In most countries, deductions for savings and retirements receive favorable tax treatment and special rules are applied. You set up these deductions within the Pre-tax or Voluntary Deduction element classifications.
In the US you use the Deductions window to generate all the elements, balances, and formulas you require to process deferred compensation plans and tax-sheltered annuities. For each plan you specify whether employees can make after-tax contributions as well as pre-tax deductions. You also specify whether employees can make Catch-up contributions (to continue contributing when they have reached the base plan contribution limit).
You can also set up State Retirement System plans, by initiating deductions in the categories "Defined Benefit Plan" or "Defined Contribution Plan".
You can use predefined system extract definitions to report on retirement plans and contributions to deferred compensation plans and tax-sheltered annuities (401K, 403b and 457 plans). You can also make copies of the seeded pension extracts and modify them to add your own data elements and layout as required by each of the pension providers.
Using the Deductions window you can generate all the payroll components you require for each plan (401(k), 457, or 403(b)). For each plan, you can specify whether to enable After-tax contributions, employer contributions, and Catch-up provisions. You can define eligibility for these plans using element links or eligibility profiles.
If you enable after-tax contributions and catch-up provisions for a plan, you can determine - for each employee and plan - how the system processes these contributions. For each type of contribution, you can specify whether these contributions are deducted at the same time as the base contribution, or only when the employee reaches the limit for base contributions. You can specify whether overflow amounts from the base contribution (that is, amounts beyond the limit) are deducted as after-tax or catch-up deductions, or simply ignored. Similarly you can specify whether overflow amounts from the catch-up contribution are deducted as after-tax deductions, or simply ignored.
The predefined system extracts are based on the most common format used by most states, but you can modify your copies of the generic extract definitions to meet specific state requirements if required.
Eligible employees can elect to participate in a deferred compensation plan (such as 401(k), 403(b)) rather than receive the full amount of their salary in cash.
Participation in a deferred compensation plan is usually a pre-tax contribution that reduces the employee's taxable income. The maximum amount of salary that an employee can elect to defer and have contributed to a plan can change annually. In addition to pre-tax contributions, employees can make after-tax contributions. Employers can contribute matching amounts (the employer's matching contribution does not have to equal the employee's contribution).
Contributions and interest on deferred amounts are not subject to federal (nor most state) income tax until they are withdrawn.
Once you create and save your deduction, Oracle Payroll automatically generates both the pre- and post-tax deduction elements (if applicable). Oracle Payroll requires you to link and enter values for these elements separately.
Your organization needs to create deferred compensation elements and links only once. You must enter and maintain individual deferred compensation values for each individual assignment as dictated by your benefit elections policy.
Note: For an employee with multiple assignments, you can set up a pre-tax deduction for each assignment. Make sure that you record any deferral amount from a previous employer in element entries for each assignment. This ensures that the payroll run stops each assignment deduction when the total of the combined employee contributions equals the maximum allowed.
If you select the After-Tax Component check box in the Deferred Comp Rule region when you define the deductions, Oracle Payroll creates the following entry values on the after-tax element.
| Entry Value Name | Purpose of Entry |
|---|---|
| Take OverLimit AT | Select an option that takes pre-tax limit overflow amounts into the after tax balance. The options are Always, Never, and One-Time Deduction. You can use this option to take both base limit and catch-up overflow amounts. |
| AT Processing Order | You select whether the application processes the after-tax deduction at the same time as the pre-tax (Concurrent), or after pre-tax deductions have reached their limit (Sequential). |
Oracle Payroll supports deferred compensation plans with catch-up provisions (401(k), 403(b), and 457).
When you enable a catch-up provision, Oracle Payroll automatically adjusts an eligible employee's maximum pre-tax contribution limit. The application tracks base deductions and catch-up deductions separately, to support discrimination testing. It also processes catch-up deductions either sequentially or concurrently up to statutory or plan limits--the deduction stops when deferral amounts reach predefined limits.
The system tracks overflow amounts for states that do not conform to federal statute and plan to tax increases in Pre Tax contributions.
Oracle Payroll also supports nonrecurring one-time adjustments to deductions and arrears balances.
You can use the Over Limit report to identify employees for whom the Catch Up balance exceeds the IRS limit. See: Over Limit Report, Oracle HRMS Payroll Processing Management Guide.
If you enable catch-up processing when you define the deductions, Oracle Payroll creates the following entry values on the catch-up element.
| Entry Value Name | Purpose of Entry |
|---|---|
| Catch-Up Type | There are three types of deferred compensation plans: General (401k, 403b, and 457), Elective Deferral (403b only), and Retirement (457 only). An employee can participate in Elective Deferral and General Catchup at the same time, or Retirement and General Catchup at the same time. |
| Take Overlimit Catchup | An employee can take base limit overflow amounts into the catch-up balance in each pay period in which an overflow exists (Always), only once in the first pay period in which an overflow exists (One-Time Deduction), or Never. |
| Catch-Up Processing | An employee can process base and catch-up deductions and the same time (Concurrent), or wait until the base deductions have reached the limit before processing catchup (Sequential). |
| Override IRS Limit | If your company's plan specifies a lower limit than that of the IRS, you can specify a lower base limit. |
The main element for a catch-up deduction is <base_name> Catchup, where <base_name> is the name you give to the deduction, such as "SleepEZ_401k".
Use the Element Entries window to associate this element with an individual employee and enable the catch-up provisions. Your state may choose to tax the catch-up portion of deferred contributions.
A related element generated by the base deduction (<base_name> Taxable by JD [401k] [403b] [457]) stores the amount taxable by your state jurisdiction (JD) when the state intends to tax the increase in the federal pre-tax limit. For example, the pre-tax limit was $10,500 in 2001 and $11,000 in 2002. Your state may choose to tax the $500 increase in 2002. This is an indirect element that you do not attach or link.
Warning: An employee is not eligible for catchup if the base deduction is not met, and discrimination testing requires accurate tracking of base and catch-up deductions. If an employee uses concurrent catch-up processing, and the total base deduction at the end of the year is less than the base limit, you must use a balance adjustment to recharacterize all or part of the catchup amount as base. You may also need to refund income taxes in a state that has taxed catch-up deductions. Oracle Payroll does not automatically perform these tasks.
The following sample cases provide a real-world view of how selected combinations of entry values for Take Overlimit Catchup and Take Overlimit AT affect payroll processing of base, catch-up, and after-tax deductions. A reference table with detailed explanations of each deduction amount follows each initial summary table.
The examples assume that the employee has elected the following prescribed deductions from monthly pay:
Base Plan (BP): 10%
Catch-up (CU): 3%
After-tax (AT): 2%
In sample case 1 the application takes base overflow amounts into catchup when the employee reaches the base plan limit. The first table summarizes the effects of three entry values over five pay periods. It displays deduction amounts, expressed as a percentage of monthly pay, in the sequence BP%+CU%. Catch-up processing is Sequential and there is no after-tax deduction.
| Take Over Limit Catchup | Pay Period n | Pay Period n+1-employee reaches base plan limit (5% excess) | Period n+2 | Pay Period n+3-employee reaches catch-up limit (2% excess) | Pay Period n+4 |
|---|---|---|---|---|---|
| One Time Deduction | 10%+0% | 5%+(5%+3%) | 0%+3% | 0%+1% | 0%+0% |
| Never | 10%+0% | 5%+3% | 0%+3% | 0%+1% | 0%+0% |
| Always | 10%+0% | 5%+(5%+3%) | 0%+(10%+3%) | 0%+1% | 0%+0% |
The following tables are for reference. They describe the effects of each entry value in greater detail, explaining how the application calculates the deduction amounts in each pay period.
