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4.3 Calculating Employee Contributions |
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Universal Payroll Universal Payroll Deduction Method Employers must use the universal payroll deduction method to calculate required contributions and contributory service weeks for all HOOPP members.
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The six-step universal payroll deduction method calculates contributions based on a member’s annualized earnings, and then prorates contributions to reflect the hours worked during the payroll period in question. When calculating contributory service, the figure should be rounded to two decimal places to avoid distorting a member’s annualized earnings and related pension.
Examples
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The following examples demonstrate how employee required contributions are calculated using the universal payroll deduction method for regular pensionable earnings. As noted above, contributions for pensionable bonuses are treated the same as retroactive pay, discussed in section 4.5 Retroactive Pay (Retro) (Click Here).
Example 1: Full-time Member Paid Bi-weekly
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This example is for a full-time employee who is paid bi-weekly however, the calculation method can be used for any HOOPP member, regardless of hours worked or salary received, and any payroll frequency.
The member in this example works full-time and is paid bi-weekly. The member's current hourly rate of pay is $32$36. The normal full-time work week or full-time equivalence (FTE) for the member's job is 37.5 hours per week or 1,950 hours per year. HOOPP annualizes earnings on a 52-week basis. The example uses the 2020 2024 contribution rates and the 2020 2024 YMPE of $58$68,700500.
Step 1: Calculate annualized earnings
Annualized earnings = hourly rate × full-time hours in a year for that job
The member’s annualized earnings are:
$32 $36 × 1,950 = $62$70,400 200
Step 2: Calculate earnings per pay
Earnings per pay = hourly rate × hours worked in a pay period
The member works 37.5 hours a week and is paid every two weeks. Therefore, their earnings for the biweekly pay period are:
$32 $36 × 75 = $2,400700
Step 3: Calculate contributions at the low rate
Contributions at the low rate are calculated as follows:
Contributions at 6.9% = [earnings per pay × (YMPE* × 6.9%)] ÷ annualized earnings
*Use the lesser of the member's annualized earnings or the YMPE.
Therefore, the bi-weekly contributions at the low rate are:
[$2,400 700 × ($58$68,700500* × .069)] ÷ $62$70,400 200 = $155$181.78 79
*The
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2024 YMPE (
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$68,
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500) is used here because it is less than the member's annualized earnings (
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$70,
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200).
Step 4: Calculate contributions at the high rate
A member must contribute at the high employee contribution rate on the portion of their annualized earnings per pay that exceeds the YMPE. Contributions at the high rate are calculated as follows:
Contribution at 9.2% = [earnings per pay × (annualized earnings* - YMPE*) × 9.2%] ÷ annualized earnings
*If the member's annualized earnings are less than the YMPE, they would make no contributions at the high rate. However, because the member's annualized earnings in this example are greater than the YMPE, the member must contribute 9.2% on the portion that exceeds the YMPE.
Therefore, the bi-weekly contributions at the high rate are:
[$2,400 700 × ($62$70,400 200 - $58$68,700500) × .092] ÷ $62$70,400 200 = $13$6.0902
Step 5: Calculate total HOOPP contributions
The formula is: $155
$181.78 79 (the low) + $13$6.09 02 (the high) = $168$187.8781
Step 6: Calculate contributory service
A member's earnings per pay and annualized earnings are used to calculate contributory service.
The figure is calculated by converting pay into weeks and rounding off the figure to two decimals.
Contributory service = [earnings per pay × 52 weeks in a year] ÷ annualized earnings = [$2,400 700 × 52 weeks] ÷ $62$70,400 200 = 2 weeks
In this example, the member worked full-time during the two-week pay period, therefore, the contributory service credit is two weeks.
Example 2: Part-time Member Paid Bi-weekly
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The member in this example works part-time, is paid bi-weekly, and works a total of 15 hours each week. The member's current hourly rate of pay is $33$36. The normal full-time work week or full-time equivalent (FTE) for the member's job is 37.5 hours per week or 1,950 hours per year. HOOPP annualizes earnings on a 52-week basis. The example uses the 2020 2024 contribution rates and the 2020 2024 YMPE of $58$68,700500.
