Define Pretax Deduction Elements

Here's how the different parts of a Pretax Deductions element work together to help you process employee deductions.

You define pretax deductions using the Elements task. Like any standard element, you must create eligibility criteria for them.

What you want to do	How you do it
Define the type of pretax deduction	Use the Elements task to select the Pretax Deductions primary element classification and appropriate secondary classification.
Choose a contribution type for deferred compensation deductions	Deferred compensation pretax deductions offer a variety of contribution types beyond the base, such as employer-match, catch-up, after-tax, and Roth. For some deduction types, you make this selection during element definition. For others, you use the employee's Benefits and Pensions calculation card. For further info, see the following in the Help Center. Set Up 401 (k) and Roth 401 (k) Deferred Compensation Plans Set Up 403 (b) and Roth 403 (b) Deferred Compensation Plans Set Up 457 (b) and Roth 457 (b) Deferred Compensation Plans
Update the wage basis rules for your new deduction	The Element task applies the appropriate wage basis rules automatically based on the primary and secondary classifications you select. You can use the Component Group Rules task to verify them. You can also define rules as required.
Configure the balance feeds	After defining the elements and configuring the contributions, you need to configure the appropriate balance feeds.
Create the eligibility criteria	Create eligibility criteria for each element you define. For further info, see Element Eligibility for the US in the Help Center.
Verify the contribution limits	Deferred compensation pretax deductions have predefined contribution limits. They help ensure the employee is in compliance with statutory limits. However, there are some cases where you need to adjust the limits for individual employees. For further info, see Contribution Limits for Deferred Compensation Plans in the Help Center.
Enable iterative processing	In cases where a pretax deduction is equal to or higher than the person's gross pay, the payroll process can withhold them iteratively. This ensures it properly withholds statutory deductions, such as taxes and involuntary deductions. For further info, see Iterative Processing for Pretax Deductions on the Help Center.

For further info, see the following sections.

Secondary Classifications for Pretax Deductions

You use the Pretax Deductions primary element classification to calculate the deduction from the gross income. It reduces the total taxable income of the employee and the tax withheld.

The Pretax Deductions primary classification uses the following secondary classifications.

• Deferred Compensation 401k

• Deferred Compensation 401k Catch-Up

• Deferred Compensation 403b

• Deferred Compensation 457

• Dental Care 125

• Dependent Care 125

• Flexible Spending Account

• Health Care 125

• Health Savings Account

• Health Savings Account Catch-Up

• Nonqualified Deferred Compensation

• Retiree Dental Care 125

• Retiree Flexible Spending Account

• Retiree Health Savings Account

• Retiree Health Savings Account Catch-Up

• Retiree Vision Care 125

• Vision Care 125

Note: The secondary classifications for 403 (b) and 457 (b) catch-up aren't for your use. The element template uses these classifications to define indirect elements. You define catch-up contributions for 403 (b) and 457 (b) plans through the person's Benefits and Pensions calculation card. For further info, see the following in the Help Center.

Deferred Compensation Contribution Types

Deferred compensation pretax deductions offer a variety of contribution types beyond the base, such as employer-match, catch-up, after-tax, and Roth.

For some of these deduction types, you make this selection during element definition. For others, you use the employee's Benefits and Pensions calculation card. For further info, see Considerations for 403 (b) and 457 (b) Deferred Compensation Plans in the Help Center.

