Defining linked after-tax limit deductions

Use after-tax limit deduction codes to represent employee contributions to a defined contribution plan on an after-tax basis. Payroll uses after-tax limit deductions when an employee reaches the federal limit for pre-tax contributions or when a plan offers after-tax deductions as a choice. This type of deduction is tied to a benefits plan and is considered a Benefits deduction.

To use linked after-tax limit deductions, you must set the Federal Limit field to No and the Use at Limit Deductions field to Yes on Company (HR00.1).

You can continue a defined contribution deduction after the federal limit has been reached, if you have the Federal Limit field set to No and the Use at Limit Deductions field set to No on Company (HR00.1). However, the same deduction code is used for both pre-tax and after-tax contributions.

Define linked deductions for pretax deductions in Deduction (PR05.1). If employees are already assigned to the pretax deduction and a linked deduction is later added to the PR05.1, run Create Linked Deduction (PR114) to update employee records with the after-tax linked deduction.

Define linked after-tax limit deductions

  1. Access Deduction (PR05.1).
  2. Define deduction code and description. Use the following guidelines to enter 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, 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 Then select
    Percent of employee gross pay Percent.
    Flat amount to be deducted Flat Amount.
  4. Define pay information. Use the following guidelines to enter 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, the deduction is based on all the employee's wages in a pay period.
    Amount or Percent

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

    Currency

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

    If the company uses one currency, the company currency defaults to this field.

    If the company uses multiple currencies, the process level currency defaults to 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.
    Note: If you select the defined contribution deduction class (defined on HR00.1), the amount of this deduction applies to Benefits Annual Limits (BN12.1), too.
  6. If you want to include this deduction in a deduction class, select the deduction class in the Deduction Class field.
  7. Define deduction processing options. Use the following guidelines to enter field values:
    Priority

    The number that represents the order in which Payroll takes the deduction within the category of other 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 your organization matches a portion of this deduction, 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.
  9. Type the beginning date or the date range that the deduction is in effect in the Effective Date fields.
  10. Type the accrual account for the deduction in the Accrual Account field.
  11. Define deduction limits. Use the following guidelines to enter 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.

  12. If you use the Accounts Payable application, define AP options. Use the following guidelines to enter 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 Accounts Payable invoices by employee.

    For more information, see the Accounts Payable User Guide.

    Vendor

    The vendor you want to use to create Accounts Payable invoices for this deduction.

    Note: Click the Addl Vendors button 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 Basic Invoice (AP20.1)via the AP interface.

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