Step 1: Calculate annualized earnings
Annualized earnings = hourly rate × full-time hours in a year for that job
The member’s annualized earnings are:
$33 $36 × 1,950 = $64$70,350200
Step 2: Calculate earnings per pay
Earnings per pay = hourly rate × hours worked in a pay period
The member works 15 hours a week and is paid every two weeks. Therefore, their earnings for the biweekly pay period are:
$33 $36 × 30 = $990$1,080
Step 3: Calculate contributions at the low rate
Contributions at the low rate are calculated as follows:
Contributions at 6.9% = [earnings per pay × (YMPE* × 6.9%)] ÷ annualized earnings
*Use the lesser of the member's annualized earnings or the YMPE.
Therefore, the bi-weekly contributions at the low rate are:
[$990 $1,080 × ($58$68,700500* × .069)] ÷ $64$70,350200 = $62$72.31 72
*The 2020 2024 YMPE ($58$68,700500) is used here because it is less than the member's annualized earnings ($64$70,350200).
Note: There is a maximum amount of low contributions that can be made within the year.
This can be calculated by:
Maximum low contribution rate for 52 weeks = (6.9% × YMPE)
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= (0.069 ×
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$68,
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500)
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= $4,726.50
Maximum low contribution rate per week = (6.9% × YMPE) ÷ number of weeks in the year = (0.069 × $68,500) ÷ 52
= $4,726.50 ÷ 52 = $90.89
Therefore in 2024, the maximum amount that a member pays at the low contribution rate is
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$4,726.
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50 per year or
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$90.89 per week.
Step 4: Calculate contributions at the high rate
A member must contribute at the high employee contribution rate on the portion of their annualized earnings per pay that exceeds the YMPE.
Contributions at the high rate are calculated as follows: Contributions at 9.2% = [earnings per pay × (annualized earnings* - YMPE*) × 9.2%] ÷ annualized earnings
*If the member's annualized earnings are less than the YMPE, they would make no contributions at the high rate. However, because the member's annualized earnings in this example are greater than the YMPE, the member must contribute 9.2% on the portion that exceeds the YMPE.
Therefore, the bi-weekly contributions at the high rate are:
[$990 $1,080 × ($64$70,350 200 - $58$68,700500) × .092] ÷ $64$70,350 200 = $8$2.41
Step 5: Calculate total HOOPP contributions
To calculate total HOOPP contributions for the pay period, add the contributions at the low and high rates.
Total contributions = low rate + high rate
Because the member makes contributions at both the low and high rates, the total HOOPP contributions for the bi-weekly pay period are:
$62$72.3172 (the low) + $8$2.41 (the high) = $71$75.3113
Step 6: Calculate contributory service
A member's earnings per pay and annualized earnings are used to calculate contributory service - the length of time, measured in weeks, that the member has contributed to HOOPP, adjusted for such things as part-time service.
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If the member in our example had worked full-time during the two-week pay period, the contributory service credit would have been two weeks. Because the member works part-time, however, the contributory service credit is prorated as follows:
[$990 $1,080 × 52] ÷ $64$70,350 200 = .80 weeks
The final figure (.80) is the contributory service the member earned during the two week pay period.
Example 3: Full-time Member Receiving Sick Pay
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The member in this example is on an employer-approved health leave, is receiving 80% of their regular bi-weekly salary of $2,400775, and has decided not to top up contributions to their pre-leave level. The normal full-time work week or full-time equivalent (FTE) for this position is 37.5 hours, or 1,950 hours a year and the hourly rate of pay is $32$37. The example uses the 2020 2024 contribution rates and the 2020 2024 YMPE of $58$68,700500.
Step 1: Calculate annualized earnings
Annualized earnings = hourly rate × full-time hours in a year
The member's annualized earnings are:
$32 $37 × 1,950 = $62$72,400150
Step 2: Calculate earnings per pay
The member receives 80% of regular salary as short-term sick pay. The member chooses not to contribute at their regular rate of pay while on short-term sick leave.The member's
Regular earnings per pay = hourly rate × hours worked in a pay period
The FTE for this position is 37.5 hours a week and payment is received every two weeks. Therefore, regular earnings for the bi-weekly
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pay period are:
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$37 ×
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75 = $2,775
The member's earnings per pay (at 80% of regular pay) for the bi-weekly payroll deduction period are:
0.80 × $2,775 = $2,220.
Step 3: Calculate contributions at the low rate
The formula is:
Contributions at 6.9% = [earnings per pay × (YMPE* × 6.9%)] ÷ annualized earnings
*Use the lesser of the member's annualized earnings or the YMPE.
