403SavingPlans PDF

403(b) Savings Plans
Version: 1.0 Wednesday, June 14, 2000

Benefits – 403(b) Savings Plans
TABLE OF CONTENTS
1 INTRODUCTION ............................................................................................................................... 4
1.1 Headline 2 ............................................................................................. Error! Bookmark not defined.
1.1.1 Headline 3 .......................................................................................... Error! Bookmark not defined.
2 IRS REGULATIONS .......................................................................................................................... 5
2.1 Code §402(g) Limits ........................................................................................................................ 5
2.1.1 Section §402(g)(8) Special Exception ............................................................................................... 5
2.1.1.1 Headline 4 .......................................................................................... Error! Bookmark not defined.
2.2 Code §415 Limits ............................................................................................................................. 5
2.3 The Maximum Exclusion Allowance Calculation ......................................................................... 5
2.3.1 Includible Compensation ................................................................................................................... 5
2.3.1.1 Full-time Employee Works Full-time .................................................................................................. 6
2.3.1.2 Full-time Employee Works Part of a Year ......................................................................................... 6
2.3.1.3 Part-time Employees ......................................................................................................................... 7
2.3.1.4 Contributions over MEA limit ............................................................................................................. 7
2.3.2 Years of Service ................................................................................................................................ 8
2.3.2.1 Definition of a Full-time Employee ..................................................................................................... 8
2.3.2.2 Full-time Employee Works Part of a Year ......................................................................................... 9
2.3.2.3 Definition of a Part-time Employee .................................................................................................... 9
2.3.2.4 Part-time Employee Works a Full Year ............................................................................................. 9
2.3.2.5 Part-time Employee Works Part of a Year ......................................................................................... 9
2.3.2.6 Eligibility ........................................................................................................................................... 10
2.3.3 Amounts Previsouly Excluded ......................................................................................................... 10
2.4 Catch-up Election ‘A’ ..................................................................................................................... 10
2.5 Catch-up Election ‘B’ ..................................................................................................................... 11
2.6 Catch-up Election ‘C’ ..................................................................................................................... 11
3 SAP CONFIGURATION .................................................................................................................. 11
3.1 Plan Set-up ..................................................................................................................................... 11
3.1.1 Hiring Date (T548Y) ......................................................................................................................... 12
3.1.2 Define Combined Contribution Limits (T74FW) ............................................................................... 12
3.1.3 Define Combined Contribution Limit Expressions ........................................................................... 12
3.2 Payroll-Benefits Integration .......................................................................................................... 12
3.2.1 Compensation Model (T7USBEN01 & T7USBEN01T) ................................................................... 12
3.2.2 Define Compensation Model (T7USBEN02) ................................................................................... 12
3.2.3 Payroll Constants ............................................................................................................................. 13
3.3 Seniority Calculation Setup .......................................................................................................... 13
3.3.1 Sample Configuration ...................................................................................................................... 13
3.3.2 Examples ......................................................................................................................................... 13
3.3.3 Tables .............................................................................................................................................. 13
3.3.4 Utility Programs ............................................................................................................................... 14
3.3.5 Function Modules ............................................................................................................................ 14
4 PAYROLL ........................................................................................................................................ 15
4.1 Payroll function – BENWT ............................................................................................................ 15
 Warning: 403(b) savings plan would not function well if vesting rules are divided by month, i.e.,
20% of ER contribution will be vested after 3 months of employment and 60% of ER contribution will be
vested after 6 months of employment. However, if vesting rules like 30% of ER contribution vested after first
year, 30% of ER contribution vested after second year and the rest of 40% after third year of employment
would work fine. ............................................................................................................................................... 15
4.2 Wage Types .................................................................................................................................... 15
2
4.2.1 Technical Wage Types .................................................................................................................... 15

