This information is for calculating and withholding employee contributions to a retirement plan.

Traditional 401k Plan

•The amount deducted for retirement may reduce the federal and state (except PA) withholding.

•The employee's other deductions remain the same.

•To correctly withhold Traditional 401k Retirement

•On the Setup screen, select 'Retirement' or '401k' as one of the 'Adjustments to Income' AND in the 'Paycheck Deductions' section, select 'Retirement' as one of the Paycheck Deduction Types.

•If there is a limit on the amount the employees can contribute, enter the amount in the Limit field. The percentage field is ignored.

•On the Employee screens, you can enter a fixed dollar amount or percentage to deduct from each check.

•For dollar amounts, simply enter the amount.

•For a percentage deduction, enter the number followed by the percent (%) sign.

•When entering paychecks, enter the retirement amount in the Retirement field - the Retirement field below the hour entry fields, not the Retirement field in the deductions.

•If you entered an amount or percentage for the employee, the retirement amount will be filled in for you.

•The amount you enter should be the part of the employee's pay going to their retirement account.

•Gross pay is not changed by entering a retirement amount.

•To test the Traditional 401k Retirement deduction

•Open the Paycheck screen and enter enough hours so the gross pay is several hundred dollars.

•If there is an amount in the retirement field, change the amount to zero, then press the <Tab> key.

•Note the gross pay and deduction amounts.

•Enter 100.00 in the retirement field, press the <Tab> key, and compare the gross pay and deduction amounts.

•You will see the federal and state (except PA) withholding amounts have been reduced.

Roth 401k Contribution

•Amounts an employee contributed to a Roth 401k are 'after tax dollars'.

•If needed, the only special handling is to setup the software to properly show the Roth 401k contributions in the correct location on Form W-2, and to include the Roth 401k contributions as retirement on Form W-3.

•To setup a field to calculate and track employee contributions to a Roth 401k, on the Setup tab, in the Paycheck Deductions section, change one of the Not Used items to one of the 'Fixed Deductions'.

•If the item must be reported as Code AA on IRS Form W-2, edit the Heading to say Roth 401k.

•If you use any other heading, or set the heading for something other than one of the 'fixed' deductions, the Roth 401k amount will not be shown on the W-2 and W-3 forms.

•On the Employee screens, you can set a dollar amount or percentage as the employee's contribution amount.

•NOTE there is no means to set a maximum contribution amount for a year, so be sure not to let an employee contribute more than allowed.

NOTES

•On the W-2 forms, if one of the deduction 'types' is Retirement, employees not marked as exempt from retirement will have the retirement plan box checked, whether or not they made a retirement contribution.

•On the W-2 forms, if an employee has an amount for a Roth 401k, the retirement plan box is checked.

•Employer contributions are not calculated or tracked as part of the paycheck process.

•If the employer is making a contribution other than a direct match, you will need to calculate and track the employer amount elsewhere, such as in a spreadsheet.