How are Contributions Calculated?
When you define contributions you need to determine how you want those contributions calculated. When you use the contribution types options amount, options amount range, or flat contributions these can be calculated as a flat amount, percent of salary, or a flat percent. The following explains each type of contribution calculation.
| Calculation Type | Description |
|---|---|
| Flat Amount | Every employee in a group pays the same amount for a coverage option. For example, single coverage costs $300 annually and family coverage costs $500 annually. |
| Percent of salary |
An annual contribution is defined as a percent of the employee's salary. You specify the salary for the calculation on the contribution form. For example, single coverage is 5 percent of salary; family coverage is 7 percent of salary. Salary is defined as each employee's annualized rate of pay from the Human Resources application. If an employee's annual salary is $20,000 and the employee chooses single coverage, the employee's annual contribution is $1,000 (0.05 * $20,000). If the employee chooses family coverage, the employee's annual contribution is $1,400 (0.07 * $20,000). The Benefits Administration application calculates the employee's annual contribution at benefit entry. Flat amount deductions are created for the benefit. |
| Flat percent |
A contribution defined as a percent of the employee's pay period wages. You define the wages on which the contribution is based by assigning a pay class to the plan's deductions. The Payroll application calculates the actual deduction amount each pay period. Percent deductions are created for the benefit. Because pay is calculated each pay period, the wages on which contributions are based could change each pay cycle. For example, an employee's wage includes regular and overtime pay. The employee elects single coverage, which is 5 percent of pay. On one week, an employee makes $1,000. The employee's contribution is $50 ($1,000 * 0.05). The next week, the employee makes $1,100, which includes $100 in overtime. The employee's contribution is $55 ($1,100 * 0.05). |
| Rate Table |
A contribution defined using a rate table where cost varies based on salary, age, or years of service. You can enter rates as an amount or percent of salary. For example, in contributions based on salary, employees making $10,000 to $19,999 pay a different rate than employees making $20,000 to $29,999. In contributions based on age, employees 20 to 29 years of age pay a different rate than employees 30 to 39 years of age. In contributions based on years of service, employees with less than five years of service pay a different rate than employees with more than five years of service. |