You define an activity rate calculation to determine the contribution that an employee (and, in some cases, an employer) spends to purchase a benefit on a recurring or non-recurring basis. Activity rates also determine the monetary distribution paid from a plan such as a savings plan or a flexible spending account.
The process of defining contribution and distribution activity rates varies depending on the complexity of your calculations. These activities include defining:
Standard contributions and distributions
Prorated partial month contributions
Variable activity rates
Employer matching rate contributions
Imputed income calculations for plans subject to imputed income regulations in the US
As part of your activity rate definition you can also define deduction schedules and payment schedules for contributions and distributions that do not process each pay period.
You can use the Total Compensation Setup Wizard to update multiple standard and variable activity rates simultaneously. You can:
correct existing rates or change rates from an effective date onwards
update rates for a combination of rate type, plan type, and plan
make updates on the page or by way of Web ADI-enabled spreadsheet loaders
When you define an activity rate definition, you select the element to which the activity rate corresponds. That way, when the system calculates an activity rate for a person and a benefit plan or option, the result can be captured in the element and transferred to payroll and other areas of your HR system as necessary.
Note: Set up your elements as a prerequisite to defining your activity rates. If your element definition changes, you must re-attach the element to the rate.
If your plan design allows a participant to enroll in more than one plan at a time in a plan type or more than one option in a plan, you create an element for each plan and each option. If you define activity rates at the plan level that cascade to each option in the plan, you must define an element for each option.
You use eligibility profiles, instead of element links, to determine benefits eligibility. Create an open element link for each benefits-related element. Query the benefits element in the Element Link window and save the record without selecting any assignment criteria to create an open link. If necessary, you can set up several links with assignment criteria for costing purposes. However, you must ensure that these links do not conflict with your eligibility profiles.
Normally, you define one input value per activity rate. However, you can select a formula in the Extra Inputs Rule field and map the formula outputs to input values by choosing the Extra Inputs button.
When a participant enrolls in a benefit, the activity rate result is written to the element. You can view the result in the Element Entries window and the Entry Values window. You cannot manually add or edit an entry for an element associated with an activity rate. These entries are maintained by the system when you make an election change or an enrollment override.
See: Defining and Linking an Element for Standard and Advanced Benefits
See: Elements: Building Blocks of Pay and Benefits
You define a standard contribution or distribution as a calculation that determines the amount a person must pay to participate in a benefit (a contribution) or the amount that is paid to a participant (a distribution).
You associate a standard calculation with a plan or an option in plan so that when a participant makes an election, the contribution or distribution amount is determined.
Standard calculations are used for a variety of plan types, such as medical plans and savings plans. Other plan types require special activity rate calculations, these include flex credit plans and plans subject to imputed income taxes.
Defining a standard contribution or distribution involves:
Defining general characteristics of the activity rate
Defining the activity rate calculation method
Defining prorated activity rates
Defining payroll processing requirements
Defining variable rate calculations, if applicable
For all activity rates, you indicate if the activity type is a contribution or distribution made by the participant or the employer. Examples of activity types include:
Employee Individual Contribution
Employer Matching Plan Contribution
Employer Distribution
You specify the tax basis on which the contribution or distribution is made, such as pretax or aftertax.
If you are defining a calculation for a non-monetary distribution, you can define the unit of measure in which that distribution is expressed, such as Options for stock options.
You define an activity rate calculation method to determine the rate of contribution or distribution for a plan or option. In addition to flat rates, the system supports a range of calculation methods including multiple of actual premium and multiple of compensation.
Calculation methods can also set boundaries for the result of the standard calculation. You can define a minimum and maximum contribution or distribution amount for the result of an activity rate calculation.
You can set the increment by which activity rates are expressed and the default activity rate value.
For a participant whose enrollment coverage date falls within the month, you can define if the system prorates the activity rate. For prorated activity rates, you can define the date range within the month that is subject to the prorated rate. For example, you may only want to prorate activity rates for participants who enroll between the 5th and the 25th of the month.
