Marginal Benefit Calculation Setup Examples

The following documentation provides an example of how you might set up compensation items to perform a marginal tax calculation.

Situation

You've got a benefit that's 20% of salary from $10k to $50k, then 30% of salary from $50k to $80k, and 45% of salary from $80k up.
You want to calculate a tiered benefit like this based on salary.

Solution

Set up the following Compensation Items:

#1 20% of Salary with an expense cap of $10k ($50k * 20%). This calculation does not consider the fact that you want no expense from 0 - 10k, so you need 2 more compensation items to reverse the "floor". This one is posted to the expense account.

#2 20% of Salary with an expense cap of $2k. This is the amount of expense you need to reverse out of the calculation in #1. This one is posted to a statistical account.

#3 (100%) of #2. When posted to the expense account, it reverses the "floor" for this calculation out of the expense account.

In summary, #1 posts the expense of 10k and 3 posts expense of 2k, resulting in a net expense of $8k for the first tier of your calculation.

Now, you will need to create 2 more sets of similar calculations to represent your next 2 tiers.