| Pay Period | Deductions (BP%+CU%) | Explanation |
|---|---|---|
| Pay Period n | 10%+0% | 10% to base, because 10% is the prescribed deduction for the employee's base plan; 0% to catchup, because catch - up processing is Sequential and the employee has not yet reached the base limit. |
| Pay Period n+1 | 5%+(5%+3%) | 5% to base, because the employee reached the base limit at the 5% mark; (5%+3%) to catchup, because sequential processing of catchup begins when the employee reaches the base limit. With the entry value One Time Deduction, the application takes the 5% base overflow to catchup this one time, and the prescribed 3% also goes to catchup. |
| Pay Period n+2 | 0%+3% | 0% to base, because the employee reached the base limit in period n+1; 3% to catchup, because with the entry value One Time Deduction, overflows go to catchup only once, and the application took a spillover already in period n+1. The prescribed 3% goes to catchup. |
| Pay Period n+3 | 0%+1% | 0% to base, because the employee reached the base limit in period n+1; 1% to catchup, because the employee reached the catchup limit at the 1% mark. There is no after - tax deduction, so processing stops after reaching the catch - up limit. The application does nothing with the 2% overflow. |
| Pay Period n+4 | 0%+0% | 0% to base and 0% to catchup, because the employee has reached both the base and catch - up limits. |
| Pay Period | Deductions (BP%+CU%) | Explanation |
|---|---|---|
| Pay Period n | 10%+0% | 10% to base, because 10% is the prescribed deduction for base; 0% to catchup, because catch - up processing is Sequential and the employee has not yet reached the base limit. |
| Pay Period n+1 | 5%+3% | 5% to base, because the employee reached the base limit at the 5% mark; 3% to catchup, because sequential processing of catchup begins when the employee reaches the base limit. With the entry value Never, the application takes no overflow amounts to catchup, but does take the prescribed 3% amount. |
| Pay Period n+2 | 0%+3% | 0% to base, because the employee reached the base limit in period n+1; 3% to catchup, because 3% is the prescribed catch - up deduction. |
| Pay Period n+3 | 0%+1% | 0% to base, because the employee reached the base limit in period n+1; 1% to catchup, because the employee reached the catch - up limit at the 1% mark. Without an after - tax deduction, processing stops after reaching the catch - up limit. Nothing is done with the 2% overflow. |
| Pay Period n+4 | 0%+0% | 0% to base and 0% to catchup, because the employee has reached both the base and catch - up limits. |
| Pay Period | Deductions (BP%+CU%) | Explanation |
|---|---|---|
| Pay Period n | 10%+0% | 10% to base, because 10% is the prescribed deduction for the employee's base plan; 0% to catchup, because catch - up processing is Sequential and the employee has not yet reached the base limit. |
| Pay Period n+1 | 5%+(5%+3%) | 5% to base, because the employee reached the base limit at the 5% mark; (5%+3%) to catchup, because sequential processing of catchup begins when the employee reaches the base limit. With the entry value Always, the application takes the 5% base overflow to catchup every time. The application also takes the prescribed 3% to catchup. |
| Pay Period n+2 | 0%+(10% + 3%) | 0% to base, because the employee reached the base limit in period n+1; (10%+3%) to catchup, because with the entry value Always, the application takes what is now a 10% base overflow to catchup every time. The application also takes the prescribed 3% to catchup. |
| Pay Period n+3 | 0%+1% | 0% to base, because the employee reached the base limit in period n+1; 1% to catchup, because the employee reaches the catchup limit at the 1% mark. Without an after - tax deduction, processing stops after reaching the catch - up limit. The application does nothing with the 2% overflow. |
| Pay Period n+4 | 0%+0% | 0% to base and; 0% to catchup, because the employee has reached both the base and catch - up limits. |
In sample case 2 the application takes base overflow amounts into aftertax when the employee reaches the base plan limit. The first table summarizes the effects of three entry values over four pay periods. It displays deduction amounts, expressed as a percentage of monthly pay, in the sequence BP%+AT%. After - tax processing is Concurrent and there is no catch - up deduction.
| Take Over Limit AT | Pay Period n | Pay Period n+1 - - employee reaches base plan limit (5% excess) | Pay Period n + 2 | Pay Period n + 3 |
|---|---|---|---|---|
| One - Time Deduction | 10%+2% | 5%+(5%+2%) | 0%+2% | 0%+2% |
| Never | 10%+2% | 5%+2% | 0%+2% | 0%+2% |
| Always (Base Pension Plan) | 10%+2% | 5%+(5%+2%) | 0%+(10%+2%) | 0%+(10%+2%) |
The following tables are for reference. They describe the effects of each entry value in greater detail, explaining how the application calculates the deduction amounts in each pay period.
| Pay Period | Deductions (BP%+AT%) | Explanation |
|---|---|---|
| Pay Period n | 10%+2% | 10% to base, because 10% is the prescribed deduction for base; 2% to aftertax, because concurrent processing of aftertax begins immediately, taking the prescribed 2%. |
| Pay Period n+1 | 5%+(5%+2%) | 5% to base, because the employee reached the base limit at the 5% mark; (5%+2%) to aftertax, because with the entry value One - Time Deduction, the application takes the 5% base overflow to aftertax this one time. The application also takes the prescribed 2%. |
| Pay Period n+2 | 0%+2% | 0% to base, because the employee reached the base limit in period n+1; 2% to aftertax, because 2% is the prescribed deduction for aftertax. The application took the one - time spillover already in period n+1. |
| Pay Period n+3 | 0%+2% | 0% to base, because the employee reached the base limit in period n+1; 2% to aftertax, because 2% is the prescribed deduction for aftertax. The application took the one - time spillover already in period n+1. |
| Pay Period | Deductions (BP%+AT%) | Explanation |
|---|---|---|
| Pay Period n | 10%+2% | 10% to base, because 10% is the prescribed deduction for base; 2% to aftertax, because concurrent processing of aftertax begins immediately, taking the prescribed 2%. |
| Pay Period n+1 | 5%+2% | 5% to base, because the employee reached the base limit at the 5% mark; 2% to aftertax, because with the entry value Never, the application takes no overflow amounts to aftertax. The application takes the prescribed 2%. |
| Pay Period n+2 | 0%+2% | 0% to base, because the employee reached the base limit in period n+1; 2% to aftertax, because 2% is the prescribed deduction. |
| Pay Period n+3 | 0%+2% | 0% to base, because the employee reached the base limit in period n+1; 2% to aftertax, because 2% is the prescribed deduction. |
| Pay Period | Deductions (BP%+AT%) | Explanation |
|---|---|---|
| Pay Period n | 10%+2% | 10% to base, because 10% is the prescribed deduction for the employee's base plan; 2% to aftertax, because concurrent processing of aftertax begins immediately, taking the prescribed 2%. |
| Pay Period n+1 | 5%+(5%+2%) | 5% to base, because the employee reaches the base limit at the 5% mark; (5%+2%) to aftertax, because with the entry value Always, the application takes the 5% spillover amount to aftertax every time, along with the prescribed 2%. |
| Pay Period n+2 | 0%+(10%+2%) | 0% to base, because the employee reached the base limit in period n+1; (10%+2%) to aftertax, because with the entry value Always, the application takes what is now a 10% spillover amount to aftertax every time, along with the prescribed 2%. |
| Pay Period n+3 | 0%+(10%+2%) | 0% to base, because the employee reached the base limit in period n+1; (10%+2%) to aftertax, because with the entry value Always, the application takes spillover amounts to aftertax every time, along with the prescribed 2%. |
In sample case 3 the application takes base or catch - up overflow amounts into aftertax when the employee reaches the base plan or catch - up limit. The first table summarizes the effects of four entry values over five pay periods. It displays deduction amounts, expressed as a percentage of monthly pay, in the sequence BP%+CU%+AT%. After - tax processing order is Concurrent.
Catch - up processing is Sequential, and the entry value for Take Overlimit Catchup is Never. So while the application does process catch - up deductions after the employee reaches the base limit, it does not ever take base overflow amounts into catchup.
Note: If the employee uses the entry value One - Time Deduction for Take Overlimit AT, the application takes a spillover only once. The application takes a base or a catchup overflow amount, depending upon which of the two limits the employee reaches first.
| Take Over Limit AT | Pay Period n | Pay Period n+1 - - employee reaches base plan limit (5% excess) | Pay Period n+2 | Pay Period n+3 - - employee reaches catch-up limit (2% excess) | Pay Period n+4 |
|---|---|---|---|---|---|
| One - Time Deduction | 10%+0%+2% | 5%+3%+ (5%+2%) | 0%+3%+2% | 0%+1%+2% | 0%+0%+2% |
| Never | 10%+0%+2% | 5%+3%+2% | 0%+3%+2% | 0%+1%+2% | 0%+0%+2% |
| Always (Base Pension Plan) | 10%+0%+2% | 5%+3%+ (5%+2%) | 0%+3%+ (10%+2%) | 0%+1%+ (10%+2%) | 0%+0%+ (10%+2%) |
| Always (base pension plan and catch-up) | 10%+0%+2% | 5%+3%+ (5%+2%) | 0%+3%+ (10%+2%) | 0%+1%+ (10%+2%+2%) | 0%+0%+ (10%+3%+2%) |
The following tables are for reference. They describe the effects of each entry value in greater detail, explaining how the application calculates the deduction amounts in each pay period.
