Company-Level Contribution Setup: Field-Level Help

Background

A contribution shows any dollars that are paid by the company on the employee’s behalf.  Examples would be 401(k) company match and the company’s portion of insurance premiums.   Contributions do not affect the employee’s net paycheck, they are for informational purposes only.

Field Level Company Contribution Help in Patriot Software

When you add or edit a company-level payroll contribution in Patriot Software, complete the following fields on the Contributions screen:

Description: This long-word description will appear on employee paychecks. You may use any combination of letters, numbers, special characters, and spaces, up to 20 characters.

Active: By default, the contribution is active, meaning it can be assigned to employees and used in payrolls.

If you are no longer using this contribution (e.g. an old medical insurance plan), uncheck the “Active” box to inactivate the contribution at the employee level. The deduction will no longer appear in the drop-down list when assigning new contributions to employees. The Edit link will also be hidden at the employee level so that contribution details cannot be changed unless the contribution is active at the company level.

If you reactivate the contribution at the company level, you must manually reactivate the contribution on each employee’s record.

For Deduction: This is an optional field. You can “tie” a contribution to a deduction so that the contribution calculates only if a specific deduction is taken in the paycheck. See Company Contributions – Based On Deductions for more details.

Type: The contribution “type” determines if the contribution should be taxed. Most contributions are not taxable, but there are a few rare exceptions. If the contribution is tied to a deduction (see above), the “Type” will be pre-filled based on the Deduction Type.  If the contribution is not tied to a deduction, select the type of contribution.  Choose “Other” if none of the other types apply.

Method: Choose from one of the following ways to calculate the contribution.  Note: Once your contribution has been saved “method” cannot be edited. Here are the choices you will see under “Method”:

• Fixed-Dollar: The contribution amount will be the exact fixed dollar amount entered either on this master contribution screen here, or the employee’s contribution record.

• Percent of Gross Pay: This will calculate the contribution based on a percentage of gross pay.
  • Do not use “Percent of Gross Pay” for Simple IRAs if your company also has employees with section 125 deductions.  Use “Percent of Simple IRA Plan Compensation“(listed below).

• Percent of Net Pay: This will calculate the payroll contribution based on a percentage of net pay after income taxes have been withheld.
  • Do not use “Percent of Net Pay” for Simple IRAs if your company also has employees with section 125 (health care,etc.) deductions. Use “Percent of Simple IRA Plan Compensation” listed below.

• Single Formula: Must be tied to a corresponding deduction. The single formula your company uses to calculate the contribution based on the deduction it is tied to. The formula can be used for both percent and dollar-method deductions. 

• Tiered Formula: Must be tied to a corresponding deduction. The tiered formula your company uses to calculate the contribution based on the deduction it is tied to. The formula can be used for both percent and dollar-method deductions. You can enter up to three formula tiered formulas.

• Percent of Simple IRA Plan Compensation: This is only shown when the contribution type selected is “Simple IRA.” It will calculate percent per pay for employees. For employees who also have Section 125 deductions taken, this method will calculate a percent of gross minus any amounts deducted from a Section 125 plan per the IRS requirments. As a reminder, the following deduction types fall under a section 125 cafeteria plan:
  • Pretax Section 125
  • HSA – Single Limit
  • HSA – Family Limit
  • FSA – Medical
  • FSA – Dependent Care

Formula: Depending on which method you select, enter either a dollar amount or the percentage formula of the contribution. For more details, see Using Company Contribution Formulas.

Taxability: If you have chosen “Fixed Dollar” for the Method, you have the option to choose to make this contribution taxable for the purposes of company-paid S Corp shareholder health insurance. Otherwise, leave the option “Not Taxable.” For more details, see How To Add S Corp Health Insurance Premiums To Each Payroll

Limits: This field is optional. The contribution can be set up with a dollar limit so that once the limit is reached, the contribution automatically stops. For more details, see Deduction and Contribution Limits.

W-2 Box: This drop-down field should be filled only when the money from this contribution needs to be in a special box on the W-2 per IRS instructions. In some cases, if this contribution, we may pre-fill this for you, depending on the deduction type. Otherwise, leave this field blank. For further instructions on W-2 reporting requirements, refer to IRS Instructions for Form W-2.

W-2 Label: The choices in this drop-down field will be determined based on the selection in the W-2 Box field above. In some cases, we may pre-fill this for you. If the W-2 Box field is blank, this field also remains blank.