4.2.2 Model Wage Types .......................................................................................................................... 15
4.3 Definitions in 403(b) Process ....................................................................................................... 16
5 INFOTYPE 0510 – TAX-SHELTERED PENSION .......................................................................... 16
6 403(B) EXAMPLES ......................................................................................................................... 17
6.1 Example 1 ....................................................................................................................................... 17
6.1.1 Basic Data Summary ....................................................................................................................... 17
6.1.2 Estimated 403(b) contribution limits ................................................................................................ 17
6.1.2.1 402g limit.......................................................................................................................................... 17
6.1.2.2 MEA limit .......................................................................................................................................... 17
6.1.2.3 415 limit............................................................................................................................................ 17
6.1.2.4 .............................................................................................................................................................. 17
6.2 Example 2 ....................................................................................................................................... 18
6.2.1 Basic data Summary........................................................................................................................ 18
6.2.2 403(b) contribution limits .................................................................................................................. 18
6.2.2.1 402g limit.......................................................................................................................................... 18
6.2.2.2 MEA limit .......................................................................................................................................... 18
6.2.2.3 415 limit............................................................................................................................................ 18
6.2.2.4 Overall 403(b) limits ......................................................................................................................... 18
7 UTILITY PROGRAMS ..................................................................................................................... 18
7.1 Report ‘RPSBENU3’ ....................................................................................................................... 18
7.2 Report ‘RPSBENU4’ ....................................................................................................................... 19
8 403(B) RELATED NOTES .............................................................................................................. 19
8.1 Note: 0201232 ................................................................................................................................. 19
8.2 Note: 0216338 ................................................................................................................................. 19
8.3 Note: 0304714 ................................................................................................................................. 19
8.4 Note: 200905 ................................................................................................................................... 19
9 REFERENCES ................................................................................................................................ 19
3
1 INTRODUCTION
Section 403(b) of the Internal Revenue Code (“Code”) provides special rules governing the taxation of
annuity contracts purchased by certain employer organizations for their employees. Employers covered by
Code §403(b) include public schools, organizations exempt from tax under Code §501(c)(3), and certain
employers of ministers. If the annuities purchased by these employers meet the requirements of Code
§403(b), the employer’s contributions to purchase the annuities will not be included in the employees’
income – hence the name tax-sheltered annuity (“TSA”). However, employer contributions to purchase the
annuity contracts will not be excludable from the employees’ income to the extent they exceed the Maximum
Exclusion Allowance (“MEA”) under Code §403(b)(2).
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2 IRS REGULATIONS
2.1 Code §402(g) Limits
Like all contributions to pre-tax retirement plans, contributions under a §403(b) plan are limited by the pre-tax
elective deferral limitation described in Code §402(g). This limit (sometimes known in the private sector as
the §401(k) limit), is $10,500 in year 2000, is indexed to changes in the cost of living, and rises only in $500
increments.
2.1.1 Section §402(g)(8) Special Exception
A special exception exists under Code §401(g)(8) which increases the §402(g) limit for certain employees
with 15 or more years of service with the current employer. The special exception increases the §402(g) limit
by the smallest of the following amounts.
 $3,000, or
 $15,000 reduced by amounts previously excluded from gross income on account of this special exception,
or
 the excess of $5,000 multiplied by the number of years of service with the organization over all of the
employee’s previous elective deferrals to all §403(b) plan, §401(k) plan, SEP, and SIMPLE IRA plans
maintained by this single organization.
2.2 Code §415 Limits
The §415(c) limit on annual additions to a defined contribution plan applies to §403(b) plan contributions as
well. Unlike the §402(g) limit, which is placed on elective deferrals only, §415(c) limits all additions to ALL
defined contribution plans for a single employee in a single limitation year regardless of whether they are
vested. This includes employee elective deferrals, employee after-tax contributions, employer matching
contributions, employer non-elective contributions, and forfeitures. The defined contribution limit under
§415(c) is the lesser of $30,000 or 25% of the participant’s compensation.
2.3 The Maximum Exclusion Allowance Calculation
The MEA is a calculation of the maximum employer contribution to a §403(b) plan excludable from income for
the employee in question. Its definition is as follows: the excess of 20% of (1) the employee’s “includible
compensation” times the employee’s number of “years of service,” over (2) the aggregate amount contributed
by the employer to purchase annuity contracts and excluded from the employee’s income in any prior year
(“amounts previously excluded”). The systems requirements for each component of this calculation (includible
compensation, years of service, and amounts previously excluded) will be related in this section.
2.3.1 Includible Compensation
"Includible Compensation" for purposes of a §403(b) plan MEAC is defined as the amount of compensation
paid by the employer sponsoring the §403(b) plan which was includible in the employee’s income for the most
recent period which constitutes a year of service.
 Includible compensation does not include (1) any amount contributed directed by the employer, or (2) any
amount that is made through a salary deduction agreement but treated as a non-elective contribution to
any Section 403(b) annuity contract, (3) Section 414(h) employer ‘Pick-Up’ contributions under a
government pension system which are made on a salary reduction basis.
 Includible compensation includes, but does not limit to, (1) 403(b) elective deferrals, (2) 457 deferrals (3)
401(k) elective deferrals, (4) Section 125 cafeteria plan salary reduction amount.
 IRS agents are directed to check for two errors in particular: first, has the employer included qualified plan
contributions in includible compensation that should have been excluded; second, is the employer not
including such amounts that are vested as amounts previously excludable for future years.
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2.3.1.1 Full-time Employee Works Full-time
For the "full-time employee who works full-time," the most recent one-year period of service will generally be the current
taxable year. A year of service under Code Sec. 403(b)(4) is not the same as for qualified retirement plans under Code
Secs. 410 and 411.
Example (1): Horan is a professor at a university, and has worked full-time

during the 1993-94 and 1994-95 academic years that run from September through
June. Horan reports his income on a calendar year basis. In computing his
exclusion allowance for the 1994 taxable year, Horan's most recent one-year
period of service consists of the period from January-June 1994 and September-
December 1994. Therefore, a portion of each academic year is used to determine
Horan's most recent one-year period of service (example provided by the Benefits
Technical Group).
9/1/93 6/1/94 9/1/94 6/1/95
1993-94 acdemic 1994-95 acdemic