| Pay Period | Deductions (BP%+CU%+AT%) | Explanation |
|---|---|---|
| Pay Period n | 10%+0%+2% | 10% to base, because 10% is the prescribed deduction for the employee's base plan; 0% to catchup, because catch-up processing is Sequential, and the employee has not yet reached the base limit; 2% to aftertax, because concurrent processing of aftertax begins immediately, taking the prescribed 2% amount. |
| Pay Period n+1 | 5%+3%+(5%+2%) | 5% to base, because the employee reached the base limit at the 5% mark; 3% to catchup, because sequential processing of catchup begins when the employee reaches the base limit. With the entry value Never for Take Overlimit Catchup, the application takes no overflow - but it does take the prescribed 3% amount. (5%+2%) to aftertax, because with the entry value One-Time Deduction, the application takes the 5% base overflow to aftertax this one time. The application also takes the prescribed 2% to aftertax. |
| Pay Period n+2 | 0%+3%+2% | 0% to base, because the employee reached the base limit in period n+1; 3% to catchup, because 3% is the prescribed deduction for catchup; 2% to aftertax because 2% is the prescribed deduction for aftertax. The application took the one-time spillover already in period n+1. |
| Pay Period n+3 | 0%+1%+2% | 0% to base, because the employee reached the base limit in period n+1; 1% to catchup, because the employee reached the catchup limit at the 1% mark; 2% to aftertax because 2% is the prescribed deduction for aftertax. The application took the one-time spillover already in period n+1. |
| Pay Period n+4 | 0%+0%+2% | 0% to base, because the employee reached the base limit in period n+1; 0% to catchup, because the employee reached the catch-up limit in period n+3; 2% to aftertax because 2% is the prescribed deduction for aftertax. The application took the one-time spillover already in period n+1. |
| Pay Period | Deductions (BP%+CU%+AT%) | Explanation |
|---|---|---|
| Pay Period n | 10%+0%+2% | 10% to base, because 10% is the prescribed deduction for base; 0% to catchup, because catch-up processing is Sequential and the employee has not yet reached the base limit; 2% to aftertax because concurrent processing of aftertax begins immediately, taking the prescribed 2% amount |
| Pay Period n+1 | 5%+3%+2% | 5% to base, because the employee reaches the base limit at the 5% mark; 3% to catchup, because with the entry value Never for Take Overlimit Catchup, the application takes no overflow to catchup. The application takes the prescribed 3% amount. 2% to aftertax because with the entry value Never, the application takes no overflow amount to aftertax. The application takes the prescribed 2% amount. |
| Pay Period n+2 | 0%+3%+2% | 0% to base, because the employee reached the base limit in period n+1; 3% to catchup, because 3% is the prescribed deduction for catchup; 2% to aftertax because 2% is the prescribed deduction for aftertax. |
| Pay Period n+3 | 0%+1%+2% | 0% to base, because the employee reached the base limit in period n+1; 1% to catchup, because the employee reached the catch-up limit at the 1% mark; 2% to aftertax because 2% is the prescribed deduction for aftertax. With the entry value Never, the application does not take the catch-up overflow to aftertax. |
| Pay Period n+4 | 0%+0%+2% | 0% to base, because the employee reached the base limit in period n+1; 0% to catchup, because the employee reached the catch-up limit in period n+3; 2% to aftertax because 2% is the prescribed deduction for aftertax. |
| Pay Period | Deductions (BP%+CU%+AT%) | Explanation |
|---|---|---|
| Pay Period n | 10%+0%+2% | 10% to base, because 10% is the prescribed deduction for base; 0% to catchup, because catch-up processing is Sequential and the employee has not yet reached the base limit; 2% to aftertax because concurrent processing of aftertax begins immediately, taking the prescribed 2%. |
| Pay Period n+1 | 5%+3%+(5%+2%) | 5% to base, because the employee reaches the base limit at the 5% mark; 3% to catchup, because with the entry value Never for Take Overlimit Catchup, the application takes no overflow to catchup. The application takes the prescribed 3% amount. (5%+2%) to aftertax, because with the entry value Always (base pension plan), the application takes the 5% base overflow amount to aftertax. The application also takes the prescribed 2% amount. |
| Pay Period n+2 | 0%+3%+(10%+2%) | 0% to base, because the employee reached the base limit in period n+1; 3% to catchup, because 3% is the prescribed deduction for catchup; (10%+2%) to aftertax because with the entry value Always (base pension plan), the application takes what is now a 10% base overflow amount to aftertax every time. The application also takes the prescribed 2%. |
| Pay Period n+3 | 0%+1%+(10%+2%) | 0% to base, because the employee reached the base limit in period n+1; 1% to catchup, because the employee reaches the catch-up limit at the 1% mark; (10%+2%) to aftertax because with the entry value Always (base pension plan), the application takes the base overflow amount to aftertax every time. The application also takes the prescribed 2% amount. |
| Pay Period n+4 | 0%+0%+(10%+2%) | 0% to base, because the employee reached the base limit in period n+1; 0% to catchup, because the employee reached the catch-up limit in period n+3; (10%+2%) to aftertax because with the entry value Always (base pension plan), the application takes the base overflow amount to aftertax every time. The application also takes the prescribed 2% amount. |
| Pay Period | Deductions (BP%+CU%+AT%) | Explanation |
|---|---|---|
| Pay Period n | 10%+0%+2% | 10% to base, because 10% is the prescribed deduction for base; 0% to catchup, because catch-up processing is Sequential and the employee has not yet reached the base limit; 2% to aftertax because 2% is the prescribed deduction for aftertax. |
| Pay Period n+1 | 5%+3%+(5%+2%) | 5% to base, because the employee reaches the base limit at the 5% mark; 3% to catchup, because sequential processing of catchup begins when the employee reaches the base limit, taking the prescribed 3%. (5%+2%) to aftertax, because with the entry value Always (base pension plan and catch-up), the application takes the 5% base overflow amount to aftertax. |
| Pay Period n+2 | 0%+3%+(10%+2%) | 0% to base, because the employee reached the base limit in period n+1; 3% to catchup, because 3% is the prescribed deduction for catchup; (10%+2%) to aftertax because with the entry value Always (base pension plan and catch-up), the application takes all spillover amounts to aftertax every time. |
| Pay Period n+3 | 0%+1%+(10%+2%+2%) | 0% to base, because the employee reached the base limit in period n+1; 1% to catchup, because the employee reached the catch-up limit at the 1% mark; (10%+2%+2%) to aftertax because with the entry Value Always (base pension plan and catchup), the application takes all spillover amounts to aftertax every time (10% from base, 2% from catchup). The application also takes the prescribed 2% amount. |
| Pay Period n+4 | 0%+0%+(10%+3%+2%) | 0% to base, because the employee reached the base limit in period n+1; 0% to catchup, because the employee reached the catch-up limit in period n+3; (10%+3%+2%) to aftertax because with the entry Value Always (base pension plan and catchup), the application takes all spillover amounts to aftertax every time (10% from base, 3% from catchup). The application also takes the prescribed 2% amount. |
The Consolidated Appropriations Act of 2023 (HR 2617) includes a number of provisions to "expand coverage and increase" employee retirement savings which are referred to as the SECURE Act 2.0.
The following sections of the SECURE Act 2.0 impact the processing of employee retirement savings:
Section 603 requires that employees who are eligible to make catch-up contributions to their qualified deferred compensation plans (i.e. 401(k), 403(b), and/or 457 plans) must do so on a Roth (or after tax) basis if they earned over the applicable wage limit in social security wages in the prior tax year.
Section 604 is about optional treatment of employer matching or non-elective contributions as Roth contributions. This section allows defined contribution plans to provide participants with the option of receiving matching contributions on a Roth basis, effective on the date of enactment of this Act.
For more information, refer to the website: https://www.finance.senate.gov/imo/media/doc/Secure 2.0_Section by Section Summary 12-19-22 FINAL.pdf
To comply with the regulations included in Sections 603 and 604, the following predefined components are available:
To support the provisions in Sections 603 and 604, Oracle maintains separate Roth elements for catch-up and employer match processing.
The following deferred compensation deduction categories enable you to comply with the regulations included in Sections 603 and/or 604:
Deferred Comp 401k - SECURE 2.0
Deferred Comp 403b - SECURE 2.0
Deferred Comp 457 - SECURE 2.0
When creating pre-tax or tax deferred 401(k) or 403(b) deductions and enabling catch-up contributions, a separate catch-up deduction element is created.
Post-Sequential Catch-Up Processing Option
The "Post Sequential" Catch-Up processing option is applicable to pre-tax 401(k), 403(b), or 457 deductions that are created using the "SECURE 2.0" categories. With this Catch-Up option, catch-up processing will not start in the same pay period that the base deduction reaches the annual limit, but instead will start in the next pay period.
This Catch-Up processing option is also available to the following element entry input values in the Entry Values window:
<Base Element> Catchup - Catchup Processing
<Base Element> Roth Catchup - Catchup Processing
ER Match Type
To comply with the Section 604 requirement of optionally offering employer matches to qualified retirement plans on a Roth (after-tax) basis, use the "ER Match Type" input value. This input value is available for the following elements that are created when a 401(k), 403(b), or 457 deduction element is created using the "SECURE 2.0" tax category.
<Base_Element>
<Base_Element> Catchup
<Base_Element> Roth
<Base_Element> Roth Catchup
The ER Match Type input value has two options: Pre-Tax Basis and Roth Basis. It has a default value of Pre-Tax Basis for base (i.e. pre-tax) and base Catch-up elements and Roth Basis for Roth and Roth Catch-up elements.
US Pre-Tax Catch-up Eligibility
For employees who have elected to make catch-up contributions to their 401(k)/403(b)/457 plans, the US Pre-Tax Catch-up Eligibility EIT determines who is eligible to make pre-tax 401(k), 403(b), (and/or 457(b)) catch-up contributions and who is not, and therefore can only make catch-up contributions on a Roth or after-tax basis.
This EIT has the following parameters:
Year
Pre-Tax Catch-up Eligible
If you are an Oracle US Payroll customer, you can also have employee eligibility for pre-tax catch-up contributions determined automatically in the 401(k), 403(b) and 457 catch-up processing formula using the "Employee Year End Archive Wages" internal-only EIT. This EIT will be populated with the employee's W-2 Box 3 (Social Security wages) amount when the Year End Pre-Process (or W-2c PreProcess) is run for the applicable reporting year and GRE.
This EIT has the following parameters:
Year
GRE
SS Wages
SECURE Act Section 603 Wage Limit
The "SECURE Act Section 603 Wage Limit" user table stores the applicable wage limit in effect for Section 603. The value stored in the field "SS Wages" in the Person EIT "Employee Year End Archive Wages" is compared to the value stored in the user table. Oracle Benefits uses information in this table to determine whether the employee is eligible to make catch-up contributions to their 401(k), 403(b), and/or 457(b) plan on a pre-tax or Roth (post-tax) basis.
