Setup 401K

To set up Employer 401K contribution to match employee contributions a Benefit payroll category can be added.

Create a benefit payroll category

1. Go to Setup > Payroll Settings > Payroll Categories.
2. Click on add (+) button and select Benefit from the list of options.
3. Complete the Basic Information under the General Tab. Also, under the SUBJECT TO window Federal and state income taxes flags should be check
4. Under the Type select FORMULA.
5. In Formula definition add the payroll category 401K(EE) (this is employee 401K) and enter the percentage depending upon how much the employer will contribute for example 100% (if employer matches employee contribution 100%).
   
6. On the Advanced tab check APPLY flag under Maximum Per Year and specify the maximum amount the employer will contribute for each employee in the Default Maximum field.
7. In the Based On drop down box select Employee YTD Amount.
8. On Employee master paycard under the Benefit Tab Employer can adjust the amount he wants to contribute for 401K for this particular employee by adjusting the factor.
9. By default the factor is 100 (i.e. 100% of the formula definition) and if the Employer wants to contribute a different amount for this employee then the factor can be changed to represent the correct percentage.
   

Setting up 401K for Employee Contribution

To set up 401K contributions for your employees create a deduction payroll category.

1. Go to Setup > Payroll Settings > Payroll Categories.
2. Click on add (+) button and select deduction from the list of options.
3. Complete the Basic Information under the General Tab. Also, under the Deduct before window federal and State income taxes flags should be checked.
   
4. For the Type choose Formula and then click on the Formula button that appears.
5. Use the Payroll category button to add the all of the Earnings categories that can be used in the 401K calculation (Salary, Hourly Wages, Overtime, Vacation Pay etc.).
6. If the contribution is the same for all employees then you can enter it here as a percentage. If the contribution rate is determined at the employee level you can enter it here as 100% but set the appropriate rate on the employees’ master paycard.
   
7. Under the Form assignment tab assign the payroll category to Box 12 on W2 and under sub box choose option D. See the figure below.

8. If any limit need to be applied then enter the amount in the Advanced tab.

   

9. Once the payroll category setup is complete proceed to employee master paycard to set the individual contribution rate under the deduction tab. Depending on how the payroll category was setup you enter appropriate rate in the factor field. If the category was set as standard percentage for all enter 100 here. If the rate is to be set individually then enter the employee’s contribution rate here.
10. Enter the amount in the Maximum cell.