Defining pre-tax deduction codes

Pre-tax deductions are deducted from employee pay before tax deductions, which reduces taxable wages.

Note: If this pre-tax deduction uses a company match deduction or an after-tax limit deduction, you must define each of these elements before defining the pre-tax deduction.

See Defining company match deduction codes and Defining linked after-tax limit deductions.

  1. Access Deduction (PR05.1).
  2. Define deduction code and description. Use these guidelines to specify the field values:
    Deduction

    The code that represents the deduction.

    (Description)

    The description of the deduction.

    Payment Description

    The description of this deduction that prints on payments

    Note: If you assign a deduction class to this deduction code, then the payment description on the deduction class overrides this payment description.
  3. Select how you want Payroll to calculate the deduction in the Calculation Type field.
    If the deduction is a Select
    Percent of employee gross pay Percent.
    Flat amount to be deducted Flat Amount.
  4. Define pay information. Use these guidelines to specify the field values:
    Pay Class

    Determines if you want the application to calculate the deduction on pay associated with a specific pay class.

    Note: If you do not select a pay class in this field, then the deduction is based on all the employee's wages in a pay period.
    Amount or Percent

    Specify an amount or percent. The type that you select in the Calculation Type field determines if the system considers the value that you type an amount or a percent.

    Currency

    Determines the currency that you want Payroll to use to calculate the deduction.

    If the company uses one currency, then the company currency is used as default this field.

    If the company uses multiple currencies, then the process level currency is used as default in this field.

    Note: The employee currency and deduction currency must match for you to be able to assign the deduction to the employee.
  5. Select Employee Paid in the Adjust Pay field.
  6. If you want to include this deduction in a deduction class, then select the deduction class in the Deduction Class field.
  7. Define deduction processing options. Use these guidelines to specify the field values:
    Priority

    The number that represents the order in which Payroll takes the deduction within the category of Tax Deductions.

    Arrears

    Select what you want Payroll to do if there is not enough employee pay to cover the deduction.

    Cycles

    Select the deduction cycles in which Payroll takes the deduction.

    You can leave these fields blank for Benefits deductions because the cycles are defined on Frequency Table (BN04.1).

    Note: You can override the value in these Cycles fields for individual employees when you assign the deduction to employees.
    Excl From Garnishment (Exclude from Garnishment)

    Determines whether or not you want to subtract the deduction from employee pay before calculating disposable income for garnishment purposes. Disposable income equals gross pay minus taxes and other deductions.

    Note: Do not use this field for tax, company-paid, or add-to-net deductions.
  8. If the benefits plan allows employees to contribute after they reach the federal pre-tax limit, then elect an after tax limit deduction in the Linked Deduction field.
  9. If your organization matches a portion of this deduction, then select the company match deduction in the Matched Deduction field.
    Note: When you calculate earnings and deductions, Payroll verifies the effective date to determine whether or not to take the deduction.
  10. Specify the beginning date or the date range that the deduction is in effect in the Effective Date fields. This date or date range can be overridden on the employee deduction.
  11. Select the deduction accrual account in the Accrual Account field.
  12. Define deduction limits. Use these guidelines to specify the field values:
    Monthly Limit

    The maximum amount Payroll can deduct for this deduction in one month.

    Payment Limit

    The maximum amount Payroll can deduct for this deduction in one payment.

  13. If you use the Accounts Payable application, then you must define AP options. Use these guidelines to specify the field values:
    Update Accounts Payable

    Select whether or not to create invoices for payroll-related payables when you close Payroll.

    Create Invoice by Employee

    Select whether or not to create AP invoices by employee.

    See your Accounts Payable User Guide.

    Vendor

    The vendor that you want to use to create accounts payable invoices for this deduction.

    Note: Click Addl Vendors to define vendors and process level combinations for this deduction.
    Remit To

    Remit To identifies a vendor location where payments are to be remitted. This field populates the Remit-To-Code on AP invoice records (AP20.1) via the AP Interface.

    If you use this field, then the payment address comes from Vendor Location (AP10.2). If field this is left blank, then the payment address defaults from Vendor (AP10.1).

    Remit To can be defined for:

    • An individual garnishment on US Employee Garnishment (PR26.1) or Canada Employee Garnishment (PR47.1).

    • An individual process level override within deduction on Additional Vendors (PR05.3).

    • An entire deduction on Deduction (PR05.1).

      If you use this field, then you must also select a vendor in the Vendor field.

Related reports and inquiries

To Use
List deductions Deduction Listing (PR205)
List frequency tables Frequency Table Listing (BN204)
Related topics