If there is a value stored in SS Wages in Person EIT "Employee Year End Archive Wages" and it is equal to or less than the value present in the user table, then the employee is considered eligible for pretax catchup contributions.
If there is no value populated (for that year) in "SS Wages" in the Person EIT "Employee Year End Archive Wages" or the value that is populated is greater than the value present in the user table, then the employee will not be eligible for pretax catchup contributions; instead they are only eligible for catchup contributions to be made on a Roth (or after-tax) basis.
For information about processing retirement savings according to the provisions of the SECURE Act 2.0, see:
Processing Employee Retirement Savings According to the Provisions of the SECURE Act 2.0.
If you are using either Oracle US Payroll or Oracle Benefits (Standard and Advanced), then this topic explains how to process employee retirement savings according to the regulations in Sections 603 and 604.
Determining Employee Eligibility According to the Provisions of the SECURE Act 2.0.
If you are using the Savings Plan enrollment form to enroll employes into a 401(k), 403(b), and/or 457 plan, then this topic describes setup information to determine employee eligibility according to the regulations in Section 603.
If you are using either Oracle US Payroll or Oracle Benefits (Standard and Advanced), then this topic explains how to process employee retirement savings according to the regulations in Sections 603 and 604 of the SECURE Act 2.0. See Overview of Retirement Savings and SECURE Act 2.0 for more information.
To process retirement savings, complete the following steps:
In the Deduction window, create deduction elements using the pre-tax deduction categories for the SECURE Act 2.0. To comply with the regulations in Section 603 (and 604) if applicable, you must create new 401(k), 403(b) and/or 457 deductions elements.
See Creating 401(k), 403(b), and 457 Elements.
Additional elements are created when a Pre-Tax deduction element is created using any of the SECURE Act 2.0 Deferred Comp categories in the Deduction window and when the following is true:
"Employer Match" and "Roth Contribution" options are selected under the Deferred Compensation Rule.
Either "Concurrent", "Sequential" or "Post-Sequential" options are checked under Catch-up Processing.
Additional Elements and Balances
List of additional elements that are created:
<BASE_NAME> Roth CU SI => Special Inputs Element
<BASE_NAME> Roth Catchup => Roth Catch-Up Element
<BASE_NAME> Roth CU SF => Special Features Element
<BASE_NAME> Roth Catchup ER => Roth Catch-Up ER (Employer Match) Element
List of additional balances that are created:
<BASE_NAME> Roth Catchup
<BASE_NAME> Roth Catchup Accrued
<BASE_NAME> Roth Catchup Additional Amt
<BASE_NAME> Roth Catchup Arrears
<BASE_NAME> Roth Catchup ER
<BASE_NAME> Roth Catchup Not Taken
<BASE_NAME> Roth Catchup Replacement Amt
Also, the application adds the "ER Match Type" input value to the following elements that are created when a Pre-Tax Deduction element is created using any of the SECURE Act 2.0 Deferred Comp categories in the Deduction window:
<Base_Element>
<Base_Element> Catchup
<Base_Element> Roth
<Base_Element> Roth Catchup
To address the Section 604 requirement of optionally offering employer matches to qualified retirement plans, you can select an appropriate option in the Entry Values window for an employee. This process is discussed in step 3.
To comply with the Section 603 requirement of determining employee eligibility for pre-tax catch-up contributions, define the US Pre-Tax Catch-up Eligibility EIT parameters. This EIT determines who is eligible to make pre-tax 401(k), 403(b) (and/or 457(b)) catch-up contributions and who is not (and therefore can only make catch-up contributions on a Roth (or after-tax basis)).
Specify the following parameters:
Year: Select the effective year.
Pre-Tax Catch-up Eligible: Select Yes or No (No is the default).
You can manually populate the EIT for each applicable employee for each year as required. Note also that this is a "multi-record" type of EIT so there can be different values stored for different years. The 401(k), 403(b), and 457 catch-up processing formula will check this EIT and will skip any employee who is not eligible (i.e. Pre-Tax Catch-up Eligible is set to No or left null) for the applicable year.
Note: If this EIT is left null (i.e. not populated for the year) for an employee, then that employee will not be eligible for Pretax Catch-up contributions.
Examples of how to populate this EIT:
If the employee's Social Security wages (W-2 Box 3 wages) for 2023 are $145,000 or less, enter:
Year = 2024
Pre-Tax Catch-Up Eligible = Yes
For the same employee, if the next year (2024), the Social Security wages (W-2 Box 3 wages) are more than $145,000, enter:
Year = 2025
Pre-Tax Catch-Up Eligible = No
Note: You can also use Oracle Web ADI or directly call the HR API from a PL/SQL script to update this Person EIT for multiple employees at once. See My Oracle Support Document <2988876.1> - How to Load US Pre-Tax Catch-up Eligibility EIT Data Using Web ADI or HR API (Related to Section 603 of SECURE Act 2.0) for Release 12.1 and 12.2 E-Business Suite US Payroll Customers for detailed steps on how to do so.
If you are an Oracle US Payroll customer, you can also have employee eligibility for pre-tax catch-up contributions determined automatically in the 401(k), 403(b) and 457 catch-up processing formula using the "Employee Year End Archive Wages" internal-only EIT. This EIT will be populated with the employee's W-2 Box 3 (Social Security wages) amount when the Year End Pre-Process (or W-2c PreProcess) is run for the applicable reporting year and GRE.
Since Person EIT "Employee Year End Archive Wages" can only be populated by running the Year End Preprocess or W-2c PreProcess (US Payroll processes), it does not apply to non-Oracle Payroll customers.
The Employee Year End Archive Wages EIT includes the following parameters:
Year: Year of Archive
GRE: Tax Unit ID
SS Wages: Stores the archived Social Security Wages (i.e. W-2 Box 3 wages)
Important: It is highly recommended that you do not update this EIT for any employee. This EIT will be updated with the employee's W-2 Box 3 (Social Security) wages for the applicable reporting year when the Year End Preprocess or the W-2c Preprocess is run. If the "US Pre-Tax Catch-up Eligibility" EIT is not populated for an employee, then the catch-up processing formula will check the "YE Wages for Employee" EIT to see if it is populated for the applicable reporting year. If it is populated for the applicable year, then the formula checks the wage amount to determine whether the employee is eligible for the pre-tax catch-up contribution: If the wage amount is $145,000 (i.e. for 2024) or less, then the pre-tax catch-up contribution will be processed; if the wage amount is greater than $145,000 (i.e. for 2024), then the pre-tax catchup will be skipped.
If neither the "US Pre-Tax Catch-up Eligibility" EIT is populated for the applicable year nor the Year End Pre-Process is run for the employee for the applicable year, then the employee is considered as not eligible for Pre-Tax Catchup, so the base catchup component will be calculated as 0 (zero).
This step is applicable to Section 604, which allows defined contribution plans to provide participants with the option of receiving matching employer contributions (when offered by the plan sponsor) on a Roth (rather than a pre-tax) basis. To comply with the requirement, in the Entry Values window for an employee, select an appropriate option for the "ER Match Type" input value. This input value has two options: Pre-Tax Basis and Roth Basis.
Following are the default values for the options:
Pre-Tax Basis for base (i.e. pre-tax) and base Catch-up elements
Roth Basis for Roth and Roth Catch-up elements.
Examples on how to use this setup are as follows:
If an employee has a base (pre-tax) and/or base Catch-up element entries and wants to have their employer-match (ER) contribution also on a pre-tax basis, no changes are required (as the ER Match Type input value will have "Pre-Tax Basis" automatically selected).
However, if the employee has a base (pre-tax) and/or base Catch-up element entries and wants to have their employer-match (ER) contribution on a Roth Basis, then "Roth Basis" must be selected.
If the employee has Roth and/or Roth Catch-up element entries and wants to have their employer-match (ER) contribution also on a Roth Basis, no changes are required (as the ER Match Type input value will have 'Roth Basis' automatically selected).
However, if the employee has Roth and/or Roth Catch-up element entries and wants to have their employer-match (ER) contribution on pre-tax basis, then the "Pre-Tax Basis" must be selected.
If you are using the Oracle Benefits (Standard and Advanced) Savings Plan enrollment form to enroll employes into a 401(k), 403(b) and/or 457 plan, then you can use this topic to see the necessary set up steps to determine employee eligibility according to the regulations in Section 603 of SECURE Act 2.0. See Overview of Retirement Savings and SECURE Act 2.0 for more information.
The Savings Plan enrollment form determines employee eligibility for enrolling into a pre-tax or a Roth (after tax) catchup plan associated with a 401(k), 403(b) and/or 457 "base" plan. To comply with the regulations included in Section 603, you need to determine an employee's eligibility for being able to make catch-up contributions to their 401(k), 403(b) and/or 457 plans on a pre-tax or Roth (after-tax) basis. The US Pre-Tax Catch-up Eligibility person EIT determines who is eligible to make pre-tax 401(k), 403(b) (and/or 457(b)) catch-up contributions and who is not (and therefore can only make catch-up contributions on a Roth (or after-tax basis)).
