A legally retired employee is someone who has formally retired from the retirement fund, even if they continue working. That retirement-from-fund status changes how employer contributions are taxed.
What it means
Normally an employer's contribution to a retirement fund on an employee's behalf is a taxable fringe benefit. Once the employee has retired from the fund, contributions in respect of them no longer give rise to that fringe benefit, so the usual benefit value is not added to their pay. The status has to be flagged for payroll to suppress the benefit correctly.
Where it fits in
The legally-retired flag sits on the employee record and changes the fringe-benefit calculation for any employer retirement contributions. Without it, payroll would incorrectly raise a taxable benefit the retiree should not bear.
Key rules
- A person who has retired from the retirement fund.
- Employer retirement contributions for them raise no fringe benefit.
- The status must be flagged so payroll suppresses the benefit.
- Can apply even where the person continues to work.
