to select these General Ledger accounts.These step-by-step instructions take you through the necessary procedures for setting up a deferred compensation plan in Costpoint. These steps must be done only once for each plan. You must add all existing plans at the time you install Costpoint Human Resources. You can add additional plans as necessary in the future by following the same steps. We recommend that read the individual sections in the manual for each of the screens mentioned.
Use the Manage Deductions screen to establish company-wide deductions and contributions. You need to create a new deduction code, such as 401K, for your plan. Complete the screen to control how Costpoint calculates its deductions and contributions for code 401K. Pay special attention to the following fields as you complete this screen:
The Deduction Type controls how the system treats the deduction for W-2 (Box 13) purposes. Select the appropriate deduction type for your plan from the drop-down list for W-2 (Box 13 Code) purposes:
401(k) Deferred Compensation
403(b) Deferred Compensation
408(k)(6) Deferred Compensation
457 Deferred Compensation
501(c)(18)(d) Deferred Compensation
The deduction Method controls how the employee deduction is calculated. One of the first two methods usually applies to a deferred compensation plan.
PCTGRS — This method multiplies the Rate % by the total earnings for the pay period.
PCTREG — This method multiplies the Rate % by the total of non-overtime pay type earnings for the pay period. You determine whether pay types are considered overtime by selecting the Overtime check box on the Manage Pay Types screen.
ADDGRS — Use this method for deductions to be added to gross salary.
FIXAMT — Use this method when a fixed dollar amount is deducted each pay.
NO DED — This method turns off a deduction and is generally used on a temporary basis.
PCTANN — This method multiplies the Rate % by the employee's annual salary.
If your plan's formula for eligible wages differs from these, you can fine-tune it with a Modify Code. You establish this code by completing the Manage Deduction Modify Codes screen before you create the deduction.
If a deduction is based on gross wages, you can use modify codes to subtract specific pay types, such as "Excess Life Insurance," from the gross before the Rate % is applied. If a deduction is based on regular wages, you can use this screen to add or subtract specific pay types, such as Incentive Payments, to regular wages before the Rate % is applied. After establishing Modify Codes, enter them on the Manage Deductions screen.
The Contribution Method controls how the company contribution is computed. You can use PCTGRS or PCTREG, with a Modify Code if needed, as you can for Deductions. You can also use PCTDED, which allows for matching contributions. This method multiplies the Rate % by the deduction amount to derive the contribution amount.
If you enter PCTDED, you must indicate how your company match operates on the Contribution subtask on the Manage Deductions screen. Click the Contribution button on the Manage Deductions screen with a contribution Rate % of zero to bring up the Contribution subtask. Remember that contribution rates are cumulative. You need to indicate in the Matching Percent column how much the company matches of the first 2%, the next 2%, and so on. Then Costpoint adds these amounts together to calculate the total match.
For example, a 3% rate gets a 2.75% contribution which equals, (2% at 100%) + (1% at 75%).
|
Rates Over |
Up to & Including |
Match % |
|
0 |
2 |
100% |
|
2 |
4 |
75% |
|
4 |
100 |
0% |
Enter the rate that is used to compute the deduction or contribution in the Rate % field on the Manage Deductions screen.
If your plan has a fixed deduction or contribution Rate %, enter it here.
If employees have the option to elect deductions at various rates, enter a deduction rate of 1%. This defaults in when you enter this deduction code for each employee on the Manage Employee Deductions screen. You can then edit the Rate column to meet each employee's individual elections.
If the company contributes at various rates based on a Contributions table, enter a contribution rate of 0%, and Costpoint automatically overrides it with the calculation from the table. Note that when you enter this contribution code for each employee on the Manage Employee Contributions screen, the Rate column displays 0%. Costpoint calculates the correct match when you run Compute Payroll.
The Deduction Ceiling Method field provides the option to make a ceiling Payroll Year or One-Time. To enter the legal limit for your Deferred Compensation Deductions, choose Payroll Year to establish a limit for each payroll year.
In the Deduction/Contribution Ceiling Amount field, enter the calendar-year limit on amounts that can be deducted. To establish the legal limit for your Deferred Compensation deductions, enter the current federal maximum. If any employee reaches this amount during the calendar year, the deductions stop for that employee for the remainder of the year.
