The monthly bonus process is designed to cater for smoothed bonus type investment products where a final rate is declared monthly, e.g. Old Mutual’s Coregrowth product.
It is therefore designed to run on the first day of each month for the previous month. It retrieves the opening balance for that month and all of the transactions processed within that month, and calculates the bonus for that month. The number of days for which the bonus is calculated depends on the investment calculation option on the scheme details. If set to TRANSACTION DATE, the number of days is calculated from the transaction date up to and including the last day of the month. If set to DUE DATE, the number of days is calculated from the due date of the transaction up to and including the last day of the month, irrespective of how many months the due date is prior to the month for which the bonus is being calculated. The bonus rate applicable to each month prior to the bonus month is used to calculate the bonus for that month.
Note:
If the investment calculation option is set to DUE DATE, and interest on take-on values is to be calculated from the actual date of take-on, then the date of the take-on values should be one day earlier.
Refer to B_JU3AE_INVESTMNT_EARNING_ALLOC under
Supplements
Batch Programs
Batch Jobs
As with the monthly bonus program, the transactions retrieved are those recorded within the period for which the bonus is being calculated.
Refer to B_JU3AM_ANNUAL_BONUS under
Supplements
Batch Programs
Batch Jobs
Final annual bonuses can be calculated using a number of different final bonus rates for a calculation period.
The calculation of bonuses in the quote, projection, realization and switching processes can be done using a number of different interim bonus rates.
The calculation of bonuses in the production of the member value and valuation reports can be done using a number of different interim bonus rates.
Interim bonus rates can be captured as at any day of the month.
Example of a final bonus calculation
The last bonus allocation request was processed on 31/03/2004.
The following final bonus rates have been captured:
Effective until 31/03/2004 = 6%
Effective until 30/09/2004 = 8%
Effective until 31/03/2005 = 4%
The following interim bonus rate has been captured:
Effective until 30/09/2005 = 10%
Contributions have been received on the following dates:
1: 15/04/2004
2: 12/05/2004
3: 14/06/2004
4: 18/07/2004
5: 12/08/2004
6: 11/09/2004
7: 13/10/2004
8: 14/11/2004
9: 12/12/2004
10: 15/01/2005
11: 10/02/2005
12: 14/03/2005
13: 10/04/2005
The new bonus allocation request is to be processed on 31/03/2005.
The allocation of interest on the member's record will be calculated as follows:
In respect of contributions 1 to 6
Interest on contribution 1 will be 8% from 15/04/2004 to 30/09/2004, then 4% from 01/10/2004 to 31/03/2005.
Interest will be compounded monthly.
No interest after that date will be calculated.
- Interest on contribution 2 will be 8% from 12/05/2004 to 30/09/2004, then 4% from 01/10/2004 to 31/03/2005.
Interest will be compounded monthly.
No interest after that date will be calculated.
- The above calculation basis will apply to contributions 3 to 6 as well.
In respect of contributions 7 to 12
- Interest on contribution 7 will be 4% from 13/10/2004 to 31/03/2005.
Interest will be compounded monthly.
No interest after that date will be calculated.
- The above calculation basis will apply to contributions 8 to 12 as well.
In respect of contribution 13
- The contribution received on 10/04/2005 will not be processed in this bonus allocation run.
Example of an interim bonus calculation
The last bonus allocation request was processed on 31/03/2004.
The following interim bonus rates have been captured:
Effective from 01/03/2004 = 6%
Effective from 01/09/2004 = 8%
Effective from 01/03/2005 = 4%
Contributions have been received on the following dates:
1: 15/04/2004
2: 12/05/2004
3: 14/06/2004
4: 18/07/2004
5: 12/08/2004
6: 11/09/2004
7: 13/10/2004
8: 14/11/2004
9: 12/12/2004
10: 15/01/2005
11: 10/02/2005
12: 14/03/2005
13: 10/04/2005
The quote request is to be processed on 25/04/2005.