For more information about defining the parameters of the US Pre-Tax Catch-up Eligibility EIT, refer to Processing Employee Retirement Savings According to the Provisions of the SECURE Act 2.0.
Prerequisite Steps
Before you use the US Pre-Tax Catch-up Eligibility EIT to determine employee eligibility for contributing to a 401(k), 403(b) and/or 457 catch-up plan on a pre-tax or Roth basis, you must set up the following:
Create a participation and rate eligibility fast formula that calls the formula function.
Create eligibility profiles to use in savings 401(k), 403(b) and/or 457 plans.
Create savings plans with the required eligibility profiles.
These steps are applicable to Oracle Benefits customers who use Oracle US Payroll and for those who do not use Oracle US Payroll.
To Determine Employee Eligibility According to the Provisions of the SECURE 2.0 Act
Create a formula function
In the Define Function window, create a new formula function using the definition "BEN_ACA_UTILS.PRE_TAX_CATCHUP_ELIGIBLE". You can refer to the PRE_TAX_CATCHUP_ELIGIBLE_BEN sample formula function for more information.
Click the Context Usages button and in the Context Usages window, add the following information:
| Number | Context Name | Data Type |
|---|---|---|
| 1 | ASSIGNMENT_ID | Number |
| 2 | DATE_EARNED | Date |
Click the Parameters button and in the Parameters window, add the following information:
| Number | Parameter Name | Type | Class |
|---|---|---|---|
| 1 | P_PERSON_ID | Number | Input only |
| 2 | P_TAX_UNIT_ID | Number | Input only |
Create a fast formula using the Participation and Rate Eligibility formula type
In the Formula window, specify the following details.
Name: Formula name, for example, Catchup_401_Eligiblity_BEN
Type: Participation and Rate Eligibility
Select the Verified check box.
Click Edit and add the following sample code:
INPUTS ARE BEN_IV_PERSON_ID, BEN_IV_GRE_ID ELIGIBLE = PRE_TAX_CATCHUP_ELIGIBLE_BEN(BEN_IV_PERSON_ID,BEN_IV_GRE_ID) RETURN ELIGIBLE
Create eligibility profiles to use with the 401(k), 403(b) and/or 457 savings plans
In the Participation Eligibility Profiles window, define the following eligibility profiles.
Pretax Base Plan Eligibility
Name: Eligibility profile name, for example, Pretax Base Plan Eligibility
Assignment Type: Any Assignment
Status: Active
Other tab:
Select Participation in Another Plan
Seq: 10
Plan Name: Your pretax savings plan name, for example, Pretax Savings Plan
Do not select the Exclude check box.
Enter the effective start date.
Pretax Enrolled Roth Exclusion
Name: Eligibility profile name, for example, Pretax Enrolled Roth Exclusion
Assignment Type: Any Assignment
Status: Active
Other tab:
Select Participation in Another Plan
Seq: 10
Plan Name: Pretax Catchup Plan name, for example, Pretax Catchup Plan
Select the Exclude check box.
Enter the effective start date.
Roth Enrolled Pretax Exclusion
Name: Eligibility profile name, for example, Pretax Enrolled Roth Exclusion
Assignment Type: Any Assignment
Status: Active
Other tab:
Select Participation in Another Plan
Seq: 10
Plan Name: Roth Catchup Plan name, for example, Roth Catchup Plan.
Select the Exclude check box.
Enter the effective start date.
401(k) Pretax Eligibility
You associate the formula ("Catchup_401_Eligibility_BEN") that you created with an eligibility profile. You can use this eligibility profile for 401(k), 403(b), or 457 plans:
Name: 401(k) Pretax Eligibility
Assignment Type: Any Assignment
Status: Active
Other tab:
Select Rule.
Seq: 10
Rule: Select formula that you created, for example, Catchup_401_Eligibility_BEN.
Enter the effective start date.
Create savings plans with the required eligibility profiles
In the Plans window, define the following plans.
Pretax Savings Plan (No eligibility added for the base plan)
Name: Your pretax savings plan name, for example, Pretax Savings Plan.
Status: Active
Plan Type: 401K Savings
Plan Usage: May not be in Program
General tab: Select the Savings Plan check box.
Pretax Catchup Plan (With eligibility profiles added)
Name: Your pretax catchup plan name, for example, Pretax Catchup Plan.
Status: Active
Plan Type: 401K Savings
Plan Usage: May not be in Program
General tab: Select the Savings Plan check box.
Click the Plan Eligibility button.
In the Eligibility window, select the following eligibility profiles and select the Required check box for all the profiles.
Pretax Base Plan Eligibility
401 Pretax Eligibility (uses the formula created)
Roth Enrolled Pretax Exclusion
Roth Catchup Plan (With eligibility profiles added)
Name: Your Roth catchup plan name, for example, Roth Catchup Plan.
Status: Active
Plan Type: 401K Savings
Plan Usage: May not be in Program
General tab: Select the Savings Plan check box.
Click the Plan Eligibility button.
In the Eligibility window, select the following eligibility profiles and select the Required check box for all the eligibility profiles.
Pretax Base Plan Eligibility
Pretax Enrolled Roth Exclusion
Processing
If the field Pre-Tax Catch-Up Eligible is set to Yes for the applicable year in an employee's Person EIT US Pre-Tax Catch-up Eligibility and the above benefits formula, eligibility profiles, as well as savings plan setup steps are followed, then the following will be true:
When enrolling initially into the savings plan, an employee will only be eligible to enroll in the Pretax Savings Plan as this is the base plan (with no eligibility configured).
Once enrolled into the Pretax Savings Plan, this employee can then be enrolled into either the Pretax Catchup Plan or the Roth Catchup Plan as they are eligible for pretax catchup for the year.
After being enrolled into either one of the catchup plans, the other plan will not be available for enrollment as they are mutually exclusive.
If the field Pre-Tax Catch-Up Eligible is set to No (or left null) for the applicable year in the employee's Person EIT US Pre-Tax Catch-up Eligibility and the above benefits formula, eligibility profiles, as well as savings plan setup steps are followed, then the following will be true:
When enrolling initially into the savings plan, only the Pretax Savings Plan will be eligible for enrollment as this is the base plan.
Once enrolled into the Pretax Savings Plan, this employee will only be eligible for the Roth Catchup Plan as they are not eligible for Pretax Catchup for the applicable year.
If you also use Oracle US Payroll, and use the Benefits Savings Plan enrollment form for enrolling employees into 401(k), 403(b) and/or 457 plans (including Catch-up), then the Person EIT ''Employee Year End Archive Wages'' can also be used to determine employee eligibility for pre-tax catch-up contributions. If the Year End Preprocess or W-2c PreProcess has been run for the applicable year, then the ''Employee Year End Archive Wages'' EIT will be populated for the employee. As part of the formula function created in Step 1, if the Person EIT US Pre-Tax Catch-up Eligibility is not populated for the employee, then the application will check the ''Employee Year End Archive Wages'' EIT for an employee's eligibility:
The value in Person EIT ''Employee Year End Archive Wages'' will be checked for the applicable reporting year:
If a value populated for the applicable reporting year is less than or equal to the value present in in the user table SECURE Act Section 603 Wage Limit, then the employee is considered eligible for pretax catchup contributions (and therefore are eligible for the Pretax Catchup Plan). See Pretax Catchup Plan.
Note about the applicable reporting year: The applicable payroll reporting year in the "Year" field of the "Employee Year End Archive Wages" EIT is always the prior year. For example, if eligibility is being considered for a pretax catchup plan in 2024, then the "applicable reporting year" is 2023. If eligibility is being considered for a pretax catchup plan in 2025, then the "applicable reporting year" will be 2024.
If there is no value populated for the applicable reporting year or the value that is populated is greater than the value present in User Table value ''SECURE Act Section 603 Wage Limit'', then the employee will not be eligible for pretax catchup contributions (and therefore not eligible for the Pretax Catchup Plan). Instead, they are only eligible for catchup contributions to be made on a Roth (or after-tax) basis and therefore would be eligible for Roth Catchup Plan. See Step 4, Roth Catchup Plan for setup details.
Create 401(k), 403(b), and 457 elements in the Deduction window.
To create 401(k), 403(b) or 457 elements
Set the effective date early enough to handle any historical entries. You cannot enter a deduction for employees before the deduction's effective start date.
Type a unique name for the element in the Name field. Type a short name in the Reporting Name field, if desired.
The Name applies to both the deduction element and its formula. It must start with a letter of the alphabet, not a number or a symbol. The Reporting Name is a short name (less than 12 characters) that appears on reports and the statement of earnings.
Select Pre-Tax Deductions in the Classification field. Select the appropriate category (such as Deferred Comp 401k) in the Category field.
Pre-Tax Deduction Categories for the SECURE Act 2.0
To support the provisions in Sections 603 and 604 of the SECURE Act 2.0, Oracle maintains separate Roth elements for catch-up and employer match processing.
The following deferred compensation deduction categories enable you to comply with the regulations included in Sections 603 and/or 604 of SECURE Act 2.0:
Deferred Comp 401k - SECURE 2.0
Deferred Comp 403b - SECURE 2.0
Deferred Comp 457 - SECURE 2.0
When creating pre-tax or tax deferred 401(k) or 403(b) deductions and enabling catch-up contributions, a separate catch-up deduction element is created. See Overview of Retirement Savings and SECURE Act 2.0 for more information.
