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Uncovering the Secrets of 403(b) Limit Processing
Session 1000Barry Melcher
Betty McClellanMike McNaughton
University of MinnesotaSoftlink, Inc.
PeopleSoft Version 7.6
Introductions
Barry Melcher Benefits Counselor, Human Resources University of Minnesota
Betty McClellan Senior Consultant Softlink, Inc.
Mike McNaughton Business Analyst, Human Resources University of Minnesota
Why We Modified Process
Problems projecting: Includible earnings Service credit
Due to: Employees with multiple jobs Employees who work part time Employees with appointments that are
less than 12 months
Agenda
Overview of University of MinnesotaTesting strategyDiscoveriesOur modificationsHow we administer the processConclusions
Who We Are
Land Grant University with 4 campuses
59,185 students30,823 employeesCommon Paymaster for University of
Minnesota (UMN) and an affiliated company (UMP)
Biweekly payroll with 10 day delay
Retirement Plans
Faculty Retirement Plan 401(a) defined contribution plan with a
414(h) pickup 5,269 participants
Minnesota State Retirement System 401(a) defined benefit plan with a
414(h) pickup 11,190 participants
Retirement Plans
403(b) Plan - Optional Retirement Plan 5,563 participants
401(k) Plan Affiliated company (UMP) 20 participate in both 401(k) and 403(b)
Thrift Savings Plan Federal employees paid through University
payroll 45 participate in both TSP and 403(b)
Legacy System
Business Rule Project annual maximum and compare
to current reduction amount Projection based on term of
appointment Service credit earned each pay period
based on term of appointment
Legacy System
Automatic maximum reduction calculation Maximum less YTD contribution divided by
pay periods remaining Reduction amount loaded into payroll
Projected yearly maximum report Run each pay period Manual adjustments to reduction amounts
Legacy Data
550 participants using automatic maximum
260 participants using Any Year Exclusion Limit (Alternative B)
35 participants using Overall Exclusion Limit (Alternative C)
Legacy Data
190 participants using 402(g) Cap Expansion
Year of Separation Limit (Alternative A) - calculation for this limit not programmed
PeopleSoft Conversion
Conversion in June 2000Converted LTD balances as of
December 31, 1999 into 403(b) annuity data record for calendar year 1999
Converted all YTD balances into payroll balance records for calendar year 2000
Did not convert to handle Year of Separation Limit (Alternative A)
Our Initial Strategy
Load setup tablesRun projection processAnalyze results of projection processRun payrollFigure out how payroll limited
What Really Happened
Loaded setup tablesRan the projection process for the
UMN company Process took 12-14 hours to
calculate for 30,000 employeesStarted running projection process
for single employees
What We Discovered
Trouble justifying PeopleSoft calculations
Discovered importance of setting deduction priorities
Reasons for deductions not taken were not specific enough to be meaningful
Discovered issues with multiple appointments
Multiple Jobs = Multiple Service Credit Problems
Employees with more than 40 standard hours due to multiple appointments received more than 1.0 Service Years YTD
Employees on short work break with less than 12 month appointments received less than 1.0 Service Years YTD
Multiple Jobs = Multiple Service Credit Problems
Employees with appointments in UMN and UMP received service credit based on both appointments (UMP company service credit should not apply to UMN)
Employees in unpaid pay groups received service credit for the appointment
Multiple Jobs = Multiple Includible Earnings Problems
Employees with appointments in UMN and UMP Compensation based on both companies
includible earnings (UMP includible earnings should not apply to UMN)
Employees in unpaid pay groups Compensation on JOB record, but it was
incorrectly added into their includible earnings
Other Issues Includible earnings
Calculated on a calendar year basis from JOB record, not on when the earnings are paid based on payroll calendar
Adjustments panel Anything entered into adjustments
panels adjusted both the year entered and any following year
Part-time employees and employees on sabbaticals
Assistance From PeopleSoft
Confirmed our strategy for converting life-to-date balances
Got a fix on projection process and includible earnings
Gave guidance and options on when to run the projection process
The Lightbulb Goes On!
Previously, focused most of our time on the results of projection process
Modified the projection data panels to allow update for each field
Entered representative test cases directly into projection data panels
Ran payroll calculation to see the impact
The Lightbulb Goes On!
Projected Exclusion Allowance - payroll limit process uses this figure
Any Year Exclusion Limit (Alt B) - FYI on panel; payroll process recalculates and applies
Projected Year of Separation Limit (Alt A) - FYI on panel; payroll process recalculates and applies
The Lightbulb Goes On!