year year
Includible
Compensation
Most recent 1 year

period of service
1/1/1994 12/31/1994
Example (2): The current pay period end date is 8/31/2000. If Vinny Variable
works full-time, the Includible Compensation will be the gross compensation
between 1/1/2000 and 12/31/2000.
2.3.1.2 Full-time Employee Works Part of a Year
For "full-time employees who work only part of a year" and "part-time employees," the most recent one-year period often
consists of periods in more than one tax year. To determine such an employee's most recent one-year period of service, it
is necessary to aggregate the employee's most recent periods of service. First, the employee's service in the taxable year
for which the exclusion allowance is determined is taken into account. Second, the employee's service for the employer
in the next preceding taxable year (and further back if necessary) is added until the employee's service equals one year of
service.
Example (3): Mulligan worked full time for a 501(c)(3) organization from July 1-
December 31, 1994, and from January 1-June 30, 1995. He earned $10,000 in 1994
and $10,500 in 1995. Mulligan's includible compensation for calculating his
exclusion allowance for 1995 is $20,500 (example provided by the Benefits
Technical Group).
6
2.3.1.3 Part-time Employees
Example (4): Kerry worked half time (50% part-time)for an eligible employer in
1994 and 1995. In 1994 he earned $13,500 and in 1995 he earned $15,000. His
includible compensation for 1995 is $28,500, the sum of his 1994 and 1995
compensation (example provided by the Benefits Technical Group).
7/1/94 12/31/94 6/30/95
Full-time Full-time
Includible Compensation
Most recent 1 year period of service
7/1/1994 12/31/1995
Example (5): The current pay period end date is 8/31/2000. Vinny Variable
currently works in a position with a Full-Time-Equivalent (FTE) of 75% as a
part-timer. The Includible Compensation is the total compensation between
9/1/1999 and 12/31/2000.
9/1/1999 12/31/2000
Present
1/1/2000
Includible Compensation
Most recent 1 year period of service
2.3.1.4 Contributions over MEA limit
Includible compensation does not include employer contributions for the purchase of an annuity contract.
Additionally, contributions by an employer that are includible in an employee's gross income for income tax
purposes because they exceed the employee's exclusion allowance are not treated as includible
compensation for purposes of computing the employee's exclusion allowance.
Example (6): Gilead, a high school soccer coach, foregoes a salary increase and
enters into a salary reduction agreement with her employer. After the salary
reduction Gilead earns $12,000 and contributes $2,800 to her TSA. The
contribution is $400 more than Gilead's exclusion allowance. For income tax
purposes Gilligan has compensation of $12,400. For purposes of determining her
exclusion allowance, Gilead has "includible compensation" of $12,000 (example
provided by the Benefits Technical Group).
If an individual works for an employer eligible to establish a TSA and an ineligible employer, the income earned
from service for the ineligible employer is not includible compensation.
7
The cost of incidental life insurance provided to an employee by an employer is not "includible compensation"
and therefore is not excludable from gross income under the exclusion allowance.
In computing the exclusion allowance, includible compensation does not include any compensation earned by the
employee after the taxable year for which the exclusion allowance is determined. However, compensation earned in a
taxable year prior to the taxable year for which the exclusion allowance is determined can be included as includible
compensation. This would occur generally when an annuity contract is purchased for a retired employee, or for a part-
time employee whose most recent one-year period of service extends over more than one taxable year of the employee.
The IRS has held that, for purposes of determining compensation, terminal pay was earned when the services, which give
rise to the employee’s entitlement to the pay, were performed.
The rules governing 401(k) plans now also apply to TSA salary reduction agreements. Elective deferrals to a
401(k) plan may be made only from amounts that are not currently available to an employee. Because these
amounts may include severance pay and accrued sick pay, employers may believe that severance pay and
accrued sick pay may be included as salary for 403(b) purposes. However, because the exclusion allowance
is based on includible compensation earned within the most recent one-year period of service, severance pay
and accrued sick pay may not be treated as includible compensation when calculating the maximum exclusion
allowance.
For compensation to be considered includible compensation, it must be earned while the employer was either
an educational organization or a 501(c)(3) tax-exempt organization.
Example (7): Ingrid receives $25,000 in 1994 for services she performed in 1993
for a 501(c)(3) organization. The $25,000 constitutes includible compensation so
long as her employer was an eligible employer during 1993--the year the
compensation was earned--even if the employer loses its tax-exempt status for
the year 1994 (example provided by the Benefits Technical Group).
If the employer maintains a qualified retirement plan, employer contributions to that plan for an employee do
not comprise includible compensation for purposes of determining the employee's exclusion allowance.
2.3.2 Years of Service
Whether an employee is a full-time employee for a full year. Here you look at whether the employee's
position and amount of work is the same as other individuals holding the same position. This requires a facts
and circumstances test. Factors such as work performed, methods of computing compensation, and job
descriptions are all relevant.
2.3.2.1 Definition of a Full-time Employee
A full year of service for a particular position means the usual work period of individuals employed full-time in
that general type of employment at the same place of employment. If an individual's position is unique, it
must be compared with employees of similar employers or with similar employees of the same employer.
Example (1): Riddle works in the inventory control section of a large university
3 1/2 days a week at most. On his full days he works an eight-hour shift. All
other inventory control employees work the same number of days and hours,
although their shifts may be different. Riddle is a full-time employee (example
provided by the Benefits Technical Group).
Example (2): Kelley is a medical technician in a hospital. She works 49

weeks and has three weeks of vacation determined by her length of service. The
other six medical technicians all work between 48 and 51 weeks, and respectively
have one to three weeks of vacation, determined by length of service. Kelley is
a full-time employee (example provided by the Benefits Technical Group).
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2.3.2.2 Full-time Employee Works Part of a Year
An individual who works as a full-time employee for part of a year is considered to work a fractional part of a
year. The fraction is determined as follows:
Number of weeks (or months) worked during the year by the employee over (divided by) Number of weeks
(or months) worked by a full-time employee as the usual work period for that position.
Example (3): Hoolihan works as a university professor from January-June, and

