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Retirement Plan ( RELNBANK_BCA_US_110_RTP )

Retirement Plan ( RELNBANK_BCA_US_110_RTP )

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Retirement Plan

Use

The functionality to maintain an IRA (Individual Retirement Account) is now supported.

A retirement plan is a portfolio consisting of special savings accounts. At this time, three different retirement plan types have been implemented:

  • A "Traditional IRA" is designed to encourage people to save for their retirement. Accountholders can accumulate funds to be primarily used for his/her retirement and to provide for a beneficiary after his/her death.
  • A "Roth IRA" is designed to encourage people to save and invest. Accountholders can accumulate wealth and transfer it to the accountholder's beneficiary (or beneficiaries).
  • A "Coverdell Education Savings Account" (formerly known as "Education IRA") is designed to accumulate funds for a minor to be primarily used to pay the postsecondary educational expenses of a child, grandchild, or other minors. It is not intended to accumulate funds for retirement.

The trustee or custodian (usually a bank) and the accountholder of an IRA have various legal and contractual rules they must follow. These rules are maintained, enforced and published by the Internal Revenue Service (IRS).

The rules governing an IRA include (but are not limited to) contributions, distributions and IRA types.

Because the IRS can change the rules imposed upon an IRA, the technical implementation of these rules has to be flexible. This means that many of the rules have to be maintained in customizing tables. For instance: the rules governing the age limits for an IRA have to be maintained in Retirement plan maintenance -> Limits -> Maintain age limits. If one or more of these rules are not fulfilled, the program will usually issue a warning message, instead of an error message. Because warning messages can be "overruled", the ultimate responsibility for deviating from the predefined rules rests with the user of the program: there may be very good reasons for doing so that are approved by the IRS.

A retirement plan portfolio can contain any number of BCA and/or time deposit accounts. Although a retirement plan portfolio itself does not contain funds (the funds are held in the BCA and time deposit account or accounts), the currency has to be maintained on a portfolio level. This means that the funds in the accounts associated to a portfolio, will all be in the same currency. The contribution and distribution amounts that are reported to the IRS will be reported in the currency maintained on the portfolio level. When creating a portfolio, the currency has to be selected. After the portfolio has been created, the currency can no longer be changed.

A retirement plan portfolio has to be created first, before an account can be associated to it. In other words: the opening date of a BCA or time deposit account has to be on or after the opening date of the portfolio. The reason for this restriction is that an association of an account, which contains funds, to a retirement plan portfolio is regarded as being a contribution to a retirement plan portfolio. As mentioned above, there are various rules imposed upon making contributions to an IRA. If existing accounts would be allowed to associate to a newly created retirement portfolio, the complexity of reporting the contributions and distributions to the IRS would increase disproportional.

If a retirement plan is to be created, certain fields will have to be entered. The three fields which are most important are the " Bank area", the "Plan type" (see above) and the "Opening date".

If a retirement plan will be changed, or displayed, only the fields that identify a retirement plan will have to be entered: the plan number of a retirement plan and the Bank area.

Effects on Existing Data

Effects on Data Transfer

Effects on System Administration

Effects on Customizing

Because a Coverdell Education Savings Account is used to accumulate funds for a minor, business partners in a specific role (in the real worlds, these people are called "parents" or "guardians") can be associated to a Coverdell ESA. These specific role types can be maintained in customizing: Maintain special role types for a Coverdell Education Savings Account

A retirement plan is identified by a "plan number". The plan number is unique for a retirement plan in a given bank area. When creating a new retirement plan, the plan number can either be assigned by the system or by the user. When the system is assigning a plan number, the plan number is numeric. When the user manually assigns a plan number, the number can either be numeric or alpha numeric. These settings can be maintained in customizing:

  • Maintain number range interval for retirement plans Different number range intervals may be defined for different number range numbers. Each number range number can be associated to an internal or an external number range interval. For an internal number range interval, the system will issue a new number. For an external number range interval, the user is required to enter a number him/her self.
  • Maintain number range numbers for plan types Different number range intervals may be defined for different plantypes. In order to achieve this, a plantype (or several plantypes) can be associated to a number range number. This number range number refers on its turn to a number range interval.

Default values can be maintained in customizing:

  • Maintain defaults and field statuses When creating a new retirement plan, certain input fields can be pre-filled with a default value. This can reduce the time needed to create a new retirement plan. The user may wish to change the field status of a screen field. He/she may, for example, wish to hide certain fields because they are not relevant to them.