If you are using Basic Benefits, select the appropriate classification in the Benefit Classification field.
Important: Do not select a benefit classification if your site uses Standard Benefits or Advanced Benefits.
Optionally, change the default priority. The deduction's classification determines its default processing priority in the payroll run. Deductions with lower processing priorities process first.
Make sure Recurring is enabled in the Type region.
Select one of the following from the Start Rule region:
On Entry, to start the deduction on the effective date you enter it for the employee.
Earnings Threshold, to start the deduction when the employee's gross earnings reach a specified amount. You specify this amount using the entry value Threshold Amount in the Element Entries window.
Note: You can specify independent Threshold Amount values for each element--for example, the base deduction and the catch-up deduction.
Check the appropriate boxes in the Deferred Compensation Rule region:
Employer Match creates an ER Match element you can enter for employees who are eligible for employer matching (or partial matching).
After-Tax Component creates an AT element you can enter for employees who elect to contribute after-tax money.
Note: You cannot select After-Tax Component for your own categories of pretax deductions.
Enabling an Employer Match or After-Tax Component check box creates a separate after-tax element. This element takes the same name as the Pre-Tax element, but is followed by the letters ER (in the case of Employer Match) or AT (in the case of After-Tax).
Select a Run Type:
Regular, for the deduction to process only in Regular runs, that is, the runs that produce employees' regular pay in each period.
All, to process the deduction in both Regular and Supplemental runs.
In the Termination region, select a termination rule to determine how entries of the element are processed after termination of the employee:
Actual Termination, if you want recurring entries to close down on the date the employee leaves. For a nonrecurring element, select Actual Termination if you want the entries to close down at the end of the pay period in which the employee leaves, or on the date the assignment ends (the final process date) if this is earlier.
Final Close, if you want the entries to stay open beyond the employee's leaving date so that you can continue to pay the employee.
Last Standard Process, for all recurring and nonrecurring elements if you want their entries to close down on the Last Standard Process date or on the date the assignment ends (the final process date) if this is earlier. The Last Standard Process date defaults to the last day of the pay period in which the employee is terminated, but you can set it to a later period when you terminate an employee.
In the Catch-Up Processing option group, select one of the following:
None, if the deduction has no catch-up processing component.
Sequential, to tell the application to process catch-up deductions only after reaching the base limit.
Concurrent, to tell the application to process base plan and catch-up deductions at the same time.
Post Sequential, when using the "SECURE 2.0" deferred compensation deduction categories, this option tells the application to process pre-tax 401(k), 403(b) or 457 catch-up deductions in the next pay period only. This means that when the annual base deduction limit is reached in the current pay period, the catchup deductions will not start in the same pay period, but instead will start in the next pay period. See Overview of Retirement Savings and SECURE Act 2.0.
Note: Selecting this option sets the default for the deduction. You may change the option later per employee in the Element Entries window.
Note: When the Catchup option is selected as Sequential or Concurrent and the Employer Match check box has been selected, an Employer Match element for Def Comp 401k Catchup element is also created. This can be used appropriately for those employees who are eligible for Catchup Employer Matching. This is applicable only for the Def Comp 401k Deduction Elements.
Check the Standard Link check box only if you want to attach the deduction to all employees.
Check the Total Reached stop rule check box if the deduction should stop when the total sum taken from an employee for this deduction reaches a specified total. You enter this total in the entry value Total Owed:
Specify a Total Reached default value for all eligible employees in the Total Owed Default field of the Input Values window of the Element Link window.
Specify a Total Reached value for an individual employee in the Total Owed field of the Entry Values window of the Element Entries window.
Uncheck the Total Reached check box if the deduction should stop on the effective date you delete the deduction for an employee. (This is the On Entry stop rule.)
Check the Frequency Rules Exist check box, and click the Frequency Rules button to enter the appropriate information (if necessary).
In the Rules region, select the appropriate amount rule:
Flat Amount, if you want to deduct a fixed amount of money each pay period. You enter this amount using BEE or the Element Entries window for each employee.
%Earnings, if you want to deduct a percentage of the employee's earnings each pay period. You enter this percentage using BEE or the Element Entries window for each employee.
If AT or catch-up elements exist, the amount rule applies to them as well.
For more information about BEE, see Making Batch Element Entries Using BEE, Oracle HRMS Configuring, Reporting, and System Administration Guide.
If appropriate, make a selection in the Insufficient Funds region.
Save your work.
Oracle Payroll generates the 401(k), 403(b) or 457 elements, formulas and balances.
Note: You cannot update deduction criteria once you have saved the deduction.
Link the generated elements.
If your deduction has both pre-tax and after-tax elements, you must create a link for both elements. If you are going to maintain costing information on the employer contribution (ER) element, you must also create a link for this element.
Mark the generated balance for gross-up processing if you will ever process the deduction with a net-to-gross element. You do this by querying the balance in the Balance window, choosing the Dimensions button, and checking the Grossup Balance box for the assignment-level current run dimension (ASG_RUN).
Note: You must perform this step for all 401k deductions that might be processed with a net-to-gross element. You can then exclude the deduction from the net-to-gross processing of some or all of your net-to-gross elements, if required.
See: Excluding Balances From an Element's Gross-up Calculation
If you have employees in Puerto Rico, you must reduce their 401(k) limit.
Oracle Payroll enables you to set up employer matching for your organization. The application default is that for every dollar that an employee contributes up to 6% of their pay, the employer matches 50 cents. You can adjust this criterion or remove employer matching altogether.
Note: Employer matching funds do not count toward statutory deferral limits.
You establish employer matching from the Globals window.
Prerequisite
You must link the appropriate deduction element to employee assignments before you can enter values for employer matching variables into the Globals window.
To set up employer matching
Enter the limit of the employer match in the Value field for the EMPLOYER_MATCH_LIMIT variable.
This decimal value represents the amount of the employee's contribution (expressed as a percentage of pay) that the company will match. The default entry for this field is .06 (up to 6%).
Enter the rate of the employer match in the Value field for the EMPLOYER_MATCH_PCT variable.
This is a decimal value that represents what percentage of each contributed dollar the company will match. The default entry for this field is .5 (50% of the amount an employee contributes).
Save your work.
Note: The default Employer Match Formula does not take catch-up contributions into account. If your plan provides employer matching for catch-up contributions, change your Employer Match formula.
Note: For the Def Comp 401k Catchup element, a default separate employer formula is created when the catch-up option is selected along with employer match option.
You set up catch-up processing in the Deduction and Element Link windows. (You may use additional windows if you set up a benefit plan.) If this is the first time you are creating deductions for catch-up processing and you are migrating existing deductions and their values, be sure to see your DBA or System Administrator for information about automating portions of the migration.
In the Deduction window, create a new deduction and its associated elements. See Creating 401(k), 403(b), and 457 Elements.
In the Element Link window, define eligibility by linking generated elements to assignments or by creating open links.
If you use Standard or Advanced Benefits, do not select assignment components to define eligibility. Create an open link (unless you need to select assignment components for costing purposes).
In the Plans window, optionally set up a benefits plan if you are using Standard or Advanced Benefits.
Enroll employees in the plan. See Enrollment Management.
Note: If you are using Basic Benefits, do not set up a benefits plan. You make entries for each employee to the input values of the deduction element. See Benefits Enrollment (Basic Benefits).
401(k), 403(b), and 457 catch-up provisions enable eligible employees to exceed pre-tax deferral limits. In the Element Entry window, create new element entries to associate catch-up deductions with the employee and to enable the catch-up provisions for the deductions.
Create a new deduction and its associated elements. See Creating 401(k), 403(b), and 457 Elements
Define eligibility by linking generated elements to assignments or creating open links. See Defining Element Links
To create new element entries for catch-up deductions
Set your effective date to accommodate the deduction's effective date and employee eligibility. You cannot associate a deduction with an employee before its effective date, or before the employee becomes eligible for the deduction.
In the Element Entry window, click in a blank Element Name field and select the catch-up deduction from the lookup list.
For more information about creating element entries for employee assignments, see Making Manual Element Entries.
Choose the Entry Values button. The Entry Values window appears.
In the Catch-Up Type field, select from the following:
Elective Deferral Catchup (403b only)
Elective Deferral and General Catchup (403b only)
General Catchup (401k, 403b, and 457)
Retirement Catchup (457 only)
Retirement and General Catchup (457 only)
In the Override IRS Limit field, optionally enter a dollar amount lower than the IRS limit on deferred contributions if your company's benefits specify a lower limit.
Warning: Do not enter a value higher than the IRS limit in the Override IRS Limit field. Oracle Payroll ignores a higher value and uses the IRS limit.
Eligible employees (for example, selected military personnel) may qualify for limits that exceed that of the IRS. To address this situation, your implementation team must create a new generic pre-tax category and a deduction within this category. Add this new category in the application utilities Lookups window for the Lookup type US_PRE_TAX_DEDUCTIONS. You set this deduction Amount value separate from those of standard pre-tax deferral plans, such as 401(k), 403(b), or 457.
For additional information on creating generic pre-tax categories, see Adding Lookup Types and Values, Oracle HRMS Configuring, Reporting, and System Administration Guide.