during that period carries a full complement of classes. The academic year for
the university is from September-June. Here, Hoolihan is a full-time employee
working part-time and is treated as having performed 3/5 of a year of service
(example provided by the Benefits Technical Group).
2.3.2.3 Definition of a Part-time Employee
A part-time employee is an individual who works full-days but part of the week or partial days but full-weeks
or partial days and partial weeks. Again, if an individual's position is unique, it must be compared with
employees of similar employers or with similar employees of the same employer.
Example (4): Walsh is a staff attorney for a university. He works 3 full days
for the university, while the rest of the legal staff works 5-6 days a week.
Walsh is a part-time employee (example provided by the Benefits Technical
Group).
Example (5) : Mary is an administrative staff for a Hospital. She works 4 hrs /
day and 5 days / week, while the rest of the administrative staff works 8 hrs /
day and 5 days / week. Mary is a part-time employee.
2.3.2.4 Part-time Employee Works a Full Year
An individual who works part-time for a full year. This type of employee is also considered to work a
fractional year. The fraction is determined as follows:
Amount of work required of the employee divided by Amount of work normally required of employees holding
the same position.
Example (6): Schneider works as a tax attorney for a university. She works 4
hours a day, three days a week over the course of the year. The other staff
attorneys work 8 hours a day, five days a week. Schneider's fractional year of
service is 3/10 (12 hours/40 hours) (example provided by the Benefits Technical
Group).
2.3.2.5 Part-time Employee Works Part of a Year
An individual who works part-time for part of a year. This type of employee is considered to work a fractional
year. The fraction requires a three-step computation.
1. Determine the fractional year of service as if the employee is a full-time employee for part of the year.
2. Determine the fractional year of service as if the employee is a part-time employee for the full year.
3. Multiply the fraction in step #1 by the fraction in step #2 to get the fractional year of service.
Example (7): Hungerford teaches advanced orthopedic surgery at a teaching

hospital 4 hours a week for four months of each academic year. The normal
teaching schedule for physicians is 16 hours per week for each of two semesters
(eight months total). Here Hungerford is a part-time employee of the hospital
9
working on a part-time basis. His fractional year of service is determined as