Leave the Deduction/Contribution Start date field blank to indicate that the deduction starts immediately. If the deduction does not begin until a particular pay period, enter the start date of that pay period.
Leave the Deduction/Contribution Through date field blank for a deduction that continues indefinitely. If the deduction must stop after a particular pay period, enter that pay period's end date in this field. The Deduction/Contribution Posting Accounts are used to enter the G/L accounts for posting this deduction and this contribution in the payroll journal. You can click to select these General Ledger accounts.
Use the tabs and subtasks of this screen to control taxability. On the Federal tab, select the Federal Exempt option to stop all withholding for tax-free plans. State and Local taxability follows the Manage Federal Taxes screen choice unless you enter a separate election.
Next, complete the Manage Employee Deductions screen. For each employee who has elected a deduction, add a new line with your 401(k) deduction code. Then tab over to the Rate column and change the default of 1% to the rate elected by that employee, if different.
If you want the deduction to start immediately, leave the Start Date column blank. If you are entering a future deduction, enter the Start Date, which should normally be a Pay Period start date from your Pay Period table. If you enter a date that falls after the start of one pay period, the deduction begins at the start of the following period.
For the third step, complete the Manage Employee Contributions screen. For each employee who receives a company contribution under your plan, add a new line for your 401(k) deduction (or contribution) code.
If your plan uses a fixed contribution rate, the Rate column displays that rate.
If the company contributes at various rates based on a Contributions table, 0 displays under Rate and Costpoint uses your Contributions table to determine the appropriate percent for each employee.
If you want the contribution to start immediately, leave the Start Date field blank. If you are entering a future contribution, enter the start date which should normally be a pay period start date in your Pay Period table. If you enter a date that falls after the start of one pay period, the deduction begins at the start of the following period.
In the following three steps, use screens in the Deferred Compensation Admin modules.
Use the Manage Deferred Compensation Plans screen to enter the plan entrance information, vesting schedule, and general information that the system uses to calculate data and produce reports. The code you enter in the Deferred Compensation Plan field on this screen is separate from the deduction code; however, it is recommended to use the same or similar code and description here that you use for the deduction. Many deduction codes can be associated with one deferred compensation plan code.
Use Plan Tax Information subtask of the Manage Deferred Compensation Plans screen to enter the limits for discrimination testing. Enter the wage limit, the deferral limit, the highly compensated category 2 amount, the highly compensated category 3 amount, and the benefit limit (for Section 415 testing).
Use the Manage Deferred Compensation Deductions screen to link deduction and contribution codes from Step 1, which you enter in the Deduction Source Code and Contribution Source Code columns, respectively, with the plan code from Step 4, which you enter in the Deferred Compensation Plan field column.
In Employee module, under the Employee Payroll Information menu, use the Update Employee Deductions/Contributions screen to update each employee's record with new values from the company-wide Manage Deductions screen.
Use this screen any time it is necessary to perform mass update employee payroll deductions. Changes in the deduction amount normally apply to medical plans, rather than to deferred compensation plans. Changes in the Ceiling Amount field normally affect your deferred compensation plan.
For example, you read that the new deferred compensation contribution limit is $12,000 for 2007. You enter the limit in the Ceiling Amount field on the Manage Deductions screen, with the start date of your first pay period in 2007 and the end date of your last one. Rather than edit those fields on each employee's Manage Employee Deductions screen, use this utility to update them for you. Enter your plan's deduction code and select the Ceiling Amount, Start Date, End Date, and all check boxes in the Include Status group box. Then click 
or 
to print a report for review, and then update the employee records.
Use this screen any time it is necessary to perform mass update employee payroll contributions. This would apply if your company has a fixed contribution percent that increases. It does not apply if your Contributions table changes, as that percent is not stored for each employee.
For example, your company increases its deferred compensation contribution from 2% to 4% for each participant, effective 1/1/07. You enter this in the Contribution Rate % field on the Manage Deductions screen, with a start date of your first pay period in 2007. Rather than edit those fields on each employee's Manage Employee Contributions screen, use this utility to update them for you. Enter your plan's contribution code and select the Rate/Amount, Start Date, and all check boxes in the Include Status group box. Then use or to print a report for review, and then update the employee records.