You specify the percentage of the standard activity rate used to calculate the prorated activity rate for participants who enroll mid-month.
As part of defining an activity rate calculation for a benefit, you define your payroll processing system, such as Oracle Payroll. Then, you define whether the calculation is recurring or non-recurring. For recurring calculations, you can define a schedule for deductions or payments depending if the calculation is for a contribution or a distribution.
You can also define when the activity rate value should be entered. Typically this is at the time of enrollment, but the system also supports automatic rate entry.
You can enforce certification requirements for a standard rate attached to a plan or option in plan when the plan is not in a program. The element associated with the standard rate is not entered for the participant until you mark the certification as having been received, on the Person Enrollment Certification window. The element is entered based on the rate start date code specified on the Plan Enrollment Requirements window.
When you define the standard rate, you can select a certification type from the lookup type BEN_ENRT_CTFN_TYP.
You can associate a variable rate profile with a standard calculation if the activity rate may vary by participant.
Note: This feature is reserved for future use.
If you define a plan where the employer matches a percentage of the employee's contribution, such as for a savings plan, you can define how the system calculates the matching rate.
Because employer matching percentages may vary based on the employee's contribution percentage, you may need to define more than one matching rate for an activity rate.
If the benefit plan sets a maximum employee earnings amount or a maximum contribution percentage beyond which a matching rate should not be calculated, you can define this maximum earnings amount or contribution percentage. That way, if the employee's earnings or contribution percentage exceeds the limit, the system calculates the matching rate based on the maximum amount or percentage that you define.
You define the matching contribution percentage based on the employee's contribution percentage. However, you can also define minimum and maximum employer contribution limits.
Note: This feature is reserved for future use.
For those plans with contribution limits, you can associate a period-to-date limit with the activity rate that determines the contribution amount. Period-to-date limits are often used with 401(k) plans in the US.
You can define an activity rate for a benefit that varies based on some factor. You group together the factors that cause an activity rate to vary into a variable rate profile. You then associate the variable rate profile with an activity rate which, in turn, you associate with a particular benefit plan or option.
As with participant eligibility profiles, variable rate profiles may consist of employment factors, personal factors, derived factors, and other factors such as participation in a particular benefits plan.
You can use a participant eligibility profile that you have defined as a criteria set in a variable rate profile. This lets you define your criteria once, then reuse the criteria set to control both eligibility and variable rates. Oracle recommends attaching eligibility profiles to variable rates--as opposed to individual criteria--to improve system performance.
Note: You can only attach one participant eligibility profile to a variable rate profile. You cannot attach an eligibility profile to a variable rate profile if you have already attached existing criteria to the profile. However, you can remove any existing criteria, then attach an eligibility profile.
Most variable rate profiles are defined so that participants who meet certain criteria are eligible to receive the variable rate. However, you can also define a variable rate profile so that persons who meet the criteria become excluded from receiving the variable rate. In such cases, the standard activity rate for the benefit applies to these persons.
If you use a FastFormula rule as part of your variable rate profile, the participant must meet the criteria of the rule and one value from any other criteria that you include in the profile. If you use more than one FastFormula rule, by default the participant must meet the criteria of all the rules. If you change the user profile option BEN:VAPRO Rule from AND to OR, the participant need only meet the criteria of one rule.
You can associate a variable rate profile with the following kinds of activity rates:
Standard contributions and distributions
Flex credit calculations
Imputed income calculations
Actual premiums
Reimbursement plan rates (for flexible spending accounts)
A coverage calculation defines the level of benefits coverage a participant receives under plans such as a group term life insurance or accidental death & dismemberment insurance plan.
Typical business requirements allow a participant to choose either a flat coverage amount or an amount that is a multiple of the participant's salary. The system also supports many other coverage calculation methods.