Therefore, the member's bi-weekly contributions at the low rate are:
[$1$2,920 220 × ($58$68,700 500 × .069)] ÷ $62$72,400 150 = $124$145.6243
Step 4: Calculate contributions at the high rate
The formula is:
Contributions at 9.2% = [earnings per pay × (annualized earnings - YMPE) × 9.2%)] ÷ annualized earnings
= [$1$2,920 220 × ($62$72,400 150 - $58$68,700500) × .092)] ÷ $62$72,400 150 = $10.4733
*If the member's annualized earnings are less than the YMPE, they would make no contributions at the high rate.
Step 5: Calculate total HOOPP contributions
The formula is:
$124$145.62 43 (the low) + $ 10$10.4733 (the high) = $135$155.0976
Step 6: Calculate contributory service
Contributory service = (earnings per pay × 52 weeks in a year) ÷ annualized earnings
= ($1$2,920 220 × 52) ÷ $62$72,400150
= 1.6 weeks for the pay period
Example 4: Member Works Two Different Jobs Concurrently
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A member may work two different jobs at an organization at the same time, often at two different rates of pay. To calculate the member's contributions, use blended annualized earnings.
In this example, a member works two jobs at one organization. In job A, the member’s base wage is $28.50 $30 per hour. In job B, the member’s base wage is $35 $36 per hour. In both jobs, the normal full-time work week or full-time equivalent (FTE) is 37.5 hours or 1950 hours per year. During the current two-week pay period, the member has worked 45 hours in job A and 10 hours in job B for a total of 55 hours. However, the member’s hours may change every pay period. The example uses the 2020 2024 contribution rates and the 2020 2024 YMPE of $58$68,700500.
Step 1: Calculate the annualized earnings for each job
Annualized earnings for job A = hourly wage full-time hours in a year = $28.50 $30 × 1,950 = $55$58,575500
Annualized earnings for job B = hourly wage full-time hours in a year = $35 $36 × 1,950 = $68$70,250200
Step 2: Calculate the blended annualized earnings (AE) for the pay period
Blended AE = [(hours worked in job A × AE for job A) ÷ total hours worked] + [(hours worked in job B ×
AE for job B) ÷ total hours worked]
= [(45 × $55$58,575500) ÷ 55] + [(10 × $68$70,250200) ÷ 55]
= $45$47,470 864* + $12,409764*
= $57$60,879628
*Rounded to the nearest dollar
Step 3: Calculate earnings per pay
The formula for earnings per pay is:
Hours worked in job A × basic hourly wage + hours worked in job B × basic hourly wage
= (45 × $28.50$30) + (10 × $35$36)
= $1,282.50 350 + $350$360
= $1,632.50710
Step 4: Calculate contributions at the low rate
Contributions at 6.9% = [earnings per pay (blended) × (YMPE × 6.9%)] ÷ blended AE
= [$1,632.50 710 × ($57$60,879× 628 × .069)] ÷ $57$60,879628
= $112$117.6499
*Use the lesser of the member's blended annualized earnings or the YMPE.
Step 5: Calculate contributions at the high rate*
Contributions at 9.2% = [earnings per pay (blended) × (blended AE* - YMPE) × 9.2%] ÷ blended AE
*If the member's blended annualized earnings are less than the YMPE, there are no contributions at the high rate.
In this example the member’s 2020 2024 blended annualized earnings of $57$60,879 628 are less than the 2020
2024 YMPE of $58$68,700500, therefore, there are no contributions at the high rate.
Step 6: Calculate total HOOPP contributions
Total contributions = contributions at low rate + contributions at high rate
= $112$117.64 99 + 0
= $112$117.6499
Step 7: Calculate weeks of contributory service
[Earnings per pay (blended) × 52 weeks in a year] ÷ blended annualized earnings
= $1,632.50× 710 × 52 ÷ $57$60,879628
= 1.47* weeks of contributory service for the pay period
*Rounded
Modifications may be required to your payroll system to handle this situation for each pay period. Supply your payroll department or external service provider with a copy of the preceding information.
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Member and Employer Contribution Rates
The HOOPP member and employer contribution rates have remained consistent since 2004. Contribution rates are reviewed by the Board of Trustees on an annual basis and communicated in advance of the next calendar year.
Member Contributions
Low: 6.9% of pensionable earnings up to the YMPE
High: 9.2% of pensionable earnings above the YMPE
Employer Contributions
Employers contribute at a rate of 126% of member contributions.