Several limits have to be maintained in customizing:

  • Maintain contribution dates Per retirement plantype and per contribution type, the contribution deadline can be maintained. An indication can be made if a shift to the next business day should be made if the contribution deadline falls on a weekend day or a holiday.
  • Maintain age limits Maintain the age limits for making contributions to and taking distributions from a retirement plan. Four age limits can be maintained per retirement plan type:
  • The age limit at which contributions to a retirement plan can be made.

  • The age limit at which contributions to a retirement plan cannot be made (without being subject to a penalty tax). Example: when the accountholder of a Coverdell education savings account turns 18, contributions cannot be made to his/her IRA.

  • The age limit at which the accountholder is eligible to make distributions. Example: when the accountholder of a traditional IRA turns 59.5, he/she is eligible to make distributions from his/her IRA.

  • The age limit at which the accountholder is required to make distributions. Example: when the accountholder of a traditional IRA turns 70.5, he/she is required to make distributions from his/her IRA. Failing to do this will lead to a tax penalty.

  • Maintain contribution limit ids In order to assess whether or not a accountholder exeeded the contribution limit, it may be necessary to add the contributions made to different plantypes. In order to make this possible, one or more plantypes can be associated to a contribution limit code.
  • Maintain contribution limits Using this transaction, contribution limits can be maintained for each contribution limit code. Some contribution limits are age dependent, therefore the minimum age for which a contribution limit is valid needs to be maintained as well.
  • Assign retirement plan type to contribution id In order to assess whether or not a accountholder exeeded the contribution limit, it may be necessary to add the contributions made to different plantypes. In order to make this possible, one or more plantypes can be associated to a contribution limit code.

The description for the retirement plan types, the contribution types and the amount identifiers, need to be maintained in customizing as well.

  • Maintain retirement plan types The type code is the central entity of a retirement plan. Each retirement plan type has a different set of rules for contributions and distributions. These rules are issued and enforced by the IRS.

  • Maintain amount identifiers Identifies different amount types used for a retirement plan. Some amount types, will have to be reported to the IRS, others do not.

The funds in an IRA cannot be stored in the portfolio forever. If the plan owner dies or if the plan owner reaches a certain age, a minimum amount needs to be withdrawn from the account(s) in the portfolio. In order to be able to calculate this so called Required Minimum Distribution (RMD) amount, three tables will need to be maintained in customizing:

  • Maintain joint life expectancy This transaction facilitates the determination of the required minimum distribution in case the sole beneficiary of the IRA is the accountholder's spouse who is at least 10 years younger than the plan owner.
  • Maintain single life expectancy This transaction is needed to enable the determination of the required minimum distribution for a beneficiary of a retirement plan.
  • Maintain distribution period This transaction is needed to enable the determination of the required minimum distribution for plan owners age 70 and above.

When reporting the withdrawal(s) of funds from the account(s) in the IRA portfolio, the IRS requires that a "Distribution Code" identifies such a withdrawal. The distribution code indicates the cause for the withdrawal. The IRS requires that the distributions from a retirement plan portfolio are identified as accurate as possible. Therefore, it may be necessary to append a second distribution code. However, not every combination of distribution codes is acceptable to the IRS. The descriptions of the distribution codes as well as the "acceptable" combinations of distribution codes need to be maintained in customizing.

When a withdrawal is made from an account belonging to an IRA portfolio, usually federal tax is being withheld. The transaction type(s) needed for this process have to be maintained in customizing: Maintain Withholding transaction type for payment items.

Postings of interest /charges need to be maintained for each posting category in the customizing transaction: Maintain mapping of Posting category and Amount identifier.

Authorization management for the retirement plan maintenance can be performed in customizing as well.

  • Maintain authorization types Authorization types are used to define which retirement plans a user is allowed to maintain. Authorization on the level of a group of retirement plans.
  • Maintain authorization object group Using this transaction, an authorization object can be maintained. Authorization on a application level (can only be used in combination with authorization groups).
  • Maintain authorization groups In this activity you define the corresponding values and a name for the authorization group field and assign it to an authorization object. Authorization on the level of an individual retirement plan. An authorization group is always associated with an authorization object group.

The screen sequence and the positions of the various input fields on those screens is fully customizable by using Maintain screen configuration.

Further Information

Retirement Plan BCA Account

Retirement Plan Standing Order

Retirement Plan Payment Transactions






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This documentation is copyright by SAP AG.

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