Here are several of the aspects of a coverage calculation that you can define:
Minimum and maximum coverage amounts
Maximum coverage amount available with certification (Advanced Benefits)
Maximum coverage increases for flat amounts and coverage amounts that are a multiple of a given value
Prorated coverage for employees who enter flexible spending accounts at any time other than the beginning of the plan year
When you define a coverage calculation method you define if the coverage level amount is entered at the time of enrollment or during the definition of the coverage calculation. You can choose from the following calculation methods depending on the requirements of the plan:
Flat fixed amount
Flat range
Flat amount plus multiple of compensation
Flat amount plus multiple of compensation range
Multiple of compensation
Multiple of compensation plus flat range
Multiple of compensation range
No standard value
Same as annualized elected activity rate
Post Enrollment Calculation Rule
If necessary, you can associate a variable rate profile with a coverage calculation when the calculation may vary by participant.
You can define a life insurance plan where spouse or dependent coverage is a percentage of the participant's elected coverage. Write a FastFormula with a rule type of Coverage Amount Calculation and attach the rule to the coverage calculation using the Post Enrollment Calculation Rule.
This formula executes both when you run the Participation Process to determine electable choices and when you save an enrollment or choose the Recalculate button on the Flex Enrollment window, Non-Flex Enrollment window, or the Benefits Selection page in Self-Service.
Note: Since the formula executes when you run the Participation Process, the coverage amount selected by the employee may not be available. Therefore, the formula should contain a default coverage value.
For those benefit programs that restrict the amount of coverage that a participant can elect across plan types in a program, you can group the plan types in the program to which a minimum or maximum coverage amount applies.
Cross plan type coverage limits work in conjunction with coverage limits you define at the plan level. If you define a maximum coverage limit at the plan level, the cross plan type coverage limit must not have a maximum coverage level that is less than the maximum you set for a plan in that plan type.
For example, suppose your organization defines a Group Term Life Insurance plan type. Within that plan type, you offer the Employee Group Term Life Insurance plan that provides coverage equal to two times earnings up to a maximum of $200,000.
You also maintain a corresponding plan type for Non-Group Term Life Insurance plans. In this plan type, you define a plan that has a maximum coverage level of $120,000.
You could define an across plan type coverage limit called "All Life Insurance Maximum" that limits the maximum coverage a participant can elect across these two plan type to $300,000.
As part of your plan design, you can define the interim coverage assigned to a participant when a participant's enrollment in a benefit is suspended pending the completion of an action item.
For example, you might require a certificate of good health from a participant who is currently enrolled in a life insurance plan with a coverage level of 1x compensation if the participant newly elects a coverage of 3x compensation during an open enrollment period. If you suspend the new election pending receipt of the certification, you can provide interim coverage until the certification is provided.
You can qualify the conditions under which interim coverage is provided based on the participant's current enrollment and the new suspended election. You can either use an interim to assign code or an interim to assign rule to determine the interim electable choice.
Interim to Assign Code
Each interim to assign code contains two parts.
The first part identifies if the suspended election is current or new. Current means that the suspended enrollment is for the Same Option in Plan, Same Plan, or Same Plan Type as the participant's current enrollment.
The second part defines the interim coverage that is provided. You have the following options:
Same: The system assigns the person's current election as interim coverage.
Next Lower: The system assigns as interim coverage the plan in plan type, option in plan, or coverage amount of a range that is the next lower sequence that will not be suspended based on your plan or option definitions. You assign a sequence number when you define a plan or option.
Default: The system assigns as interim coverage the default compensation object or coverage amount defined for the plan, based on the default enrollment codes.
Min: The system assigns as interim coverage the minimum option in plan, plan in plan type, or coverage amount within a range defined for the plan.
Nothing: The system assigns no interim coverage in place of the suspended coverage.
Example: Current Same Plan Type, Default; New, Nothing--This code means that if the participant is currently enrolled in a plan of the same plan type, they are assigned the default coverage; if they are not currently enrolled in a plan of the same plan type, they receive no interim coverage.