The interest on the member's quote will be calculated as follows:
In respect of contributions 1 to 6
- Interest on contribution 1 will be 6% from 15/04/2004 to 31/08/2004, then 8% from 01/09/2004 to 28/02/2005, then 4% from 01/03/2005 to 25/04/2005.
Interest will be compounded monthly.
- Interest on contribution 2 will be 6% from 12/05/2004 to 31/08/2004, then 8% from 01/09/2004 to 28/02/2005, then 4% from 01/03/2005 to 25/04/2005.
Interest will be compounded monthly.
- The above calculation basis will apply to contributions 3 to 6 as well.
In respect of contributions 7 to 12
- Interest on contribution 7 will be 8% from 13/10/2004 to 28/02/2005, then 4% from 01/03/2005 to 25/04/2005.
Interest will be compounded monthly.
- Interest on contribution 8 will be 8% from 14/11/2004 to 28/02/2005, then 4% from 01/03/2005 to 25/04/2005.
Interest will be compounded monthly.
- The above calculation basis will apply to contributions 9 to 12 as well.
In respect of contribution 13
- Interest on contribution 13 will be 4% from 10/04/2005 to 25/4/2005.
In the case of an REF benefit (refund of contributions plus interest for a DB member) interest is calculated on the employee contributions and voluntary contributions for the period from the member’s date of joining the fund to the date of exit. A vesting scale is applied to the employee contributions to determine the amount of the employer contributions to be paid to the member, e.g. if the full employer contribution is payable, a scale of 200% is applied to the employee contribution and 0% to the employer.
Contribution Collection
The contribution collection process for defined benefits is much the same as for defined contributions.
Member accounts are used to calculate the member’s refund of contribution plus interest (e.g. withdrawal benefit) even though, technically speaking, none of the fund’s assets are attributable to any particular member in a defined benefit scheme.
Member Accounting
In a defined benefit scheme, the concept of a member investment account does not really apply (except perhaps for voluntary contributions). All investments are at a scheme level, with members’ benefits defined in isolation of investment values.
However, to the extent that certain member benefits may be defined as an accumulation of contributions at a certain rate of interest, it is convenient for such accumulations to be provided as part of the member accounting facilities that would normally be available in the context of a defined contribution scheme.
Calc Benefit
For a withdrawal claim, when the CALC BENEFIT update type is processed, interest will be calculated on the employee contributions to the date of withdrawal and the total contributions plus interest will be transferred to the member’s benefit payment account. The benefit amount will be calculated taking into account the vesting scale.’
The following accounting entries are generated for the total contributions plus interest when the DB CALC update type is processed for an REF benefit:
REFUNCONTRB
|
DR |
MEMBER |
MEMDEPOSIT |
|
CR |
MEMBER |
BENPAYABLE |
|
DR |
MEMBER |
BENEFIT |
|
CR |
MEMBER |
TRF TO/F FUND |
|
DR |
FUND |
BENEFITS |
|
CR |
FUND |
BENPAYABLE |
The following accounting entries are generated when an REF benefit is authorised:
DBINVTRANSFER
|
DR |
MEMBER |
TRF TO/F FUND |
|
CR |
MEMBER |
INVESTMEMB |
There will therefore be no separate accounting transaction for the interest.
If the CALC BENEFIT results are correct then the REFUNDCONTRB entry on the member’s BEN PAYABLE account is correct.
If a fund is run using an REF benefit for defined benefit (DB) members for withdrawal benefits, it is unnecessary to apply bonuses to the investment portfolios to which the DB members’ contributions are allocated.
Interest will be calculated using the refund interest rate for the full period of the member’s membership of the fund.
The member’s investment account is cleared when the benefit payment is finalised.
If the intent is to pay the DB members a withdrawal benefit based on bonuses (monthly or annual) applied to their investment accounts, the STD benefit must be used for withdrawal benefits.
Note:
STD refers to an accumulated credit for a defined contribution benefit.