How are Company Match Contributions Calculated?
There are two contribution types that allow company match deductions: match limit schedule and match percent schedule. Each contribution type calculates deductions differently. Each contribution type works differently.
Match Limit Schedule
For the match limit schedule, the Benefits Administration application creates the deduction without any special calculations, taking the values directly from the schedule. The Payroll application performs calculations that are unique to these benefits deductions to determine the amount of the deduction in each payroll cycle.
For example, the company matches 50 percent of an employee's contribution up to four percent. If an employee contributes three percent, the company match is 1.5 percent (0.50 * 0.03). If an employee contributes six percent, the company match is two percent (0.50 * 0.04). You can further define limits to be based on years of service. You can vary the match limit schedule based on years of service. If you do not want the match limit schedule varied by years of service, define only one range.
Match Percent Schedule
For the match percent schedule, the Benefits Administration application performs unique calculations to determine the values to be used when the deduction is created. The Payroll application handles the deduction like all other payroll deductions.
For example, a plan matches 50% of employee contributions from one percent up to four percent and 25% of employee contributions from five percent up to ten percent. If the match calculation is fixed and an employee contributes three percent, the company match is 1.5 (0.5 * 3). If the employee contributes seven percent, the company match is 1.75 (0.25 * 7). If the match calculation is cumulative and an employee contributes three percent, the company match is 1.5 (0.5 * 3). If the employee contributes seven percent, the company match is five percent of the first four percent and 25% of the next three percent, or 2.75% (0.5 * 4 + 0.25 * 3).