OMERS Calculation Logic in HRP

Modified on Tue, 13 Jan at 4:11 PM

OMERS Calculation Logic in HRP

GOAL: To provide a wholistic and technical overview of how OMERS contributions are calculated within the Pay Engine of HRP.

This framework will explain the calculation, process flow, and considerations for boards looking to inquire about the composition of such generated values.

Purpose:

This article explains how HRP calculates the OMERS (Ontario Municipal Employees Retirement System) benefit pension plan deductions during payroll processing.

Applies To:

Payroll Administrators, HR Specialist, and Financial Officers managing employee pensions and deductions.

Component:

OMERS Calculation Engine – integrated within HRP Payrolls Processing Service.

Overview

What is OMERS?

OMERS (Ontario Municipal Employees Retirement System) is a defined benefit pension plan for employees of Ontario municipalities, school boards, and other local government entities. In the HRP payroll system, OMERS calculations determine pensionable earnings (OMERS Gross) and calculate employee and employer (board) contribution amounts based on established rates and thresholds.

Role of OMERS in Payroll

During each pay run, the system:

Calculates the OMERS Gross (pensionable earnings) for the pay period
Applies adjustments based on Days Not Paid (DNP) entries and their reduced pay reason codes
Determines employee and board contribution amounts
Generates pay records for OMERS deductions and gross amounts

Core Calculation Logic

How Pensionable Earnings are Determined

The OMERS Gross calculation begins by invoking the Subject Entity routine to determine the current OMERS gross amount. The Subject Entity configuration defines which earnings components are included in the OMERS calculation.

Key Inputs Affecting OMERS Gross:

Input	Description
Salary	Base salary earnings for the pay period
FTE (Full-Time Equivalent)	Employee's FTE factor affects proration
Pay Frequency	Number of pays per year (e.g., 26 for bi-weekly)
Vacation Paid on Each Pay	When enabled, vacation pay percentage is included in OMERS Gross
Allowances	May be included based on Subject Entity configuration
Shift Payments	May be included based on Subject Entity configuration

Subject Entity Configuration

The Subject Entity Maintenance screen defines how OMERS Gross is calculated. Key subject entities include:

OMERS - Defines which entity types (SALARY, ALLOWANCE, OTHER_PAYMENT) contribute to OMERS Gross
VACPAY - Defines which entity types are included in vacation pay calculations, which impacts OMERS Gross when vacation is paid on each pay

YMPE (Year's Maximum Pensionable Earnings)

The system calculates the current YMPE based on:

Board Data CPP YMPE value
Employee's Pension FTE
Equivalent Pay Count for the period
Number of pays per year

Current YMPE = (CPP YMPE × Pension FTE × Equivalent Pay Count) / Number of Pays

Maximum Annual Gross

If a Maximum Annual Gross is configured in the Pensions setup, the system caps the OMERS Gross accordingly:

If Max Annual Gross = 0, a high threshold (9,999,999) is used
The proration is applied similarly to YMPE

Pay Inputs and Adjustments

How Days Not Paid (DNP) Impact OMERS Calculations

Days Not Paid entries directly affect the OMERS Gross calculation. The system processes each DNP record and adjusts OMERS Gross based on the Reduced Pay Reason Code assigned.

Reduced Pay Reason Codes

Code	Name	Impact on OMERS Gross	Impact on Vacation Pay Adjustment
N0	No OMERS Credit, Reduced Pay	OMERS Gross is reduced by the full DNP amount AND the prorated daily rate deduction	Vacation pay is recalculated on reduced gross
N1	No OMERS Credit, Full Pay	OMERS Gross is adjusted by adding the full daily rate DNP amount	Vacation pay on full earnings maintained
N2	Full OMERS Credit, Reduced Pay	OMERS Gross remains full; only contributions are affected	Employee pays extra to maintain full credit
RP	Reduced Pay	Treated similar to N1 for OMERS calculations	See special scenarios below

N0 Processing Logic

When a DNP with Reduced Pay Reason Code = N0 is processed:

Insert informational pay record for salary DNP (full daily rate × days not paid)
Insert adjustment pay record (daily rate FTE × -1 × credit/loss factor)
If vacation pay is enabled:
- Accumulate DNP amounts and allowances
- Reduce gross by daily rate plus allowance plus shift amounts
If no vacation pay:
- Directly reduce OMERS Gross
- Process allowance and shift adjustments separately

N1 Processing Logic

When a DNP with Reduced Pay Reason Code = N1 is processed:

Insert informational pay record for salary DNP (full daily rate × days not paid)
If vacation pay is enabled:
- Accumulate DNP amounts including shift and allowance
- These amounts are added back when recalculating OMERS Gross
If no vacation pay:
- Add DNP amount to replaced OMERS Gross
- Include allowance and shift DNP amounts

N2 Processing Logic

When a DNP with Reduced Pay Reason Code = N2 is processed:

OMERS Gross remains at full value
Employee contribution is calculated to cover both employee and board portions for DNP days
Board contribution is calculated on reduced gross only
This allows employees to "buy back" the full OMERS credit

Deduct Over Pays Logic

When DNP entries span multiple pay periods (Deduct Over Pays > 1):

The system validates whether to deduct the full DNP in the current pay
Vacation adjustments are accumulated and applied appropriately
N2 with deduct over pays is treated as N1 for calculation purposes

