How do I configure pretax deductions for the US?

Pretax deductions are deductions made from a person's gross income. They reduce the total taxable income of the person and the tax withheld.

Before you can assign them to employees, you need to:

1. Define pretax deductions elements for the appropriate plan type.

2. Configure tax wage basis rules to reduce gross wages.

   Use tax 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.

   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.

3. What are their contribution limits.

   The predefined contribution limits 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.