The features of “Terminated and Not Vested’ and ‘On Hold’ are similar in how they prevent paying Commissions to Agents using a system generated Adjustment. After Commissions have been calculated, an Adjustment with the name of the respective features is created in the amount needed to reduce the Agents Net to $0.00. With Terminated and not Vested, the withholding of Commissions is usually permanent, while for On-hold it is often meant to be temporary or to reduce an Agent’s commissions for a specific purpose.
The Terminated and Not Vested or On Hold adjustments is created with respective Adjustment Setup templates. The descriptions of those templates cannot be used to manually create Adjustments or used in the Commission Adjustments import.
Commissions Summary page with Condition message outlined for Agents with Commissions on Hold and Terminated and Not Vested
Vesting and Terminated features for Agents.
Many companies vest 100% from day one so that as soon as an Agent is Contracted, he or she will be eligible to receive any residual commission even if they are terminated. But even with these companies, they may need a way to manage residual commissions for an agent that was terminated for cause. Other companies have vesting rules, with the rules based on tenure, on production goals, or based on a combination of factors, where this feature can be helpful. Agents with Vesting checked in their details and are Status Terminated will continue to receive commissions.
To withhold funds from an Agent with this feature, the Vesting checkbox in the Agents details must be unchecked, and the Status must be Terminated, or Terminated with Cause.
If there are Vested Products, where Vested is checked in the Commissionable Product, commissions for those products will still be paid to the Terminated Agent with only commissions from everything else going into the Terminated and Not Vested Adjustment. However, for Agents that are Terminated for Cause Status and vesting unchecked, all their commissions will be withheld, even for Policies that are for Vested Products. See the section on Vested Products for more information.
It is important to note that the system will look at the Termination Date of the Agent when determining if the Terminated and Not Vested Adjustment should be created. If the cycle’s Processing Date is 11/17 but the Agent’s termination Date is after that date, the cycle will not add the Adjustment.
Agent Details with Status (terminated), and Vested field highlighted:
When the Cycle runs, it will calculate the Agents’ Commissions but then create an Adjustment that will reduce the Net to zero. The Adjustment will reduce both the Net and 1099 for Commissions in the cycle.
The Adjustment can be changed using the Adjustment Allocation page. For example, you may want to reduce the amount of the Adjustment, for example if you want to increase Net in order to then apply them to Chargebacks or other types of Adjustments, or to leave a portion of funds to be disbursed to the Agent.
Summary page showing Terminated and Not Vested Adjustment:
Adjustment (applied) List page showing Terminated and Not Vested Adjustment:
Adjustment Allocation Page with a Terminated and Not Vested Adjustment:
When an Agent is Terminated and Not vested, there is a message displayed in the Summary of their pdf Statement, and the Adjustment can be seen in the section for Adjustments:
Exception in Commission Cycle
When Agents are Terminated and Not Vested, there are scenarios where they can still increase Net Payable. An exception (warning) has been in the cycle so that an admin can review and decide if paying the Agent is appropriate.
- A warning will be displayed on the exception page in a cycle when an Agent is Terminated and not vested has net after the so an Admin can consider if action is desired to reduce the increase.
- The validation to display the warning occurs when ‘Close’ or ‘Generate ACH’ is selected.
- The message displayed is ‘Warning - Agent <Agent ID> is Terminated and Not Vested and has Net of <amount of final net>.'
- The message does not prevent closing the cycle or generating the ACH file, but when the warning is present, the option to Close or Generate the ACH file must be selected from the exception page. Selecting those options from the Summary page will only take the admin back to the exception page.
- Agents that are terminated but vested (checkbox for Vesting in Agent details is checked, continue to be paid the same as an active agent and therefore are not subject to the exception.
- After the Adjustment for Terminated and Not Vested is created in the amount of the Agents commission, there are three scenarios where the Agent could wind up with Net greater than zero prior to when the cycle is closed.
- There are ‘Vested Products’ where the Commissionable Product has ‘Vested’ checked so that Net from Policies with the product should still be paid. There may be a contractual agreement with the Agent that they will not receive commissions after they leave the company’s employment, but government regulations on, for example, Medicare Products require continuing commissions on those products.
- A Bonus or similar adjustment has been applied in the cycle that adds to Net.
- There is a ‘Net Increase’ which is when an Agent has more Advance Recovery than their Agent Balance. Since Agent Balance cannot go below zero, the amount that would reduce Agent Balance below zero instead is converted to increasing Net. This rarely happens unless there has previously been an Adjustment to reduce or ‘pay off’ any portion of the Agent Balance.
- Actions considered by the admin may be when they see the warning:
- Confirm if the Product in the Policy should be vested and continue to pay commissions.
- Consider if paying a bonus to a terminated Agent could be a mistake.
- If the Agent had paid off the Agent Balance and should not receive the Net increase, then the admin should create an Adjustment with ‘Apply to Net’ checked in the amount of the increase and apply to the cycle to reduce the final Net payable amount to zero.
Exception page in a cycle showing example of warning when an Agent that is Terminated and not Vested has net:
On-Hold Feature
There may be situations where a Company needs to put all, or a portion of an Agents commission proceeds on hold. The most common situation is by court-ordered or tax authority direction. The system will create an Adjustment like the Terminated and Not Vested one but will the description ‘On-hold.’ The other major difference is the On-Hold Adjustment does not default to withhold 1099 reporting. This is because usually the time taxes should still be paid against the income used to pay the debts. It is the responsibility of the Company to determine if 1099 should be withheld for the specific instance and adjust the checkbox for ‘Apply to 1099’ as needed. Also, if it is a situation where the funds are only to be held temporarily, and then later given back to the Agent using another Adjustment, for that situation the Adjustment to pay them back should also have the same checkbox for Apply to 1099.
To put an Agent on hold, the checkbox for ‘Commission On Hold’ needs to be checked in the Agent Details page for the Agent. It will then be applied to any Commission Cycle ran after it has been checked, (unlike the Terminated and Not Vested feature which will consider the Cycle’s Processing Date in relation to the Termination date for the Agent).
Agent Detail page highlighting Commissions on Hold option:
When the Cycle runs, it will calculate the Agents’ Commissions, then create an Adjustment with a description ‘Commission On Hold’ that will reduce the Net and 1099 to zero. The amount to be applied in the Adjustment can be changed if needed, for example if only a specific amount or portion is needed, using the Adjustment Allocation page.
If the hold onto an Agent’s funds is only temporary, after withholding commissions a new Adjustment can be created manually with a different description and with a negative number, which will then pay the Agent the amount. (Since Adjustments are subtracted from a balance, a negative number when subtracted becomes an add.)
It is important to note regarding when 1099 should be reduced or not that Tenant’s should consult their tax expert to use system generated adjustments or manually created adjustments appropriately.
If the Agent has no commissions generated in the cycle, then Adjustments for Terminated and Not Vested or Commissions On Hold are not created. They are only generated to bring the Net to $0.00, so if an Agent’s Net is already at $0.00 or less, than an Adjustment is not created.
If for any reason an Agent that was Terminated and Not Vested or with Commissions On Hold had a Bonus Adjustment, it would still be applied after the other Adjustment would have brought Net to $0.00. For this reason and others, the admin should always carefully confirm the final Net and details for Agents that come up for Terminated and Not Vested or Commissions On Hold.
Summary page showing an Agent with condition ‘Commissions on Hold:’
Adjustment (applied) List page showing Commission On hold Adjustment:
Adjustment Allocation page showing Commissions on Hold Adjustment:
The Agent Statement will show a message ‘Commission On Hold’ in the summary, and the Adjustment in the section for Adjustments.