follows:
1. If Hungerford were a full-time employee for part of the year, his fractional year of service would be 1/2 (4 months worked/8
months usually required of the position).
2. If Hungerford was a part-time employee for the full year, his fractional year of service would be 1/4 (4 hours required/16 hours
usually required of the position).
3. 1/2 x 1/4 equals 1/8 fractional year of service (example provided by the Benefits Technical Group).
2.3.2.6 Eligibility
An employee can only earn a year of service (including, as noted above, an employee's most recent one-
year period of service) during a period that the organization is an eligible employer or, in the case of a public
educational organization, during a period when the employee is performing services, either directly or
indirectly for that organization.
Example (7): For all of 1997, 1998, and half of 1999, Kerrigan was employed as
the director of the local humane society, a 501(c)(3) organization. The society
lost its tax-exempt status in 1997 and received its tax-exempt status again in
both 1998 and 1999. For purposes of determining Kerrigan's exclusion allowance
for 1999 for contributions made to his TSA, he has 1 1/2 years of service (1998
and 1999) (example provided by the Benefits Technical Group).
Note: If an employee has a period of less than one year of service, the regulations treat the employee as if
he has one year of service. And the period of less than one year of service is treated as the employee's most
recent period of service for purposes of determining his includible compensation.
2.3.3 Amounts Previsouly Excluded
Amounts previously excludable is the total of all contributions for retirement benefits made for you by your
employer (including salary reduction contributions) that could exclude from your gross income. It does not
include amounts for the tax year for which the current exclusion allowance is being figured.
Amounts previously excludable include contributions in earlier years by your employer to:
 A tax-sheltered annuity (TSA),
 A qualified annuity plan or a qualified pension, profit-sharing, or stock bonus trust,
 A qualified bond-purchase plan,
 A retirement plan under which the contributions originally were excludable by you only because your rights
to the contributions were forfeitable when made, and which also were excludable by you when your rights
became non-forfeitable, or
 A 457 plan.
2.4 Catch-up Election ‘A’
The "A" Election is made by an individual employee. It is allowed to be made only once in an employee's
lifetime and only in his or her final year of service. An employee is eligible to make the "A" election only if he
or she has never previously made the "B" or "C" election. By making the "A" election, the employee is precluded
from making the "B" or "C" election in the future, even for service with another employer.
The "A" election changes the §415(c) limit definition from "the lesser of $30,000 (as indexed) or 25% of the
participant’s compensation" to "the lesser of $30,000 (as indexed) or the MEA that would otherwise apply to
the employee but taking into account only the employee’s last 10 years of service with the employer as of the
employee’s separation date.
10
2.5 Catch-up Election ‘B’
The "B" election is made by an individual employee. Unlike the "A" election, it is allowed to be made as
frequently as annually. An employee is eligible to make the "B" election only if he or she has never previously
made the "A" or "C" election. By making the "B" election, the employee is precluded from making the "A" or
"C" election in the future, even for service with another employer.
The "B" election changes the §415(c) limit definition from "the lesser of $30,000 (as indexed) or 25% of the
participant’s compensation" to "the smallest of:
(1) 25% of the participant’s “includible compensation” plus $4,000, or
(2) the MEA itself, or
$15,000.
2.6 Catch-up Election ‘C’
The "C" election is made by an individual employee. Unlike the "A" election, it is allowed to be made as
frequently as annually. An employee is eligible to make the "C" election only if he or she has never previously
made the "A" or "B" election. By making the "C" election, the employee is precluded from making the "A" or
"B" election in the future, even for service with another employer.
The "C" election allows the employee to elect to ignore the MEA calculation entirely, making the controlling
limit for §403(b) plan contributions the lesser of the §402(g) limit on elective deferrals or the §415(c) defined
contribution limit. This election obviously makes sense only in circumstances in which the MEA is calculated
to be lower than these two other limits.
3 SAP CONFIGURATION
3.1 Plan Set-up
11
3.1.1 Hiring Date (T548Y)
Customers define the date type they want to use for hiring date in Table T74FG (Date Type: T74FG-DATTY).
All date types are in T548Y. The hiring date will be stored in the Infotype 0041.
3.1.2 Define Combined Contribution Limits (T74FW)
Set up plans to be included in limits processing. This is the way to identify which saving plans, e.g. 401K,
SEP, SIMPLE IRA etc., are subject to the §402(g) limit and the §415(c) limit respectively. Note that ‘402G’
and ‘415C’ are hard coded in the system, users can’t use different names.
i. At IMG -> Savings plans -> Combined contribution -> Define combined contribution limits, for each
plan that is subject to §402(g) limit, e.g. 401K and 403B, create an entry with the following values:
Comb. Limit(T74FW-CCNLM) = ‘402G’
Operator(T74FW-RELOP) = ‘=’
ii. At IMG -> Savings plans -> Combined contribution -> Define combined contribution limits, for each
plan that is subject to §415(c) limit, e.g. 401K and 403B, create an entry with the following values:
Comb. Limit(T74FW-CCNLM) = ‘415C’
Operator(T74FW-RELOP) = ‘=’
IMG Path: Personnel Management Benefits  Plans  Savings Plans  Define combined contribution
limits.
Note: Under no circumstances should the names for ‘402G’ and ‘415C’ in the above combined limit setting
be changed by the user. These literals will be used within the code to process according to the regulations.
This setting is independent of other user defined combined limit checks during enrollment.
3.1.3 Define Combined Contribution Limit Expressions
The combined contribution limit expression will only be checked during enrollment but not in payroll. Even
though 403(b) process does not care about the combined contribution limit expression, if it does not set up
correctly, an error will occur during benefits open enrollment.
IMG Path: Personnel Management Benefits  Plans  Savings Plans  Define combined contribution
limit expressions.
3.2 Payroll-Benefits Integration
3.2.1 Compensation Model (T7USBEN01 & T7USBEN01T)
Compensation model defines how the ‘Benefit Compensation’ should be calculated. Users can freely define
wage type /102 as gross compensation or any combination of summation or subtraction of wage types. If the
wage type is 100% in the calculation, leave the field ‘Percent’ blank, otherwise put in the number between 1
to 99.
IMG Path: Payroll Payroll:USA Benefits Integration  Compensation Models for Savings / Pension
Plans  Create gross compensation model.
3.2.2 Define Compensation Model (T7USBEN02)
Define the expression of the model defined in table T7USBEN01 like wage types, signs, and percentage.
IMG Path: Payroll Payroll:USA Benefits Integration  Compensation Models for Savings / Pension
Plans  Configure gross compensation model.
3.2.3 Payroll Constants
402GL (T511P) - 402(g) lim for pretax elective, value = $10,500

415CL (T511P) - 415(c) lim for defined contrib, value = $30,000
402G8 (T511K) - Eligible for 402g8 exception? Value = 0 if no exception is allowed for the organization;
Value = 1 if 402(g) exception is allowed.
3.3 Seniority Calculation Setup
SAP payroll designates ‘403B’ as the Calculation Process and Valuation Model for employment period for
403(b) Savings Plan, and the function module ‘HR_BEN_US_403B_GET_SERV_INDIV’ for Additional Logic
in calculation process.
IMG Path: Personnel Management Personnel Administration Evaluation Basis  Calculation of

Employment Period.
3.3.1 Sample Configuration
The sample configuration is one of many ways that seniority calculation can be process. It is not unique and
customers can setup their own mechanism to calculate years of service in the IMG or through their own
function module exits.
The following setup allows you to separate years of service into two parts:
(1) Years of Service prior to SAP system: The calculation is done by reading Infotype 0552 records.
Customers can create multiple Infotype 0552 records for an employee due to interruption of
employment or different utilization percentage over a time period.
(2) Years of Service after SAP live: The calculation is done by reading Infotype 0008. The field
Capability Utilization represents the percentage of employment.
Calculation Process – ‘403B’