Overall Exclusion Limit (Alt C) - FYI on panel; payroll process recalculates and applies
Elect 402(g) Cap Expansion - payroll limit process uses this figure
Final Conclusions From Our Testing
Service Years and includible earnings calculations were not accurate for UMN setup
LTD and YTD totals for our retirement plans setup in custom plan types were not calculating appropriately in the projection process
Final Conclusions From Our Testing
PS has the right fields - projection process just doesn't populate them correctly for us
Limiting of deductions during payroll calculation works well
Decided not to change the vanilla projection process, instead built our own to populate delivered fields
Our Projection Process
Uses the vanilla run control recordCan run process for 1 employee or 1
companyWhen run for a company, will
process anyone who has been paid in that company anytime during the calendar year
Our Projection Process
Can run for whatever year you want, so you can "build" history for rehired employees who don't have historical data on the system
Awards service credits for the pay period that was just confirmed
Our Custom 403(b) Panel
Our Projection Process
Uses the vanilla setup tables to define: Deductions to be limited Limit amounts Imputed income to include Deductions to exclude
Our Projection Process
Start with YTD earnings in our special accumulator
For each appointment, project regular earnings for pay periods remaining based on the term of appointment
Add these together
Custom Appointment Term Panel
Our Projection Process
For all deductions set up as imputed income to include: Add imputed income from most recent
pay check Project for the rest of the year based on
number of remaining pay periods, regardless of appointment term
Add this to our base earnings
Our Projection Process
Created Gross Salary Override to use in lieu of previous calculation for part time employees (less than 40 standard hours)
Gets the deduction balances and project for retirement plans, such as Faculty Retirement Plan and Minnesota State Retirement System
Using rules from setup tables, reduce the base as appropriate
Our Projection Process
Calculate the 403(b) record: Start with the most recent year's LTD
amounts Add in YTD balances + projected
includible amounts Add in YTD imputed income +
projected amounts Subtract YTD deduction balances +
projected amounts
Our Projection Process
Multiply the result by the MEA percent from limit table by years of service, then subtract the previous LTD deduction
Also calculate alternative elections, 415 limit, and 402(g) cap expansion
Update or insert new 403(b) records
Summary of Modifications
Custom record and panel to store YTD service credit awarded and Gross Salary Override
Custom appointment term record and panel
Custom SQR process to populate 403(b) annuity data fields
Summary of Modifications
Minor modifications to the vanilla panels that display the projection record
A few custom reports and queries
Final Stretch
Process and timingThe reports/queriesWhat we’ve gainedThe futureQuestions and answers
Process Flow
Projection process runs biweekly before paysheets are created
Audit reports are createdPay calculation runs and deductions
are calculatedRun custom queriesManual updates/overrides as needed
Custom Reports
403(b) Projection Process Audit Report 4 lines per employee which displays all
fields on the projection panels, plus components that go into the calculations
Report is huge, but can view online Refer to it for testing and to audit
calculations Produced on an individual run also
Custom Reports
403(b) Projection Process Overall Exclusion Limit Report Displays data for people who have chosen
the Overall Exclusion Limit election The payroll COBOL process does not
calculate the limit accurately with our retirement plan setup
We use this to manually override 403(b) deductions for this group
Custom Reports
Payroll Limited Report Currently a query that is run after pay
calc Look for all “Not Taken” 403(b)
deductions Verify accuracy
Custom Reports
Payroll Limited Report (cont.) Reviewed by staff
History evaluatedMake sure large deductions will be taken
Projection re-run, and paysheet recalculated if needed
Ran again after Pay Confirm to be ready for pay day
Custom Reports
Combined Limit Reports Combines totals for multiple plans (e.g.
401(k), 403(b) and Federal Thrift Savings Plan)
Run before and after each confirm (common paymaster)
Manually override deductions as appropriate
What We Gained From PeopleSoft
Now allow percent elections 9 month faculty have 19 ½ paychecks 403(b) deductions every paycheck including
summer earnings
Partial deductionsAn integral part of the payroll process Data is more available via query tools
What We Gained From PeopleSoft
Election history onlineUser friendly panels that have a lot
of information on themAutomatically limits deductions
What We Gained From Our Customizations
More accurate limit calculationsCustom projection process runs in
less than an hourAble to leverage vanilla setup tables,
employee records and payroll process without modifying them
Produce more informative reports
Future Opportunities
Automatic 402(g) deduction limit between 403(b), 401(k) and Thrift Savings Plan
Still need to do some monitoring and manual adjustments
Federal legislation to repeal maximum exclusion allowance
Questions
Barry Melcher University of Minnesota [email protected]
Betty McClellan Softlink, Inc. [email protected]
Mike McNaughton University of Minnesota [email protected]
