How to Define 401 (k) Contributions

Setting up the base employee contributions for a 401 (k) plan can involve multiple operations.

1. Define the base deduction element.

2. Define catch-up contributions, if you are offering them.

3. Define 401 (k) Roth contributions, if you are offering them.

4. Define after-tax contributions, if you are offering them.

5. Define contribution amount rules.

6. Define the element processing rules.

7. Set up any employer matching.

8. Choose the employee contribution method, and set the other input values to configure the element behavior, including overrides and limits.

9. Change the element processing priorities, as needed.

10. Configure balance feeds.

For further info, see the following sections.

How you define the base element

Use the Elements task.

• Pretax Deductions primary classification

• Deferred Compensation 401k Catch-Up secondary classification

Note:

When you create these elements, the element template creates multiple indirect elements, such as Calculator elements. Some are based on selections you made during element definition, such as catch-up and employer-matching results elements.

How you define catch-up contributions

During base contribution element definition, the element template prompts you to include catch-up contributions with the base contributions.

If you choose to include them, it prompts you choose if the payroll process deducts them concurrently or sequentially with the base deductions. If you select Sequential, the process doesn't start taking deductions until the statutory maximum for the base contributions are met.

The template creates a <base element name> Catchup results element for these contributions.

How you define Roth contributions

During base contribution element definition, the element template prompts you to include Roth contributions with the base contributions. This can include Roth catch-up contributions.

If you choose to include catch-up contributions, it prompts you choose if the payroll process deducts them concurrently or sequentially with the base deductions. If you select Sequential, the process doesn't start taking deductions until the statutory maximum for the base contributions are met.

The template creates a <base element name> Roth results element for these contributions.

How you define contribution amount rules

Amount Rules in the template defines how the payroll process handles insufficient funds and eligible compensation limit checks.

How you define after-tax contributions

The element template prompts you to include after-tax contributions with the base contributions.

If you choose to include them, it prompts you choose between concurrent and sequential deduction methods. If you select Sequential, the process doesn't start taking deductions until the statutory maximum for the base contributions are met.

The template creates a <base element name> After tax results element for these contributions.

How you define element processing rules

Processing Rules in the template defines how the payroll process handles this element during payroll calculation, including iterative processing.

How you set up employer matching

Employer base contribution matching is optional, configurable, and applies to these deduction types.

• 401 (k)

• 401 (k) Catch-Up

• 401 (k) After-Tax

• 401 (k) Roth

• 401 (k) Roth Catch-Up

Employer Match Rules in the element template has a single prompt. The selection you make applies to all employer-match types.

Template prompt	What it does
No	No employer matching for your compensation plan.
Yes, with employee contributions	Applies employer matching amounts based on employee contributions. By default, this element matches $.50 for every $1 contributed by the employee, up to 6% of their pay per pay period. Note: Employer match deductions continue until the employer-match threshold is met, even if the employee has reached their deferred contribution limit for the year.
Yes, without employee contributions	Applies an employer match even if the employee doesn't contribute. You must use the Employer Match Amount input value to define your contributions. The match calculation remains 50% of the 6% of earnings.

You can change the employer match values through the Employer Liabilities element's input values.

How you set the employee contribution method and other input values

Employees can contribute either a flat dollar amount or a percentage of their earnings per pay period. Based on their choice, you enter a value in the element's Deduction Amount, Amount, or Percentage input value. When you assign the element entry to an employee, you define the flat amount or percentage for that employee. If you choose percentage, the payroll process draws the contributions from eligible earnings only.

Note:

If you enter values in all three, the payroll process applies them according to the following priority.

1. Deduction Amount

2. Amount

3. Percentage

You can also set input values for these elements.

• Base element

• Employer match

How you change the element processing priorities

The element template automatically sets the appropriate processing priorities for the elements you define.

If you need to change the processing priority for an element, use the Elements task to set a new value in Priority.

How you configure balance feeds

There are no predefined balance feeds for the pretax catch-up indirect elements.

For the payroll process to properly calculate taxes for the catch-up contributions, use the Balance Definitions task.

• Feed 401 (k) catch-up results elements to the Other Pretax balance definition.