Conversion Rule – 0100 (Years, Months, Days: Variant A)
Function Module for Additional Logic - ‘HR_BEN_US_403B_GET_SERV_INDIV’
Valuation Model – ‘403B’
Selection Class – ‘US3A’ (employment period after system live)
Use Infotype 0008 Cap.util.level
The exit HR_SEN_SEL_EXIT_IT0008_BSGRD
Selection Class – ‘US3B’ (employment period before system live)
Use Infotype 0552. The subtype is defined in T525T.
3.3.2 Examples
Example (1): John worked as a full-time employee for his current employer from
1/1/1980 to 12/31/1997 and became a 60% part-time employee since then. Assuming
that his company uses SAP system and goes live on 5/1/1998, what are his years
of service up to 12/31/1999?
Years of Service between 1/1/1980 and 12/31/1997 are 18 years 0 month 0 days,
Years of Service between 1/1/1998 and 12/31/1999 are 1 year 2 months and
12 days
Total Years of Service are 19 years 2 months and 12 days, or 19.2 years.
3.3.3 Tables
T525U - Conversion Rules for Employment Period Calculation

T525T - Time Specification Type for Employment Period Calculation
T525Z - Permissibility of Infotype Selection in Empl.Period Calculation
T525I - Infotype Selection Condition
T525V - Selection Exit
T525A - Selection Rules for Employee Data
T525N - Selection Class
13
T525L - Valuation Models for Employee Data

T525E - Rounding Rule for Time Intervals
T525P - Calculation Process for Employment Period Calculation
T525R - Process Step for Employment Period Calculation
T525S - Assignment of Valuation Model and Rounding Rule
3.3.4 Utility Programs
Report RPUSEN20 (Transaction OG00) – Display settings for employment period calculation
Report RPUSEN10 – Start test utility for employment period calculation
3.3.5 Function Modules
Call Function 'HR_BEN_US_403B_GET_SERV_DURAT'

exporting
pernr = pernum
datum = ref_date
reaction = no_msg
importing
noyrs = years_of_service
subrc = subrc
tables
error_table = error_tab.
* Get length of §403(b) service from hire date until DATUM

Call Function 'HR_SEN_CALCULATE_COMPLETE'
exporting
id_pernr = pernr
id_molga = '10'
id_proce = '403B'
id_calty = calc_serv_duration
id_begda = low_date
id_endda = datum "#EC DOM_EQUAL
importing
es_duration = ls_duration
exceptions
wrong_import_parameter = 1
wrong_calculation_type = 2
process_not_found = 3
process_pstep_not_found = 4
error_of_other_functions = 5
others = 6.
*--- read SAP-Standard or customer values for the process

* Read configuration in T525P or T525Q
CALL FUNCTION 'HR_SEN_READ_PROCESS'
EXPORTING
ID_MOLGA = l_molga
ID_PROCE = id_proce
ID_SEL_DATE = id_sel_date
IMPORTING
ES_READ_PROCESS = gs_read_process
EXCEPTIONS
PROCESS_NOT_FOUND = 1
OTHERS = 2
*--- check individual valuation model (if defined for the process)
* For example: if gs_read_process-indiv eq true.
CALL FUNCTION 'HR_SEN_VALUATION_MODEL_INDIV'
EXPORTING
ID_MOLGA = l_molga
ID_PROCE = id_proce
ID_PERNR = id_pernr
ID_AUTHO = gs_read_process-autho
IMPORTING
ET_PSTEP_TSPST = gt_pstep_tspst
EXCEPTIONS
MISSING_AUTHORITY_INFTY_0553 = 1
ERROR_OF_OTHER_FUNCTIONS = 2
OTHERS = 3
*--- call the individual function if it is defined for the process

* Otherwise the general function 'HR_SEN_CALCULATE_PROCESS_PSTEP'
* will be called
if not gs_read_process-fnpro is initial.
14
call function gs_read_process-fnpro

exporting
id_molga = l_molga
id_proce = id_proce
id_pernr = id_pernr
id_crule = gs_read_process-crule
IT_PSTEP_TSPST = gt_pstep_tspst
ID_CALTY = id_calty
ID_BEGDA = id_begda
ID_ENDDA = id_endda
IS_DURATION = is_duration
ID_PROTO = id_proto
IMPORTING
ED_DATE = ed_date
ES_DURATION = es_duration
EXCEPTIONS
NO_RESULT_FOR_CALTY = 1 "XYAK013634
OTHERS = 9
* Standard SAP process when no customizing function module is defined

call function 'HR_SEN_CALCULATE_PROCESS_STEP'
exporting
id_molga = l_molga
id_proce = id_proce
ID_PSTEP = id_pstep
id_pernr = id_pernr
id_crule = gs_read_process-crule
IT_PSTEP_TSPST = gt_pstep_tspst
ID_CALTY = id_calty
ID_BEGDA = id_begda
ID_ENDDA = id_endda
IS_DURATION = is_duration
ID_PROTO = id_proto
IMPORTING
ED_DATE = ed_date
ES_DURATION = es_duration
* ED_RDATE =
* ES_RDURATION =
EXCEPTIONS
WRONG_IMPORT_PARAMETER = 1
WRONG_CALCULATION_TYPE = 2
NO_RESULT_FOR_CALTY = 3
ERROR_OF_OTHER_FUNCTIONS = 4
OTHERS = 5
4 PAYROLL
4.1 Payroll function – BENWT
 Warning: 403(b) savings plan would not function well if vesting rules are divided by month,
i.e., 20% of ER contribution will be vested after 3 months of employment and 60% of ER
contribution will be vested after 6 months of employment. However, if vesting rules like 30%
of ER contribution vested after first year, 30% of ER contribution vested after second year
and the rest of 40% after third year of employment would work fine.
4.2 Wage Types
4.2.1 Technical Wage Types
 /BX1: Before current year EE pretax

