day are reportable to DRS.  Holiday hours are prorated based upon the employee’s contract hours per day and the calendar’s default hours per day.

Example:

Contract hours per day:  4:00

Calendar default hours per day:  8:00

Holiday hours:  8:00

Answer:  4:00 holiday hours

(Contract hrs/day / Calendar default) x

Calendar Holiday hours

(4/8) x 8 = 4 hours

Retirement Member Profile

This record defines the employee’s period of eligibility (start/stop) for the specified retirement system and plan in addition to the employee’s choice date, investment manager, plan 3 rate option, and type.  Data is sent to DRS from this record when the transmittal process recognizes a change.  Upon ‘add’ of a retirement member profile record, the system will prompt the client to add associated deduction and benefit control records to the employee’s profile.

Deduction and Benefit Control Records

Deduction and Benefit control records must exist for the employee and be ‘applied’ to associated pay records for the retirement reporting to take place.  Deduction and Benefit codes have been established by WSIPC, example:

1ReT1 – TRS, Plan 1

1RetE2 – SERS, Plan 2

1RetP2 – PERS, Plan 2

The client may establish additional or different system/plan codes if they desire within the system to control benefit charges.

The retirement deduction and benefit control records start/end dates should be left blank.  The retirement membership profile eligibility start/end dates will control when to apply the deduction or benefit to the employee’s pay check.  

Sources of Pay

Payroll Record

Perhaps the simplest form of pay is the Pay Record.  There must be a pay record for each contract and for each desired breakdown of hourly pay.  The pay record must have the appropriate deduction and benefit control records applied to activate retirement reporting.

Rate Type Pay Record

The pay record will commonly include all information except the hours worked.  The hours worked will be entered within the payroll worksheet process or within the selected payroll transactions.  Rate type pay records will have an earning period assigned by the payroll worksheet earning period, the earning period on the selected payroll transaction, or if left blank the default retirement posting date set at the time of payroll calculation.

Contract Type Pay Record

The pay record for the contract will contain like information to the above rate type pay record, however the amount will reflect the installment amount and a factor of 1.0000.  Later, in the calculation process, the system will use data within the contract and associated pay record to calculate retirement compensation.

Contracts

Using the following information from the contract, the calculation will project the earning across the earning periods contained within the Work Start to Work End date range.

Contract amount

Work Start, Work End

Calendar

Hours per day

Contract to-date

With each calculation the system will project earnings for the contract.  The calculation will compare the contract projections to historical amounts reported through the payroll period end date.  If there are any differences between projections vs. historical values, the calculation will create transactions for the current reporting period by earning period.  Thus, with each calculation the system is rebalancing the values based upon any changes to an employee’s contract or profile data.

Example:

Contract Amount:  $48,000, Work 9/1/xx through 6/22/xx+1, 6 hrs/day, calendar AA

Calendar – AA, 8 hours/day default

For each earning period above:

(c) = (a + b)  / 195) x $48,000

(d) = (a + b) x 6 hrs/day

(e) = (c) x .05

(f) = (c) x .06

Payroll Worksheets

Payroll worksheet data may be entered using the Skyward payroll worksheet user interface or payroll worksheet data may be imported from an external source such as an Excel spreadsheet.  Eventually, the worksheet data is imported to the selected payroll where it is summarized.

The client is not able to observe imported worksheet data in the selected payroll and determine the retirement earning period.  During the calculation for a rate type record, if worksheet transactions exist, the system will reference the worksheet transactions to determine the appropriate earning period split.  The split between worksheet earning periods can be observed in the Retirement Activity Report or Retirement Transaction Report.

Substitute Tracking

Substitute Tracking earnings are imported to the selected payroll like importing payroll worksheets.  For each selected rate type pay record the calculation will ‘look’ for associated sub tracking detail transactions to determine the appropriate earning period.  Like worksheets, the client cannot observe the earning period splits from the selected payroll records, but must observe the earning period splits in the Retirement Activity Report or Retirement Transaction Report.

Adjustments

Retirement adjustments are manual transactions created by the client to correct previous erroneous reporting.  Before retirement adjustments can be processed they must be associated with a pay record and that pay record must be selected into the payroll.  The adjustment must also be associated with a valid retirement membership profile for the adjustment earning period.

