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 Overview

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

 

To set up pension plan and cafeteria plan deductions

1. Select Payroll Setup menu > Deduction Code Maintenance.

2. Enter a deduction code and description. For more information, see Deduction Code Maintenance - Fields.

3. In the Deduction Type field, select either Pension Plan or Cafeteria Plan, and select a standard calculation method (percentage of gross, hours worked, or fixed amount) to calculate the deduction amount.

4. If you're setting up a pension plan that is not a 401(k) plan:

   • In the Apply to W-2 Box field, select 12.
   • In the Box 12 Code field, select the applicable code.
5. In the Tax Rule field, enter a tax rule to determine how taxes are calculated.
6. Click Accept.

Repeat these steps to define as many deduction codes as necessary for the pension plan.

 

To set up deductions for employees

1. Select Payroll Main menu > Employee Maintenance.
2. Select an employee. For more information, see Employee Maintenance - Fields.

3. On the Benefits tab, select the Retirement Plan check box. This causes an X to print in the Retirement Plan box on the employee's W-2 form and will be in effect for the current and future years.

4. On the Deductions tab, click Add Deduction.

5. In the Add Deduction window, enter the deduction code for the pension or cafeteria plan. The amount or rate and the goal entered in Deduction Code Maintenance are the default values in this window, but you can change them as needed.

6. If you want to automatically apply this deduction in Payroll Data Entry, select the Automatic check box.
7. Click OK, and then in Employee Maintenance, click Accept.

To process the deduction

1. Select Payroll Main menu > Payroll Data Entry.

2. Enter pension plan deductions using the same procedure followed for other voluntary deduction. For more information, see Payroll Data Entry - Fields.

   If you're manually entering the deductions, on the Lines tab, select Deduction as the line type and enter the deduction code.

   Alternately, see Perform Automatic Deductions.

3. Complete payroll data entry and run Payroll Tax Calculation. For more information, see Payroll Data Entry.

4. Select Payroll Main menu > Pension and Cafeteria Plan Register. Click Print. For more information, see Pension and Cafeteria Plan Register - Fields.

   The gross wages, deduction amount, and deduction percentage appear on this report.