Configuring and Using Pension Plans

Objective

After completing this lesson, you will be able to configure and use pension plans.

Types of Pension Plans

A pension is a retirement benefit that an employee is entitled to at the time of retirement.

Global Benefits provides options for three types of pension plans:

  • Employer Pensions: An employer pension 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. Employer pension plans can be contributory or non-contributory.

    • In contributory pensions, both the employer and employee contribute to pensions.

    • In non-contributory pensions, only the employer contributes to pensions.

  • State Pensions: Many countries have created funds for their citizens and residents to provide income when they retire. A state pension is a defined contribution based pension plan, and depends on an individual's contribution history. Employees pay a fixed percentage towards this pension fund, which is usually deducted from their taxable income. The percentage contribution is a legally defined value.

  • Workplace Pensions: The workplace pension allows the system to offer more flexibility for configuring the contribution guidelines for a pension plan. Using this type of pension, employers can map multiple contribution guidelines, such as contribution matching, more contribution options, and allows you to configure a pension plan without providing pension fund details. Pension funds must be set to Single as multiple funds are not supported for the workplace pension plan type.

    Note

    For the Workplace pension plan, the Employer Contribution Amount, Employer Contribution Percentage, and Additional Voluntary Contribution amount fields are replicated from Employee Central to Employee Central Payroll.

Pension Funds

When creating a pension plan benefit, you will be prompted to select or create a pension fund. A pension fund is a pool of assets set aside by an employer or individual to provide income to employees or participants upon retirement. It's a retirement savings plan where money is invested, and at retirement, the accumulated funds are used to provide regular income, often for life.

The Pension Fund record includes the name, ID and fund number, as well as the pay component for the employer and employee contributions.

A screenshot of the Benefit Pension fund screen, which includes the fund name, fund agency ID, fund number, and employee and employer pay components.

Remember! When creating pensions:

  • The pay component currency and the Benefit currency entered while creating the benefit must be the same.

  • All legal entities must belong to the same country specified in the benefit pension object.

  • Employer defined Contribution Amount or Contribution Percentage must not be less than the value of Statutory Minimum Amount or Percentage, that you enter for an employee.

  • Employee defined Contribution Amount or Contribution Percentage must not be less than the value of Statutory Minimum Amount or Percentage, that you enter for an employer.

Set Up a Pension Plan

Business Example

You are setting up a pension plan for ACE USA employees. In this pension plan, the company contributes USD100 per month for each employee. The payment is made to the pension plan.

Task 1: Create the Schedule and Schedule Period for a Pension Plan

ExerciseStart Exercise

Steps

  1. Create a new benefit period and benefit schedule with the below details:

      
    Schedule ID2025PENSION
    Schedule Name2025 Pension Plan Schedule
    Schedule Period

    • Period ID: 2025PENSION

    • Period Name: 2025 Pension Plan Schedule Period

    • Enrollment Opens: 01/01/2025

    • Enrollment Closes: 12/01/2025

    • Enrollment Effective From: 01/01/2025

    • Enrollment Effective Until: 12/31/2025

    1. Use the Action Search to open Benefits Admin Overview.

    2. Select Create New→Benefit Schedules.

    3. Enter the Schedule ID and Schedule Name from the table above.

    4. In the Schedule Period field, select +.

    5. Enter the details given in the table for the Schedule Period .

    6. Select Save and close the Benefit Schedule Period window.

    7. Select Save.

Task 2: Create a Pay Component for a Pension Plan

ExerciseStart Exercise

Steps

  1. Create a pay component for the pension plan benefit with the following details:

    FieldValue
    Effective as of01/01/2025
    Pay Component IDPensionPlan
    NamePension Plan
    StatusActive
    Pay Component TypeAmount
    Is EarningNo
    CurrencyUSD
    FrequencyMonthly
    RecurringYes
    Can OverrideYes

    1. Use the Action Search to open Manage Organization, Pay, and Job Structures.

    2. Select Create New→Pay Component.

    3. Enter the data from the table.

    4. Select Save.

Task 3: Create a Pension Plan Benefit Using the schedule and Pay Component

ExerciseStart Exercise

Steps

  1. Create a new pension plan called ACE Pension Plan with the following details:

    FieldValue
    Benefit TypePension/Retirement Savings Plan
    Benefit IDPENSION
    Benefit NameAce Pension Plan
    Effective From01/01/2025
    StatusActive
    CurrencyUSD
    Integration ModeBenefit Objects
    Legal EntityAce USA
    Benefit Schedule2025 Pension Plan Schedule
    FrequencyMonthly (MON)
    Enrollment RequiredYes
    Days Remaining to EnrollShow
    Enrollment TypeManual
    Country/RegionUnited States
    Pension FundsSingle
    Retirement Plan TypeWorkplace
    Contribution OptionsMinimum and Maximum Limits

    1. Use the Action Search and navigate to Benefits Admin Overview.

    2. Select Create New→Benefit.

    3. Enter the data from the table.

    4. Select Save.

  2. Add the contribution limits to the pension plan using the following details:

    FieldValue
    IDACEPENSIONLIMITS
    NameAce Pension Limits
    Employer Contribution TypeAmount
    Effective Start Date01/01/2025
    Employee Contribution TypeNo Selection
    Employer Contribution TypeAmount
    Employer Minimum Contribution Amount0
    Default Contribution100

    1. Select the Add Pension Contribution Limits icon next to the Contribution Limits field.

    2. Enter the information in the table above.

    3. Select Save.

    4. Set the value in the Contribution Limits field to ACEPENSIONLIMITS

  3. Add the details for the Pension Fund

    FieldValue
    Fund NameAce Pension Fund
    Fund Agency IDACEPENSIONFUND
    Fund Number100
    Employee Contribution Pay ComponentPension Plan (PensionPlan)
    Employer Contribution Pay ComponentPension Plan (PensionPlan)
    Is DefaultYes

    1. Select the Add Benefit Pension Fund icon next to the Pension Funds field.

    2. Enter the information in the table above.

    3. Select Save.

  4. Finish populating fields in the Benefit record.

    1. Set the Employer Contribution Type to Amount.

    2. Use the trash can icon to remove the Employee Contribution Detail section.

    3. In the Additional Help Text section, set the Title field to Pension Information and set the Description field to Pension is Employer Contribution Only.

    4. Select Save.

  5. Confirm the Pension benefit appears in the Benefits tab.

    1. From the Admin Center menu, select Home.

    2. Select Manage My Benefits..

    3. Verify that the ACE Pension Plan benefit appears under Benefits Available to Enroll..

Summary

  • A pension fund is a pool of assets set aside for employee retirement. When creating a pension plan, a pension fund must be selected.
  • Global Benefits supports Employer Pensions, State Pensions, and Workplace Pensions.
  • Employer Pensions can be contributory (both employer and employee contribute) or non-contributory (only employer contributes).
  • State Pensions are funded by employees' fixed percentage contributions and are usually deductible from taxable income.
  • Workplace Pensions provide flexibility in setting contribution guidelines and allow for contribution matching.

Learning

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