Set Up a 401(k) Employer Match

Instructions for setting up a 401(k) company / employer match (liability), along with other required setup steps.

These instructions include specifying which earnings the 401(k) liability should be calculated on and registering the code in the PR Federal Info form so it will calculate on all employees with a corresponding 401(k) deduction.

Click here to view a tutorial.

Step One: Create a Pre-Tax Deduction Group

Prior to creating a 401k employer-match liability, you must set up a pre-tax deduction group. The system uses this group to apply limits across multiple 401(k) liabilities.

To create a pre-tax deduction group:

  1. Open the PR Pre-Tax Deduction Groups form and click the New Record icon.
  2. In the Pre-Tax Group field, enter a number for the group.
  3. In the Description field, enter a description for the group.
  4. Specify the group's 401(k) annual limits.
    • For standard or Roth 401(k) employee contributions, use the Standard Annual Contribution Limit field.
    • For catch-up 401(k) employee contributions, use the Catch up Annual Contribution Limit field.
    • For 401(k) employer match liabilities, use the Annual Compensation Limit field.
Step Two: Set Up the Liability Code
  1. Open the PR Deductions/Liabilities form and click the New Record icon.
  2. In the Dedn / Liab Code field, enter an unused number.
  3. In the Description field, enter a description.
  4. In the Type section, select Liability.
  5. In the Calculation Category field, select Employee or Federal.
    If you select F-Federal, you must also select a Federal Type of 1-Withholding.
  6. In the GL Account field, press F4 to select the appropriate GL liability credit account.
  7. In the Method field, select G-Rate of Gross.
  8. In the Rate / Amount #1 and Rate / Amount #2 fields, enter the same match percentage rate in negative decimal form in both fields. If the match percentage were 50%, for example, you would enter –0.50000 in both fields. If the match rate were 100%, you would enter –1.00000 in both fields
  9. In the Limit secton, select the Rate of Earnings option.
  10. In the Rate field, enter the result of multiplying the company match rate by the percentage limit. For example, if the company match rate were 50% of up to 7% of total regular earnings, the rate limit would be the product of 0.50 x 0.07 (.035000); if the match rate were 100% of up to 7% of total regular earnings, the rate limit would be the product of 1.00 x 0.07 (.070000).
  11. Select the Accumulate subject amounts check box.
  12. Select the 401k Liability check box.
  13. In the Pre-Tax Group field, press F4 to select a pre-tax group.
  14. If you want the deduction amounts to update automatically to an Accounts Payable invoice, select the Automatic Update to Accounts Payable check box on the Addl Info tab.
Step Three: Add the Earnings that Contribute to the Catch-Up 401(k) Deduction Amounts

The system bases the employee 401(k) contribution amounts on the earnings codes you add to the basis of the deduction. Add the same earnings codes here as are set on the 401(k) deduction(s) you are matching.

You can add codes to the basis in two ways:

  1. Option 1: Add codes to the basis one at a time
    1. Open the PR Deductions and Liabilities form.
    2. In the Dedn / Liab Code field, enter the code that needs codes added to its basis. Press F4 to select from a list of valid codes.
    3. On the Basis Codes tab, in the EDL Type field, select the appropriate type - Earnings, Deduction, or Liability.
    4. In the EDL Code field, enter the code number or press F4 to select from a list of valid codes.
    5. For each earnings code in the grid, select the Subject Only check box.
    6. Repeat to add other EDL codes that should contribute to the basis. In this case, add each 401(k) deduction code that you are matching. Do not select the Subject Only check box on the 401(k) deduction code(s).
  2. Option 2: Add multiple codes to the basis.
    1. Open the PR Deductions and Liabilities form.
    2. In the Dedn / Liab Code field, enter the code that needs codes added to its basis. Press F4 to select from a list of valid codes.
    3. Click Add Basis Codes.
    4. In the PR Add DL Basis Codes form that displays, do one of the following:
      • To apply the same basis codes as are applied to an existing deduction or liability code, select the Copy basis codes from another DL Code option. Enter the deduction or liability code in the DL Code to Copy From field. Press F4 to select from a list of existing codes.
      • To apply all existing eligible earnings, deductions, and liability codes as the basis, select the Add all eligible Earnings and DL Codes to basis option.
    5. Click Add. If you do not receive a confirmation message that Basis Codes were successfully added, click Refresh at the top of the form
    6. Delete from the grid any individual earnings, deduction, or liability codes that do not apply
    7. For each earnings code in the grid, select the Subject Only check box.
    8. If not already in the grid, add each 401(k) deduction code that you are matching. Do not select the Subject Only check box on the 401(k) deduction code(s).

Step Four: Add the Liability Code to the PR Federal Info Form

Adding the liability code to the PR Federal Info form allows the system to correctly calculate the liability. Additionally, by doing so, the system calculates the liability for every employee and prevents you from having to set it up individually in the PR Employee Dedns/Liabs form.

  1. Open the PR Federal Info form.
  2. In the PR Company field, enter the appropriate payroll company. Press F4 to select it from a list.
  3. On the Add'l Federal Based Dedns/Liabs tab, in the DLCode column, enter the code number of the first liability code you set up. Press F4 to select it from a list.