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Employee Provident Fund (EPF) Malaysia
In Malaysia the Employee Provident Fund is a program that allows people to accumulate savings for retirement in Account I and accumulate for living expenses such as housing, education and healthcare expenses in Account II. While the calculation of the EPF is fairly straight forward, the handling of these savings present some challenges when doing long term planning.
For purposes of the PlanPlus Planit, the approach we take is to only recognize the EPF Retirement contributions into Account I as savings for long-term goals. The employee contributions to Account II are treated like normal lifestyle style expenses and thus are not entered as specific expenses.
When it comes to the employer contributions to the EPF accounts, our approach is to enter the employer contribution to the EPF Account I as a savings amount on the savings screen and enter the employer contributions to Account II as miscellaneous income since these contributions are in fact like additional income for the employee to fund their lifestyle expenses.
Let’s look at some actual screen shots that illustrate this approach.
EPF Retirement Savings (Account I)
1. Enter the employee contribution to EPF Retirement Savings in the Detailed Cash Flow screen.
- Using a client income of 300,000 RM the contribution would be 300,000 x 11% x 70% = 23,100 RM
- Using a spouse income of 180,000 RM the contribution would be 180,000 x 11% x 60% = 13,860 RM
When you enter these EPF Retirement Savings on the detailed cash flow screen, they will appear on the summary Cash Flow Management Screen as seen here:
2. To include the employer contribution to the EPF Retirement Savings in the long-term projections, enter the employer’s contribution on the Savings Screen. To do this, click “Edit” on each of the EPF Retirement Savings records
This will open the record and give you access to the “Employer Amount” field.
- Using a client income of 300,000 RM the employer contribution would be 300,000 x 12% x 70% = 25,200 RM
- Using a spouse income of 180,000 RM the contribution would be 180,000 x 12% x 70% = 15,120 RM
Once you have entered the Employer contributions for the Client and Spouse, the Savings Screen illustrates both the Employee and Employer contributions as seen below.
EPF Account II Employer Contributions
As explained above, we only recognize the employer contributions to EPF Account II since we need to recognize this additional cash flow to fund living expenses. We enter these under “Miscellaneous Income” on the Detailed Cash Flow screen.
- Using a client income of 300,000 RM the employer contribution would be 300,000 x 12% x 30% = 10,800 RM
- Using a spouse income of 180,000 RM the contribution would be 180,000 x 12% x 30% = 6,480 RM
Below you’ll see the entries for these amounts:
The Account II contributions will appear on the summary Cash Flow Management Screen as part of the total Income number.