Planit:Employer EPF Contributions Case Study
From Planipedia
This case study is specific to financial planning in Malaysia, so has fixed values rather than indices by country. For a similar case study applicable to Singapore, please see Planit:Detailed CPF Contributions Case Study.
The Malaysian Employee Provident Fund works to create a financially sound retirement for your client based on the employee’s and the employer’s contributions. While you have already accounted for your client’s savings, you can also show the employer’s savings amount coming from an external source. This will show an important growth in the EPF account, without the reduction in your client’s lifestyle.
Example Problem One:
Suhaila Mokhtar tells you that she is saving what she feels is quite a large amount into her EPF and other investments. She is still concerned that it is not enough to fund her goals, so has given you more granular information.
She earns RM 120,000 of personal income and RM 1,400 of investment income. In addition to the 11% of her income automatically saved into her EPF account, Suhaila saves RM 6,000 into her non-EPF account, and RM 1,500 for her son’s education. She wants you to include the 12% of employer savings for her EPF.
Solution Using Objectives and Revenues:
On the Cash Flow Management screen you will add in all incomes, savings, and any tax deductions in order to deduce income taxes and living expenses.
1. Enter Suhaila’s $120,000 salary in the Personal Income field.
2. Enter Suhaila’s $1,400 investment income in the Investment Income field.
3. Calculate the 11% of her income (RM 13,200) and enter this in the EPF Approved Annual Savings
4. The additional RM 6,000 savings can be included under Other Savings.
5. Finally, for Education Savings input the $1,500 identified.
6. Click Calculate so that these values are saved into the Detailed Cash Flow
Continue to the Savings screen using the Next arrow to enter the employer EPF contributions.
- Click Edit beside Suhaila’s EPF Retirement Savings
- The employer contribution will be entered in the Matching Amount field. First you must calculate his contribution based on 12% of Suhaila’s RM 120,000 income (RM 14,400). So enter $14,400 as the Matching Amount
- Click Save
Go to the exercise to test your knowledge on EPF contributions