Calculation Flow

High-Level Step-by-Step Process

┌─────────────────────────────────────────────────────────────────┐

│ Pay Run OMERS Process │

└─────────────────────────────────────────────────────────────────┘

│

▼

│ 1. INITIALIZE │

│ • Find processing group by cheque date │

│ • Load board data (CPP YMPE values) │

│ • Load pension configuration (OMERS rates) │

│ • Load employee pension deductions record │

│ • Check pension waiver dates │

│

▼

│ 2. CALCULATE BASE OMERS GROSS │

│ • Invoke Subject Entity routine for OMERS │

│ • Get initial OMERS Gross from subject entity │

│ • Check for pension waiver adjustments │

│ • Check if allowances are included in OMERS │

│

▼

│ 3. PROCESS DAYS NOT PAID (DNP) │

│ For each DNP record: │

│ • Get daily rate (FTE and Full FTE) │

│ • Determine if catch-up DNP │

│ • Check deduct over pays settings │

│ • Apply N0/N1/N2 logic based on reason code │

│ • Calculate allowance and shift DNP amounts │

│ • Accumulate vacation pay adjustments │

│

▼

│ 4. RECALCULATE OMERS GROSS WITH VACATION PAY │

│ • Apply accumulated N0 and N1 adjustments │

│ • Calculate replaced vacation pay OMERS Gross │

│ • Apply subject entity adjustments for allowance/salary │

│ • Calculate difference from original OMERS Gross │

│

▼

│ 5. PROCESS SKIP PAY DNP │

│ • Handle deferred DNP from previous periods │

│ • Apply N2/N1 adjustments with vacation percentage │

│ • Update replaced OMERS Gross │

│

▼

│ 6. APPLY RETRO DNP ADJUSTMENTS │

│ • Get retro DNP amounts from pay input │

│ • Add to replaced OMERS Gross │

│

▼

│ 7. CALCULATE YMPE AND MAX GROSS │

│ • Calculate current YMPE prorated for pay period │

│ • Calculate current max gross prorated for pay period │

│ • Handle ADDITION run type (no YMPE) │

│

▼

┌─────────────────────────────────────────────────────────────────────┐

│ 8. CALCULATE CONTRIBUTIONS │

│ • Split OMERS Gross into Gross1 (≤YMPE) and Gross2 (>YMPE) │

│ • Calculate employee deduction using pension rates │

│ • Calculate board deduction (matches employee) │

│ • Apply N2 adjustments if applicable │

└─────────────────────────────────────────────────────────────────────┘

│

▼

│ 9. APPLY OVERRIDES │

│ • Check employee pension deductions for overrides │

│ • Apply R (Replace), A (Add), or F (Factor) overrides │

│ • Override employee amount, gross, and/or board amount │

│

▼

│ 10. PRODUCE PAY RECORDS │

│ • Create OMERS employee deduction record │

│ • Create OMERS board share record │

│ • Create OMERS_GROSS record │

│ • Apply pension class for reporting │

When Recalculation Occurs

Process Stage	Recalculation Trigger
Pay Run Debug	OMERS is calculated for each selected employee
Schedule Groups	Prepares employee data for OMERS calculation
Pay Register Generation	Final OMERS values are committed to pay records
Retro Pay Processing	Adjustments are applied based on retro DNP amounts

Expected Behavior and Validation

What Constitutes Expected OMERS Results

Normal Scenario (No DNP):

OMERS Gross = Subject Entity calculated gross
If vacation paid on each pay: OMERS Gross includes vacation percentage

With DNP (N0 - No Credit, Reduced Pay):

OMERS Gross is reduced proportionally
Vacation pay is recalculated on the reduced gross

With DNP (N1 - No Credit, Full Pay):

OMERS Gross includes full earnings for the period
Employee receives no OMERS credit for DNP days despite full pay

With DNP (N2 - Full Credit, Reduced Pay):

OMERS Gross remains at full value
Employee contribution is increased to cover board portion for DNP days
Board contribution is on reduced amount only

Validating OMERS Gross Against Regular Earnings

To validate OMERS Gross:

Check Subject Entity Setup
- Navigate to: Payroll → Group Data → Subject Entity Maintenance
- Filter by "OMERS" to see included entity types
Compare with Pay Register
- Regular Earnings should align with OMERS Gross (adjusted for DNP)
- Vacation pay should be included if configured
Verify DNP Impact
- Check DNP entries for the employee
- Verify reduced pay reason codes are appropriate
- Confirm daily rate calculations

Known Scenarios Requiring Closer Review

Scenario	Why Review is Needed
DNP with RP reason code + Vacation on each pay	OMERS Gross may appear inflated due to vacation component interactions
Multiple DNP entries with different reason codes	Mixed N0/N1/N2 can produce complex adjustments
Deduct Over Pays > 1	DNP spanning multiple periods affects current period OMERS differently
Subject Entity with allowance-only VACPAY	Salary portion excluded from vacation affects OMERS Gross calculation
Pension waiver dates overlapping pay period	Partial waiver reduces OMERS Gross proportionally

Reference Scenario

Scenario: OMERS Gross Appears Inflated After DNP Entry (HRP-1869)

Background:
A customer reported that OMERS Gross nearly doubled after entering Days Not Paid with Reduced Pay Reason Code = RP (Reduced Pay) for a permanent group employee with vacation paid on each pay.

Configuration:

Employee ID: 15759
Schedule Group: EDASST
Pay Period: 202503
FTE: 1.0
Vacation Paid on Each Pay: Yes
DNP Reduced Pay Reason Code: RP

Observed Behavior:

Pre-DNP OMERS Gross: $2,442.14
Post-DNP OMERS Gross: $4,552.35

Expected Behavior:

OMERS Gross should be approximately $2,441.99

Analysis:

The RP (Reduced Pay) reason code is treated similarly to N1 in the OMERS calculation logic. When vacation is paid on each pay, the system:

Adds the full daily rate × DNP days to the replaced OMERS Gross
Includes vacation pay adjustments on the accumulated DNP amounts
The original OMERS Gross already includes vacation pay calculated on full earnings

This can result in the vacation component being counted twice when:

The Subject Entity configuration includes both salary and vacation in OMERS
A union agreement specifies that vacation is not reduced by DNP

Current System Behavior:

The system is functioning as originally designed. However, the original design did not account for union agreements where vacation pay is not reduced proportionally when DNP is entered.

Workaround:

For customers with such union agreements, the OMERS Gross override functionality in Employee Pension Deductions can be used to manually adjust the OMERS Gross to the correct value.