Interim to Assign Rule
The interim to assign rule provides greater flexibility in interim cover determination. You configure an interim to assign rule to return one of the following parameters that meets your business requirements:
An interim to assign code
An electable choice ID within the plan type of the suspended enrollment
An electable choice ID within the plan type of the suspended enrollment, and a benefit amount, which must be less than the amount for the suspended enrollment.
Note: Return a benefit amount only if the interim coverage calculation method is:
Flat range
Flat amount, and the Enter Value at Enrollment option is selected
For more information about the Default to Assign Pending Action formula type, see Oracle HRMS FastFormula Reference Guide available on My Oracle Support (Note ID 218059.1).
For those cases where a suspended enrollment is unsuspended, you define the enrollment coverage start and end dates and the activity rate start and end dates for the unsuspended enrollment.
If you assign interim coverage when an enrollment is suspended, the interim enrollment is ended one day before the coverage start date of the unsuspended enrollment.
You select an unsuspend enrollment code that controls the enrollment coverage start date of the unsuspended enrollment if the unsuspended date is equal to or later than the original enrollment coverage start date. Select from the following codes:
As of Completed Date This code sets the enrollment coverage start equal to the effective date on which the enrollment is unsuspended.
Use Existing Enrollment Start Date This code uses the original enrollment coverage start date, even if this date is before the suspension end-date.
Recalculate Using Completed Date and Enrollment Start Date CodeThis code recomputes the enrollment coverage date using the un-suspended date as the life event occurred on date or notification date (depending on your life event definition) if the computed coverage start date is less than the effective date of the un-suspension.
The activity rate start and end dates are re-calculated based on the enrollment coverage start date of the unsuspended enrollment.
Section 79 of the US Internal Revenue Service code defines imputed income as certain forms of indirect compensation termed fringe benefits, and taxes the recipient accordingly. You define imputed income calculations to calculate the amount of a benefit that is taxable as imputed income.
For example, if you offer a group term life insurance plan that provides coverage in excess of $50,000 to a participant or in excess of $2,000 to a spouse or dependent, you can define an imputed income calculation that determines the amount of coverage that is subject to imputed income tax regulations.
You can select the payroll system that processes the imputed income calculation and the manner in which the calculations are processed. If your payroll system calculates imputed income on a basis other than every pay period, you can associate one or more payment schedules with the imputed income calculation.
Note: By default, the imputed income calculation assumes that the employer pays 100% of the benefit, and the benefits system does not subtract employee contributions from the calculation. However, you can set the BEN:Imputed Income Post Tax Deduction profile to Y so that the imputed income process deducts the sum of all standard rates defined as Subject to Imputed Income with a Tax Type of After Tax and an Activity Type of either Employee Payroll Contribution, Employee Individual Contribution, or Employee Plan Contribution.
For employees whose participation in an imputed income plan begins mid-month, you can define partial month treatment rules.
You can also restrict the calculation to a subset of people according to assignment type or types (such as Employee, Benefits, or Employee then Benefits).
You associate a variable rate profile with an imputed income calculation because imputed income taxes vary based on a person's age.
See: Imputed Income Plans (US)
Premiums are the amount paid by a benefit plan sponsor to the supplier of a benefit. Typically, premiums are calculated on a per-participant basis, but the system also supports premium calculation based on the total participants enrolled in a plan or the total volume of elected coverage.