In the Take Overlimit Catchup field, select from the following:
Always, to take base limit overflows into the catch-up balance in each pay period in which a base limit overflow exists.
Never, to take no base limit overflows into the catch-up balance.
One-Time Deduction, to take overflows into the catch-up balance only once, in the first pay period in which a base limit overflow exists.
Note: A base limit overflow occurs when an employee's deductions for the year exceed the maximum amount allowed by the IRS or your company's benefits. The entry value Take Overlimit Catchup tells the application how (if at all) to take base limit overflows into the catch-up balance.
In the Catch-Up Processing field, select from the following:
Concurrent, to process base and catch-up deductions at the same time.
Sequential, to finish processing base deductions when they reach the base limit, then begin processing catch-up deductions.
Post Sequential, when using the "SECURE 2.0" deferred compensation deduction categories, this option tells the application to process pre-tax 401(k), 403(b) or 457 catch-up deductions in the next pay period only. This means that when the annual base deduction limit is reached in the current pay period, the catchup deductions will not start in the same pay period, but instead will start in the next pay period. See Overview of Retirement Savings and SECURE Act 2.0.
In the Take Overlimit AT field, select from the following if there is an after-tax component to the deduction:
Always (Base Pension Plan and Catch-Up), to take base and catch-up limit overflows into the after-tax balance in each pay period in which a base limit or catch-up limit overflow exists.
Always (Base Pension Plan), to take base limit overflows into the after-tax balance in each pay period in which a base limit overflow exists.
Always (Catch-Up), to take catch-up limit overflows into the after-tax balance in each pay period in which a catch-up limit overflow exists.
Never, to take no overflows into the after-tax balance.
One-Time Deduction, to take overflows into the after-tax balance only once, in the first pay period in which an overflow exists.
Warning: Make sure that an employee understands the implications of selecting Always for Take Overlimit Catchup and Always for Take Overlimit AT in the same deduction. Potentially, the application could take up to a double deduction in a single pay period when the employee reaches the base limit.
In the After-Tax Processing Order field, select from the following if there is an after-tax component to the deduction:
Concurrent, to process after-tax deductions and base/catch-up deductions at the same time.
Sequential (Base Pension Plan and Catch-Up), to first process base and catch-up deductions, then begin processing after-tax deductions.
Sequential (Base Pension Plan), to first process base deductions, then begin processing after-tax deductions.
For real-world examples of how the above entry values affect payroll processing of catch-up deductions, see Sample Cases for Catch-up Processing.
Puerto Rico has a lower 401(k) limit than the IRC limit. If you have employees in Puerto Rico, you must override the default 401(k) limit at the employee level.
To override the 401(k) limit
Perform the following for each Puerto Rican employee:
Open the Element Entries window.
Select the assigned 401(k) element, and click Entry Values.
Specify a value for the 401(k) limit as follows:
| Taxable Year | Maximum Pretax Contribution |
| 2009 and 2010 | $9,000 |
| 2011 and 2012 | $10,000 |
| 2013 forward | $12,000 |
Save your work.
Oracle Payroll provides templates and seed data to simplify the administration and reporting of participation in State Retirement System Plans.
When you initiate deductions for these plans, you can choose one of the following deduction categories:
Defined Benefit Plan
This category is for plans that provide a certain level of benefit during the employee's retirement, generally based on the employee's age, compensation level, or length of service. The value of the benefit does not depend on the amount of money in the employee's account at retirement.
Defined Contribution Plan
This category is for plans that contain individual accounts for each employee, with a set amount contributed regularly into the account by the employer (and sometimes by the employee). The value of the benefit does depend on the amount of money in the employee's account at retirement.
There are seeded taxability and wage attachment rules for these categories. If an employee is participating in more than one State Retirement System plan, requiring different taxability rules, you can create a new category and add taxability rules for your category.
When you initiate deductions, Oracle Payroll generates all the elements, formulas, formula result rules, balances, and balance feeds that you require for payroll processing. You can configure the generated components, if required. The generated elements are:
Plan element, which has the name you give the deduction
Buy Back element, if you select the Buy Back check box on the Deduction window
AT element, if you select the After Tax component check box on the Deduction window
ER element, if you select the Employer Match check box on the Deduction window (available only for a Defined Contribution Plan)
ER Contribution element
AT ER, if you select the After Tax component check box and the Employer Match check box on the Deduction window
Special Inputs elements (for entering replacement and additional amounts) and Special Features elements (for indirect results of payroll processing) are also generated for the following elements: plan, buy back, AT, and ER Contribution.
The plan element has the following input values.
| Input Value Name | Purpose of Entry |
|---|---|
| Pay Value | The actual pretax deduction that is taken--returned by payroll run. |
| Percent | The percentage of eligible compensation to be deducted. This input value only appears if you select %Earnings as the Amount rule. |
| Amount | The flat amount to be deducted. This input value only appears if you select Flat Amount as the Amount rule. |
| Additional Amount | An additional flat amount to be deducted. Use this input value if you want to report the additional amount separately. |
| Override IRS Limit | Holds the plan's limit if this is lower than the IRS limit. |
Retirement plan deductions are either a flat amount or a percentage of earnings. You can select the eligible compensation on which to base the percentage.
Each generated plan adheres to the IRS Retirement Calculation Federal Contribution Limits. If your plan's limit is different from the IRS limit, you can override contribution limits on the element input value.
The State Retirement Systems Plan Information assignment Extra Information Type stores information about an employee's enrollment in retirement plans. This includes the Person Identification Number issued by the plan administrators, participation start date, and whether the person qualifies for the ten year rule or a grandfathering scheme.
Under the ten year rule, the benefit limit is reduced proportionally for employees who have participated in the scheme for less than ten years. For example, the limit is half of the full limit for a person who has participated for five years.
Enter Yes in the Qualifies for Grand-fathering field if the employee's contributions are to be calculated using an earlier contribution formula.
You can use System Extract for periodic reporting of individual and organizational contributions. Data elements and sample record layouts are provided, along with formulas defining the extract criteria for four types of extract: payroll run, monthly, quarterly, and annual. You must copy these extract definitions and add your plan names and, optionally, payroll names to the extract criteria formula. You can run your copies of the extract definitions from the Submit Requests window.
The sample layout is based on the most common format used by most states, but you can modify your copies of the generic extract definitions to meet specific state requirements if required.
You must ensure that the data used in the extracts is held in the expected location within Oracle HRMS, or modify the extract definitions to match your own database. The expected locations are as follows:
| Data Elements For Reports | Location Required by Predefined System Extract |
|---|---|
| Last Name, First Name, Middle Name | People window |
| Social Security Number | People window (national identifier) |
| Person Plan Identifier (assigned by plan administrators) | Assignment EIT |
| Assignment Status Code | Assignment Status |
| Latest Hire Date | People window |
| Birth Date | People window |
| Adjusted Service Date | People window, Benefits tab |
| SRS Plan Name | Name field on Element entry for elements in State Retirement categories |
| SRS Plans Eligible Comp Balance | Balance called <base name> Eligible Comp Balance |
| SRS Plans EE Balance | Balance called <base name> |
| SRS Plans ER Balance | Balance called <base name> ER Contribution |
| SRS Plans EE After Tax Balance | Balance called <base name> AT |
| SRS Plans Buy Back Balance | Balance called <base name> Buy Back |
| SRS Plans EE Additional Balance | Balance called <base name> Addl EE Contr Amt |
| SRS Plans ER Additional Balance | Balance called <base name> Addl ER Contr Amt |
| Period Hours Worked | Balance called Regular Hours Worked |
| Separation Date | Assignment End Date of terminated assignment |
| FTE Value | Assignment Budget Values window |
| PFT Value | Assignment Budget Values window |
| Employer Number | Constant value defined in |
| County Code | User defined constant value entered as a string on the Data Elements tab of the Layout Definition window |
| District Code | User defined constant value entered as a string on the Data Elements tab of the Layout Definition window |
| Agency Code | User defined constant value entered as a string on the Data Elements tab of the Layout Definition window |
| Entity Code | User defined constant value entered as a string on the Data Elements tab of the Layout Definition window |
| SRS Payroll Frequency | Assignment payroll (for PTD extract only) |
| SRS Period Start Date, End Date | Extract start and end date (for MTD, QTD, and YTD extracts); payroll period start and end date for PTD extract |
| SRS Payroll Actual Pay Date | Date Paid (for PTD extract only) |
| Data Elements For Reports | Location Required by Predefined System Extract |
|---|---|
| Footer SRS Plans EE Balance | Total Employee Contributions (calculated value) |
| Footer SRS Plans ER Balance | Total Employer Contributions (calculated value) |
| Footer FTE Total | Total FTE (calculated value) |
| Footer No of Employees | Calculated value |
| Header Footer Employer Contact Point | User defined constant value entered as a string on the Data Elements tab of the Layout Definition window |
Follow these steps to set up state retirement plans for payroll processing and reporting.
If you want to create your own taxation category, define it as a lookup for the lookup type US_PRE_TAX_DEDUCTIONS. The predefined lookups are:
State Retirement (Defined Benefit Plan)
State Retirement (Defined Contribution Plan)
See: Adding Lookup Types and Values, Oracle HRMS Configuring, Reporting, and System Administration Guide
If you have created your own categories, create taxability rules for this category.
