Iterative Processing for Pretax Deductions
Sometimes a pretax deduction is equal to or higher than the person's gross pay. When this happens, the payroll process can withhold it iteratively. This makes sure it properly withholds higher priority deductions, like taxes and involuntary deductions.
How You Enable Iterative Processing for New Pretax Elements
When you use the Elements task, select Yes for the Is this element subject to iterative processing template prompt.
If you're enabling iterative processing, you must enable them for all pretax deduction elements.
How You Can Enable It for Your Existing Elements
To turn this on for existing elements, use the Element Upgrade Process.
For further info, see Oracle Cloud Human Capital Management for the US: Element Upgrade (2458385.1) on My Oracle Support.
Here's an Example
Your employee has elected for 100% of their salary be deferred for pretax 401 (k). Although they're deferring their entire salary, that deferral is still subject to Social Security and Medicare taxes and certain state and local taxes. In this case, you would enable iteration for your 401 (k) element. When you run your payroll, the process withholds the required taxes before taking the 401 (k) deduction, up to the maximum limit.
What Input Values Affect Iterative Processing
These input values define how the payroll process performs the iterations.
Input value |
What it does |
---|---|
High Deduction |
Identifies the highest threshold for the iterations. It would display an
amount of $1,000 as You can't change this value. |
Iteration Count |
Identifies the maximum number of iterations the payroll process can perform. You can't change this value. |
Low Deduction |
Identifies the lowest threshold for the iterations. It would display an
amount of $900.99 as You can't change this value. |
To Within |
Informs the payroll process how close to the contribution amount it must get during its calculations. To determine the amount, it uses the value you set in the following input values:
|
When the payroll process completes, it updates these values with its final amounts in the run results.
How the Payroll Process Calculates the Earnings
For those pretax elements where iteration has been enabled, the payroll process reduces the amount to withhold in the following order to ensure proper tax withholding, according to their secondary classification.
-
Nonqualified Deferred Compensation
-
Deferred Compensation 401k Catch-Up
-
Deferred Compensation 401k
-
Deferred Compensation 403b
-
Deferred Compensation 457
-
Health Savings Account Catch-Up
-
Flexible Spending Account
-
Dependent Care 125
-
Vision Care 125
-
Dental Care 125
-
Health Savings Account
-
Health Care 125