 /BX3: Year-To-Date EE pretax
 /BX4: Year-To-Date ER contribution
 /BX5: Year-To-Date EE post-tax
 /BX6: Before current year ER vested contribution
/BX7: Before current year EE 402(g) exception
4.2.2 Model Wage Types
 BE32: EE pre-tax contribution
15
Wage Type BE32 processing class setup

Class Description Valu Text
e
68 Payment type for tax calculation 1 Regular payment
69 Taxable earning or non-taxable 2 Non-taxable contribution
contribution
71 Wage type tax classification I 403b
 BR32: ER contribution
Wage Type BR32 processing class setup
Class Description Valu Text
e
41 Cumulation and storage of wage types B RT storage with V0 split and
to be limited cumulation
4.3 Definitions in 403(b) Process
 Hiring date: The hiring date of an employee is stored in infotype 41 if it’s defined in T74FG; or otherwise,
in infotype 0000.
 Implementation date: Same as the 403(b) enrollment date in SAP system. In the payroll, it’s the begin
date of the first infotype 0510 records.
 For full-time employees, the function module to calculate includible comp is
‘HR_BEN_US_GET_GROSS_COMP_FT’.
 For part-time employees, the function module to calculate includible comp is
‘HR_BEN_US_GET_COMP_FT’.
5 INFOTYPE 0510 – TAX-SHELTERED PENSION
Infotype 510 stores contribution amounts prior SAP system and is for employees who had 403(b)
contributions in legacy system. If a person does not have any contribution prior SAP, he does not need an
infotype 0510 record.
Example 1: If 403(b) continue from SAP live date.
1st employment 1st SAP payroll

date
Contributions are
stored in IT 0510
403(b) enrollment
Example 2: If 403(b) enrollment is after system live date. The begin date of Infotype 510 record should be
the same date of 403(b) enrollment and all the numbers in IT0510 should be the contributions between hiring
date and the 1st SAP payroll date.
16
1st employment 1st SAP payroll

date
Contributions
are stored in
IT 0510
Contributions
are in cluster
403(b) enrollment
6 403(B) EXAMPLES
6.1 Example 1
6.1.1 Basic Data Summary
Payroll Area: UM (IT0001)

Annual Salary: $87,333.00 (or $7,277.75/ month) (IT0008)
EE contribution rule: 30% of salary (IT0169)
ER contribution rule: 25% of base salary (IMG)
System go live date: 1/31/1999 (T511K)
Years of Service: 10 years (IT0552)
LTD EE pretax contributions: $158,000 (IT0510)
Year worth Compensation: $87,333 (IT0510)
6.1.2 Estimated 403(b) contribution limits
6.1.2.1 402g limit
402g limit = $10,500
6.1.2.2 MEA limit
Maximum Exclusion Allowance (MEA)
(1). Includible Compensation 87333

(2). Percent Limit 0.2
(3). Years of Service 10
(4). Multiply (1) * (2) *(3) 174666
(5). Previous Excludable Amounts 158,000.00
MEA Limit = (4) – (5) 16666
6.1.2.3 415 limit
Code 415Limit
(1). Maximum Amount ($30,000) 30000

(2). 25% Compensation 21833.25
Code 415 Limit = Lesser of (1) or (2) 21833.25
6.1.2.4
EE contribution limit: $10,500

EE + ER contribution limit : $16,666
17
6.2 Example 2
6.2.1 Basic data Summary
Payroll Area: UM (IT0001)

Annual Salary: $87,333.33 (or $7,277.78/ month) (IT0008)
EE contribution rule: 30% of salary (IT0169)
ER contribution rule: 25% of base salary (IMG)
System go live date: 1/31/1999 (T511K)
Years of Service: 5 years (IT0552)
LTD EE pretax contributions: $79,333 (IT0510)
Amount previous excluded: $ 79,333.00 (IT0510)
6.2.2 403(b) contribution limits
6.2.2.1 402g limit
$10,500
6.2.2.2 MEA limit
Maximum Exclusion Allowance (MEA)
(1). Includible Compensation 87333

(2). Percent Limit 0.2
(3). Years of Service 5
(4). Multiply (1) * (2) *(3) 87333
(5). Previous Excludable Amounts 79,333.00
MEA = (4) – (5) 8000
6.2.2.3 415 limit
Code 415Limit
(1). Maximum Amount ($30,000) 30000