Include in Retirement Balancing

Checking this box has no effect on non-contract pay records (non-contract pay records are not balanced).  If this checkbox is marked and it is associated with a contract via the shared pay code, then the adjustment will added to the balancing process of the calculation.  If the checkbox were not checked then the adjustment would not be included and the adjustment values would be in addition to the projected compensation, employee, and employer values.

Do Not Report to DRS

If the client wishes to create a retirement adjustment to the employee’s pay check without transmitting the transaction to DRS, then check this box.  If a manual transaction is sent via WBET to DRS that information is not recorded in the WESPaC database.  To bring the two systems into balance, this feature can be used.  The transaction will be applied against the employee’s pay check, the vendor check amount, appear in retirement reports, (denoted with an asterisk “*”), but will not be included in the DRS transmittal.

Special Conditions

Pay Records Exempt from Retirement Reporting

To not report a pay record’s information to DRS, simply do not add or apply a retirement deduction or benefit to the pay record.  The calculation will not report any compensation or service credit associated with the pay record.  A warning will appear on the payroll calculate exception report for each exempt pay record.

Retroactive Pay

Modify the Contract Amount within the contract record and the (installment) Amount within the associated Pay Record to the new values.  To pay retroactive pay, create another Pay Record using a matching pay code to the contract Assoc. Retro Pay (code).  The non-contract pay record’s pay code should have the Rate Type and Contract Type indicators set to ‘No’.

The calculation will spread the retroactive pay proportionally back to the work start.  The pay that is after the eligibility start date will be reported to DRS with the associated deduction and benefit amounts.

Lump Sum Payments

Contract Method – see retroactive above

Non-Contract Method

Depending on the type of lump sum payment (vacation, cashout), hours or days may be reportable (see Retirement Status Codes)  Ensure the pay code used for the payment is associated with the appropriate retirement status code.

To report hours – Enter the reportable hours in the Factor/Amount data field of the pay record.  The Factor/Amount value will default to the Retire Hours data field.

To not report hours

Option 1 – Do the same as above, but place a zero value in the pay records Retire Hours data field.

Option 2 – Set the pay code’s attribute of Rate Type and Contract Type both equal to No.

Dock Pay

A Dock pay code can be associated with a contract.  When unpaid time off is entered it can be associated with single or multiple contracts and worksheet records automatically created to properly distribute the dock pay among earning periods and contract pay codes.

Snow (non-work) Days

For persons affected by the snow day, set the appropriate calendar day(s) to a non-work day, i.e. -0- hours and extend the calendar by making non-work days into work days.

The next payroll calculation process will create contract earning projections based upon the new calendar day pattern and automatically create correcting retirement transactions as needed.

Terminations/Retirement

Within the Retirement Membership Profile record, set the Eligibility Stop Date to the last day of earnings.  When the next transmittal is created, the system will recognize the change in the employee’s profile record and transmit the stop date.

Substitutes

Part time or substitute employees must be reported to DRS under plan 0.  Add the appropriate retirement membership profile record and deduction and benefit control records.  The appropriate plan 0 deduction and benefit control records must exist and be applied to the pay record. The calculation will not take deductions or benefit from the employees’ pay check.  

Transfers

Plan transfers occur in 4 situations:

1.  New Employee chooses or defaults to Plan 3:  

1. Add the appropriate Plan 3 membership profile information and deductions and benefit to the pay  record(s) and all retirement transactions processed through payroll from that point forward will be reported as plan 3.

2. Previously ineligible Employee now eligible:

3. 1. Add the appropriate new plan membership profile information and deductions and benefits to the pay records(s).  If the eligibility is retroactive, all retirement previously reported as plan 0 will be reversed and re-reported under the new plan.  Future items paid will be reported to the plan in effect for the earning period being paid.

3. Previously eligible employee becomes ineligible:

4. 1. Add the Plan 0 new plan information and deductions and benefits to the pay records(s). If the eligibility is retroactive, all retirement previously reported in an eligible plan will be reversed and re-reported under Plan 0. Future items paid will be reported to the plan in effect for the earning period being paid.

4. Data entry mistake causing an employee to be reported under the incorrect plan:

5. 1. 1. 1. Correct the membership profile information and add the correct deduction and benefit codes to the pay record(s).  All retirement previously reported under the incorrect plan will be reversed and re-reported under the correct plan.  (Except when the incorrect plan is plan 2 and the correct plan is plan 3, because DRS generally will do that automatically.)

Page Updated 04/2010