See: Changing Taxability Rules for a Pre-Tax Deduction, Oracle HRMS Payroll Processing Management Guide
You can copy the rules from an existing category using the Copy Taxability and Wage Attachment Rules process, which you run from the Submit Requests window.
See: Copying Taxability and Wage Attachment Rules, Oracle HRMS Payroll Processing Management Guide
Use the Information Type Security window to add the PQP_US_SRS_PLAN_ASG_INFO extra information type to the responsibilities that will enter plan information for employees.
Note: Do not add the element extra information type PQP_US_SRS_DEDUCTIONS to your responsibilities. Oracle Payroll automatically enters this information when you initiate an SRS deduction.
See: Setting Up Extra Information Types Against a Responsibility, Oracle HRMS Configuring, Reporting, and System Administration Guide
Initiate one deduction for each plan.
Review the generated items and edit them if necessary.
Define element links for the generated elements.
See: Defining Element Links.
If your deduction is calculated as a percentage of earnings, optionally change the balance feeds to the <deduction name> Eligible Comp balance. This balance holds the compensation that the formula uses to calculate the percentage.
If you are setting up the retirement plan within Standard or Advanced Benefits, define your plan, other compensation objects, eligibility profiles, and activity rates.
See: Total Compensation
Enter the deduction elements for your employees, or enroll employees in the retirement plan, if you have set it up within Standard or Advanced Benefits.
On the Assignment window, choose the Extra Information button, select the type State Retirement Systems Plan Information and click in the Details field. Enter the following information:
Start and end dates for the employee's participation in the plan
Person Identification Number, allocated by the plan administrators
Plan Name
Important: This Plan Name must match the deduction name exactly. If the plan and deduction names do not match, the employee is excluded from the extract reports.
Qualifies for 10 Year Rule (yes or no). The 10 Year Rule reduces the benefit limit for an employee who has been participating in the plan for less than 10 years. The limit is multiplied by the number of years participation and divided by ten.
Qualifies for Grand-fathering (yes or no). This affects the annual compensation limit used for determining the Defined Benefit Plan deduction limit.
Where an employee is enrolled in more than one retirement plan, you can create multiple records for State Retirement Systems Plan Information.
Copy the predefined system extract layouts and definitions using the Define Extract window. The seeded definitions all begin "Pay US SRS". Your copies will begin with the prefix you specify: "<prefix> Pay US SRS".
Enter your plan name and, optionally, payroll name in the formula <prefix> PAY_US_SRS_EXTRACT_CRITERIA. Enter the plan name in the variable l_extract_plan_name. If you want to limit the extract to a certain payroll, enter the payroll name in the variable l_extract_payroll_name. If you do not enter a payroll name, the report extracts data for all payrolls.
Note: If you want to extract data for two or more payrolls, make a copy of the payroll period extract (Pay US SRS Extract (PTD)) for each payroll and enter the name of one payroll in each formula. For example, you might have one extract for a weekly payroll and another for a monthly payroll.
Consider whether you need to configure your copies of the system extract layouts and definitions to meet specific state requirements.
You can hide data elements or make them required in the detail extract record layout. You can also add new data elements at the person level to the detail record.
Ensure that you are storing the data used in the extracts in the expected location. Refer to the table in: State Retirement System Plans.
When you are ready to run the extracts, use the Submit Requests window.
Initiate state retirement plan deductions in the Deduction window.
To initiate state retirement plan deductions
Set the effective date early enough to handle any historical entries. You cannot enter a deduction for employees before the deduction's effective start date.
Type a unique name for the element in the Name field. Type a short name in the Reporting Name field, if desired.
The Name applies to both the deduction element and its formula. It must start with a letter of the alphabet, not a number or a symbol. The Reporting Name is a short name (less than 12 characters) that appears on reports and the statement of earnings.
Select Pre-Tax Deductions in the Classification field. Select the appropriate category to specify whether the plan is a Defined Benefit Plan, a Defined Contribution Plan, or another category defined at your site.
If you are using Basic Benefits, select the appropriate classification in the Benefit Classification field.
Important: Do not select a benefit classification if your site uses Standard Benefits or Advanced Benefits.
Optionally, change the default priority. The deduction's classification determines its default processing priority in the payroll run. Deductions with lower processing priorities process first.
Select a Type, which would typically be Recurring.
Select one of the following from the Start Rule region:
On Entry, to start the deduction on the effective date you enter it for the employee.
Earnings Threshold, to start the deduction when the employee's gross earnings reach a specified amount. You specify this amount using the entry value Threshold Amount in the Element Entries window.
Check the appropriate boxes in the Deferred Compensation Rule Region:
Employer Match creates an ER Match element you can enter for employees who are eligible for employer matching (or partial matching).
Note: You cannot check the Employer Match box for a deduction in the category State Retirement (Defined Benefit Plan).
After-Tax Component creates an AT element you can enter for employees who elect to contribute after-tax money.
Enabling an Employer Match or After-Tax Component check box creates a separate after-tax element. This element takes the same name as the Pre-Tax element, but is followed by the letters ER (in the case of Employer Match) or AT (in the case of After-Tax).
Select a Run Type:
Regular, for the deduction to process only in Regular runs, that is, the runs that produce employees' regular pay in each period.
All, to process the deduction in both Regular and Supplemental runs.
In the Termination region, select a termination rule to determine how entries of the element are processed after termination of the employee:
Actual Termination, if you want recurring entries to close down on the date the employee leaves. For a nonrecurring element, select Actual Termination if you want the entries to close down at the end of the pay period in which the employee leaves, or on the date the assignment ends (the final process date) if this is earlier.
Final Close, if you want the entries to stay open beyond the employee's leaving date so that you can continue to pay the employee.
Last Standard Process, for all recurring and nonrecurring elements if you want their entries to close down on the Last Standard Process date or on the date the assignment ends (the final process date) if this is earlier. The Last Standard Process date defaults to the last day of the pay period in which the employee is terminated, but you can set it to a later period when you terminate an employee.
If the State Retirement Plan region is enabled - which means you selected a user-defined category - select the appropriate option to indicate whether the plan is a Defined Benefit Plan or a Defined Contribution Plan.
Check the Standard Link check box only if you want to attach the deduction to all employees.
Check the Total Reached stop rule check box if the deduction should stop when the total sum taken from an employee for this deduction reaches a specified total. You enter this total in the entry value Total Owed:
Specify a Total Reached default value for all eligible employees in the Total Owed Default field of the Input Values window of the Element Link window.
Specify a Total Reached value for an individual employee in the Total Owed field of the Entry Values window of the Element Entries window.
Uncheck the Total Reached check box if the deduction should stop on the effective date you delete the deduction for an employee. (This is the On Entry stop rule.)
Check the Buy Back box if you want to create a Buy Back element you can enter for employees who have had a break in service and want to buy back service time by replacing the funds that were withdrawn earlier.
Check the Frequency Rules Exist check box, and click the Frequency Rules button to enter the appropriate information (if necessary).
In the Rules region, select the appropriate amount rule:
Flat Amount, if you want to deduct a fixed amount of money each pay period. You enter this amount using BEE or the Element Entries window for each employee.
%Earnings, if you want to deduct a percentage of the employee's earnings each pay period. You enter this percentage using BEE or the Element Entries window for each employee.
If an AT or Buy Back elements exist, the amount rule applies to them as well.
Note: Payroll Table and Benefits Table are not appropriate selections for state retirement plan deductions.
For more information about BEE, see Making Batch Element Entries Using BEE, Oracle HRMS Configuring, Reporting, and System Administration Guide.
If appropriate, make a selection in the Insufficient Funds region.
Save your work.
Oracle Payroll generates the state retirement plan elements, formulas and balances.
Note: You cannot update deduction criteria once you have saved the deduction.
Note: If your deduction has both pre-tax and after-tax elements, you must create a link for both elements. If you are going to maintain costing information on the employer contribution (ER) element, you must also create a link for this element.
If you use Standard or Advanced Benefits, remember to create open links for the element; that is, do not select any assignment components when you define the link.
You can create the reports required by external plan administrators using System Extract. The report includes all employees enrolled in a state retirement system plan who meet the report criteria.
Use the Submit Requests window.
To run the state retirement system extract
Select Extract Process in the Name field.
Enter the Parameters field to open the Parameters window.
Select the extract you require. You can choose:
Pay US SRS Extract (MTD) for a monthly extract
Pay US SRS Extract (PTD) for a payroll period extract
Pay US SRS Extract (QTD) for a quarterly extract
Pay US SRS Extract (YTD)for an annual extract
Your extract names will have a prefix chosen by your implementation team.
Enter an effective date, such as the end date for the month, payroll period, quarter, or year, depending on which extract you selected.
The report includes all employees who had an active primary assignment during the period you select. For example, if you are using the Pay US SRS Extract (QTD) extract, the report includes all employees who had an active primary assignment during the quarter that ends on the effective date.
Choose OK then choose the Submit button to run the system extract.
View the output in the Extract Results window.
Important: If you have error and warning messages that need correcting before the file can be sent to the plan administrator, change the Run Status of the report to Rejected By User. Update the data on Oracle Payroll and rerun the report.