Process Pension Plan and Cafeteria Plan Deductions

Two types of deduction plans can be tax exempt: pension plans and cafeteria plans.

To process pension plan and cafeteria plan deductions

Select Payroll Setup menu > Deduction Code Maintenance.
In the Deduction Code field, define as many deduction codes as necessary for the pension plan. For more information, see Deduction Code Maintenance - Fields.
In the Deduction Type field, select either Pension Plan or Cafeteria Plan. You can assign a standard calculation method (percentage of gross, hours worked, or fixed amount) to calculate the deduction amount. Indicate which federal, state, and local jurisdictions and tax categories allow reduction of taxable wages as a result of contributions to this plan.

Note If the deduction allows a reduction of taxable wages, the earnings code used in Payroll Data Entry must also be subject to the same tax.
Select Payroll Main menu > Employee Maintenance.
Select the appropriate employee number. For more information, see Employee Maintenance - Fields.
On the Main tab, select the Pension/Profit Sharing check box. This causes an X to print in the Pension Plan box on the W-2 Form.
Click Deductions. For each applicable employee, enter the deduction code for the appropriate pension or cafeteria plan. You can also set individual rates and/or limits at this time.
Select Payroll Main menu > Payroll Data Entry.
Enter pension plan deductions using the same procedure followed for any other voluntary deduction. For more information, see Payroll Data Entry - Fields.
Complete payroll data entry.

Note During the Selective Payment Entry process, pension plan deductions are calculated only on the Earnings Code lines that precede the Pension Plan Deduction Code line on the Payroll Data Entry Lines tab. If any earnings or deductions will be excluded from the pension plan deduction, they must be entered on the lines following the pension plan deduction code.

Select Payroll Main menu > Deduction Register. Click Print. For more information, see Deduction Register - Fields.
A dialog box appears allowing you to print the Pension Plan Deduction Register. The gross wages, deduction amount, and deduction percentage appear on this report.

If pension plans other than 401(k) are used, Box 12 Codes must be set up in Deduction Code Maintenance for each type of pension plan deduction. Up to 16 codes can be set up for W-2 forms processed through Federal eFiling and Reporting. .