Disability Deduction Calculation Incorrect for Employees Limited to Maximum Coverage Amount
Last updated on SEPTEMBER 28, 2017
Applies to:PeopleSoft Enterprise HCM Human Resources - Version 9 to 9.1 [Release 9]
Information in this document applies to any platform.
Deductions based on covered base salary for a Long Term Disability plan with a salary replacement percentage of less than 100% and a maximum coverage or benefit are being calculated incorrectly, if the employee's benefit is limited to the maximum (that is, the calculated benefit of salary x percent replacement exceeds the maximum benefit). The deduction is incorrectly being calculated using the maximum coverage amount instead of the covered base salary that would generate that benefit. This results in an understatement of the deduction.
For example, a plan has an 80% salary replacement percentage and an $8,000 monthly maximum benefit and has a cost based on salary. An employee would reach that maximum benefit with a monthly salary of $10,000 ($10,000 x 80%). However, the deduction would be calculated on the $8,000 benefit, not the $10,000 salary. By contrast, an employee with a monthly salary of $9,000 would have a benefit of $7,200 ($9,000 x 80%) but would have deductions calculated on the $9,000 salary as the maximum benefit was not reached.
Steps to Replicate
1. Calculate a paycheck for an employee whose monthly salary exceeds that which would generate the maximum benefit for the plan (Navigation: Payroll for North America > Payroll Processing USA > Produce Payroll > Calculate Pay).
2. Review the employee's Long Term Disability deduction (Navigation: Payroll for North America > Payroll Processing USA > Produce Payroll > Review Paycheck).
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