Contribution type	What you want to do	How you do it
Base	Define the base contributions for pretax deferred compensation plans.	Use the Elements task. For further info, see the following in the Help Center. Set Up 401 (k) Deferred Compensation Plans Set Up 403 (b) Deferred Compensation Plans Set Up 457 (b) Deferred Compensation Plans
Employer Match	Depending on your organization's policies, you can provide employer matching contributions at the base contribution, catch-up, Roth, and Roth catch-up levels. You can also enable employer matching even when the employee isn't contributing to their plan.	For 401 (k) plans, you set up employer matching during element definition. For further info, see Set Up 401 (k) Deferred Compensation Plan Contributions in the Help Center. For 403 (b) and 457 (b) plans, you use the appropriate calculation values on the person's Benefits and Pensions card. For further info, see Considerations When Setting Up 403 (b) and 457 (b) Deferred Compensation Plans in the Help Center.
Catch-Up	Eligible employees can make additional "catch-up" contributions to help them reach their retirement goals. If your organization allows it, you can also configure employer matching for catch-up contributions.	For 401 (k) plans, you configure catch-up contributions during element definition. For further info, see Set Up 401 (k) and Roth 401 (k) Deferred Compensation Plans in the Help Center. For 403 (b) and 457 (b) plans, you use the appropriate calculation values on the person's Benefits and Pensions card. For further info, see Considerations When Setting Up 403 (b) and 457 (b) Deferred Compensation Plans in the Help Center. Note: Don't attempt to manually define catch-up deductions using the Deferred Compensation 403b Catch-Up or Deferred Compensation 457 Catch-Up secondary classifications. The element template uses these classifications to create the elements for you.
After-tax	Employees can elect to participate in after-tax contributions to pretax accounts. These plans can include employer-matching contributions.	For 401 (k) after-tax contributions, you can configure them during the base element definition. You can also define the element manually using the Voluntary Deductions primary classification and Pension Plan After Tax secondary classification. For 403 (b) and 457 (b) plans, you can define these contributions using the Voluntary Deductions primary classification and Pension Plan After Tax 403b or Pension Plan After Tax 457 secondary classification.
Roth	Employees can elect to participate in after-tax Roth contribution plans. These plans can include catch-up and employer-matching contributions.	For 401 (k) plans, you configure Roth, employer-match, after-tax, and catch-up contributions during element definition. For further info, see Set Up 401 (k) and Roth 401 (k) Deferred Compensation Plans in the Help Center. For 403 (b) and 457 (b) plans, you use the appropriate calculation values on the person's Benefits and Pensions card. For further info, see Considerations When Setting Up 403 (b) and 457 (b) Deferred Compensation Plans in the Help Center.

Wage Basis Rules

Use wage basis rules to determine how pretax deductions reduce gross wages. A reduction in gross wages results in a reduction of taxable income, thereby allowing a reduction of some taxes and involuntary deductions.

The element template automatically applies predefined wage basis rules based on the primary and secondary classifications you select.

For example, Pretax Healthcare 125 deductions are exempt from Medicare and Social Security taxes. However, 401 (k) deductions reduce taxable wages for federal income tax (FIT) only and not for Social Security and Medicare. In most cases you use the predefined rules and don't need to do anything.

Use the Component Group Rules task to view or modify the predefined wage basis rules. You can also define rules as required.

For further info, see Tax Wage Basis Rules for the US in the Help Center.

Balance Feeds

When you define pretax deductions, the element template doesn't establish feeds for all balances. You need to configure balance feeds for the following.

• Eligible earnings for deferred compensation deductions

• Other pretax deductions

Eligible Earnings

The Elements task doesn't automatically feed a balance for tracking eligible earnings. You must configure balance feeds to calculate deferred compensation requiring eligible earnings.

To configure these balance feeds:

1. Start the Balance Definitions task.

2. Search for and select the appropriate balance.

   • Deferred Compensation 401K Eligible Earnings

   • Deferred Compensation 403b Eligible Earnings

   • Deferred Compensation 457 Eligible Earnings

   • Total Deferred Compensation 401k Eligible Earnings
   • Total Deferred Compensation 403b Eligible Earnings
   • Total Deferred Compensation 457 Eligible Earnings

3. Click Edit.

4. Click Balance Feeds.

5. Configure the feeds for these contribution types, and save your work.

   • 401 (k)

   • 401 (k) after-tax

   • 401 (k) catch-up

   • 403 (b)

   • 403 (b) after-tax

   • 403 (b) catch-up

   • 457 (b)

   • 457 (b) after-tax

   • 457 (b) catch-up

   • Roth 401 (k)

   • Roth 401 (k) catch-up

   • Roth 403 (b)

   • Roth 403 (b) catch-up

   • Roth 457 (b)

   • Roth 457 (b) catch-up

Note: If you're running multiple 401 (k) plans, you must use separate balances for each. Use the predefined Deferred Compensation 401K Eligible Earnings and Total Deferred Compensation 401k Eligible Earnings balances for the first plan. For any additional plans, define and feed a new balance by copying the predefined one and modifying the appropriate fast formulas.

Other Pretax Deductions

The Elements task doesn't automatically establish balance feeds for these secondary classifications.

• Deferred Compensation 401k Catch-Up

• Deferred Compensation 403b Catch-Up

• Deferred Compensation 457 Catch-Up

• Nonqualified Deferred Compensation

For these elements, use the Balance Definitions task to configure a feed to the Other Pretax balance.