You can think of premium determination and processing as divided into the following areas:
Premium calculation setup
Premium determinations that occur during enrollment
Recalculation of premiums based on life events (Advanced Benefits)
Premiums and credits are determined by the Premium Calculation batch process at month end
Manual adjustment of calculated premiums by participant or by plan and review of monthly premium totals
You setup premiums calculations to define how the system calculates, costs, and administers premiums. The system supports the administration of the following premium types:
regular premiums that are calculated on a per-participant basis
premiums based on the total number of participants covered in a plan or option in plan
premiums based on the total coverage volume elected in a plan or option in plan
You can calculate premiums prospectively (in advance of the period of coverage) or retrospectively (as a result of coverage previously received). Premium are calculated on a monthly basis in accordance with the most common business practices of benefit suppliers. The system supports pro-rated premium calculations for benefits participants who gain or lose coverage mid-month. You can also define a standard wash rule so that participants who are covered by a plan for less than a full month have no premium obligation.
You can choose how to cost a participant's premium so that the contribution is distributed to the appropriate general ledger account. A single plan or option can have multiple premiums so that, for example, you could calculate one premium for an employee contribution and a second premium for the employer contribution.
Premium setup also includes defining the calculation method you use to determine the premium, including any variable rates. You link premium calculations to the benefit supplier organization so that premiums can be remitted to the appropriate source.
For premiums that are determined based on the total number of participants or the total coverage volume elected by all participants in a plan or option in plan, you use variable rate profiles to calculate the premium.
You select a variable rate criteria of Total Participants or Total Coverage Volume and then define a variable rate calculation that determines the premium based on the number of participants or the coverage volume that you specify.
Note: Variable rates for actual premiums must have a tax type of Not Applicable.
Premiums that are calculated on a per-participant basis are determined when a participant elects a plan or option in plan.
At month end, you run the Premium Calculation batch process from the Concurrent Manager to select the participants for whom you want to write a premium result.
You can then view monthly premium results by participant in the Monthly Participant Premium window or by plan and option in the Monthly Plan or Option Premium window.
Note: Premiums that vary based on the total number of participants or the total coverage volume elected by all participants for a plan or option in plan are determined only when you run the Premium Calculation batch process.
You can define premiums that vary based on life events.
You link a life event reason that you have defined to a premium definition so that when a participant experiences this life event the premium is recalculated.
Note: You can define a life event such that its impact only effects a participant's premium, and not their eligibility for benefits.
You run the Premium Calculation batch process from the Concurrent Manager to calculate monthly premiums. By selecting parameters, you can control the plan or option in plan for which premiums are calculated. You can also select the processing month and year and the participant or participant groups for whom a premium is calculated.
The batch process uses your premium definition to determine the per participant premium or the total premium for the compensation object depending on your premium type.
Note: You cannot select parameters that limit the results of the Premium Calculation process by person criteria for calculations that allocate premiums to participants based on the total number of participants in a plan or option.
For premiums that have been paid but which should not have been paid (due to retroactive changes or an error in processing), the Premium Calculation process allocates credits to offset the result of the previously paid premium. Credits are applied against the premium due for the current month.
Your credit lookback processing rules determine how credits are applied to a premium. If you restrict the application of credits to the current plan year or you restrict credit lookbacks to a particular length of time, the system does not apply credits to the current premium if the month from which the credits are due is outside the boundary of the credit lookup period.
Credits can only be applied to premiums that are calculated on a per-participant basis. In all cases, the applied credits cannot exceed the premium due.
The product lets you manually adjust a premium result both for a participant and for the premium total for a plan or option in plan. Use this feature if making a manual adjustment to a premium result is a more efficient means of correcting a premium error than recalcuating the premium.
For those plans where there is a regulated maximum contribution amount (such as a 401(k) plan in the US) or where a participant has discretion over the amount contributed into the plan, you can define period-to-date maximum contributions.
These maximums are specified either by the plan itself or, as is true in the US, by regulations. In addition to straightforward limits in which the period-to-date amount, once reached, stops subsequent contributions for the remainder of the period, other, more complex, limits must be enforced.
You use the Benefit Balances window to create a benefit balance that you can then associate with a person or a formula.
For example, you might define a benefits balance for use when calculating how many flex credits an employee can be given to spend on benefits as part of a flex program.
Benefit balances are useful in transitioning data from a legacy benefits system to Oracle HR.