(2). 25% of Compensation 21833.25
Code 415 Limit = Lesser of (1) or (2) 21833.25
Only annual base salary is considered for compensation in hand estimation here.
6.2.2.4 Overall 403(b) limits
EE + ER contribution limit : $8,000.00
7 UTILITY PROGRAMS
7.1 Report ‘RPSBENU3’
The 403(b) Contribution Summary report enables you to track an employee's contributions and employer
matching contributions to 403(b) plans, and ensure that these amounts do not exceed the following IRS
limits:
- the §402(g) limit on elective deferrals
- the Maximum Exclusion Allowance (MEA) under Code §403(b)(2)
- the §415 defined contribution limit
18
This report uses information from payroll results and the Tax-sheltered annuity infotype (510) to calculate the
maximum excludible amount (not included in the employee's taxable income) that may contributed to an
employee's 403(b) savings plan. The report displays a summary of the limit calculations, as well as a
individual limit calculations broken down in the following worksheets:
(1) Worksheet 1- calculates the maximum elective deferrals that can be contributed by an employee
according to the §402(g) limit.
(2) Worksheet 2- calculates the Maximum Exclusion Allowance.
(3) Worksheet 3 - calculates the Code §415 limit and the total amount excludable from an employee's
income. This worksheet is displayed if the employee has not chosen a special catch-up election. If
the employee has chosen a special catch-up election, then either Worksheet 4, 5, or 6 will appear
in lieu of Worksheet 3.
Worksheets 4-6- calculate the total amount excludable from an employees income if the employee has
chosen one of the three special catch-up elections; Worksheet 4: Catch-up "A", Worksheet 5: Catch-up "B",
Worksheet 6: Catch-up "C".
7.2 Report ‘RPSBENU4’
The 403(b) Contribution Estimate Worksheet allows you to estimate what the appropriate 403(b) employee
contribution and employer matching funds would be for a given employee. The only difference between this
report and RPSBENU3 is this report uses estimation while the latter one uses the actual payroll result to do
the calculation.
8 403(B) RELATED NOTES

8.1 Note: 0201232
Savings: 403b revision of includible compensation
8.2 Note: 0216338

HR-BEN-US: 403B includible compensation for part-time employees
8.3 Note: 0304714

HR-BEN-US: 403B Processing major revision
8.4 Note: 200905

Overview needed for process involved in setting up 403(b) savings plan.
9 REFERENCES
 IRS Publication 571 – Tax-Sheltered Annuity Programs for Employees of Public Schools and
Certain Tax_Exempt Organizations.
 403(b) Answer Book, Fourth Edition.
 403(b) maximum Exclusion Allowance Calculation (“MEA”) Requirements by PRP group.
 403(b) design document by US Benefits group.
 Q & A from the Benefits Technical Group.
19
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403(b) Savings Plans

Version: 1.0 Wednesday, June 14, 2000

4.2.1 Technical Wage Types .................................................................................................................... 15

2.1 Code §402(g) Limits

2.1.1 Section §402(g)(8) Special Exception

2.2 Code §415 Limits

2.3 The Maximum Exclusion Allowance Calculation

2.3.1 Includible Compensation

2.3.1.1 Full-time Employee Works Full-time

Example (1): Horan is a professor at a university, and has worked full-time

9/1/93 6/1/94 9/1/94 6/1/95

1993-94 acdemic 1994-95 acdemic

Most recent 1 year

2.3.1.2 Full-time Employee Works Part of a Year

2.3.1.3 Part-time Employees

7/1/94 12/31/94 6/30/95

Most recent 1 year period of service

Most recent 1 year period of service

2.3.1.4 Contributions over MEA limit

2.3.2 Years of Service

2.3.2.1 Definition of a Full-time Employee

Example (2): Kelley is a medical technician in a hospital. She works 49

2.3.2.2 Full-time Employee Works Part of a Year

Example (3): Hoolihan works as a university professor from January-June, and

2.3.2.3 Definition of a Part-time Employee

2.3.2.4 Part-time Employee Works a Full Year

2.3.2.5 Part-time Employee Works Part of a Year

Example (7): Hungerford teaches advanced orthopedic surgery at a teaching

working on a part-time basis. His fractional year of service is determined as

2.3.3 Amounts Previsouly Excluded

2.4 Catch-up Election ‘A’

2.5 Catch-up Election ‘B’

2.6 Catch-up Election ‘C’

3.1 Plan Set-up

3.1.2 Define Combined Contribution Limits (T74FW)

3.1.3 Define Combined Contribution Limit Expressions

3.2 Payroll-Benefits Integration

3.2.1 Compensation Model (T7USBEN01 & T7USBEN01T)

3.2.2 Define Compensation Model (T7USBEN02)

3.2.3 Payroll Constants

402GL (T511P) - 402(g) lim for pretax elective, value = $10,500

3.3 Seniority Calculation Setup

IMG Path: Personnel Management Personnel Administration Evaluation Basis  Calculation of

3.3.1 Sample Configuration

Calculation Process – ‘403B’

T525U - Conversion Rules for Employment Period Calculation

T525L - Valuation Models for Employee Data

3.3.4 Utility Programs

3.3.5 Function Modules

Call Function 'HR_BEN_US_403B_GET_SERV_DURAT'

* Get length of §403(b) service from hire date until DATUM

*--- read SAP-Standard or customer values for the process

*--- call the individual function if it is defined for the process

call function gs_read_process-fnpro

* Standard SAP process when no customizing function module is defined

4.2 Wage Types

4.2.1 Technical Wage Types

 /BX1: Before current year EE pretax

4.2.2 Model Wage Types

 BE32: EE pre-tax contribution

Wage Type BE32 processing class setup

4.3 Definitions in 403(b) Process

5 INFOTYPE 0510 – TAX-SHELTERED PENSION