Ensuring That Retirees Recover Their Contributions
You need to keep track of an employee's final contributory balances and compare them to their benefits when they retiree. Employees are entitled to full recovery of their contributions. Any posttax contributions are recovered as nontaxable benefits.
The first time you pay a retiree, the system looks up the final employee account balances for the plan in order to track payments against these balances. The system identifies the appropriate employee account using information you enter on the Plan Aliases page.
Use the Plan Aliases page to identity the appropriate employee accounts and track final employee contributory balances.
Note: You identify the account in the Employee Contribution Account file.
The pension payment process copies the account information to a payment summary record. The system also uses this record to keep a running balance of the total benefits paid and the nontaxable benefit paid. You can view the final account balances and the running payment totals on the Review Balances and Totals page.
Every time you make payments, the system compares an employee's final posttax contributions to the total nontaxable benefit paid out by the plan. After a retiree has recovered all the posttax contributions as nontaxable income, the system no longer treats any portion of the retiree's benefit payments as nontaxable.