Home/ Client Management/ Setup a Deferred Compensation Plan

Setup a Deferred Compensation Plan

Overview

This article provides step-by-step instructions for setting up a deferred compensation plan with employer contributions in ProPay. The process involves configuring employer deductions, employee deductions, and optional pay-to-agency settings for automatic check generation.

Step 1: Set up Employer Deductions

  1. Go to Employer > Deductions Setup.
  2. Set up two deductions:
    • 401-k as (D) Deduction
    • 401-k Match as (M) Match
    1. Check the appropriate boxes based on the taxability of the item.
    2. Enter the appropriate letter for W-2 Box 12, 14, 11, or 10. Refer to ProPay help instructions for the correct code based on the plan type.

    Note: The employer match is set up as a Match item because it tracks employer contributions without creating an additional paycheck deduction for the employee.

    Step 2: Set up Employee Deductions

    1. Go to Employees > Add or Change > select the employee > Deduct/Reim tab.
    2. Set up two deductions corresponding to the employer deductions you created:
      • Employee's 401-k deduction
      • Employee's 401-k match tracking

      Step 3: Configure Pay to Agency (optional)

      If you wish to generate a check to the appropriate agency for deferred compensation contributions:

      1. Set up Pay to Agency for both amounts (employee deduction and employer match).
      2. Configure the payment frequency:
        • To pay these amounts each pay date, set the Pay Frequency to P (per payroll)
        • For other frequencies, select the appropriate option (Monthly, Quarterly, etc.)

        Note: Agency checks will be printed automatically when printing employee checks. A report will also be automatically generated showing all amounts deducted and matched by the employer.

        Deferred Compensation Limits

        ProPay automatically sets annual contribution limits for each employee during the year-end file transfer from the prior year to the new year. You can make changes to individual employee limits at any time thereafter.

        Verify that current IRS contribution limits are properly configured to prevent over-contributions.

        Troubleshooting

        Issue: Deferred compensation deductions not appearing on paychecks

        1. Double-check that all fields are filled out correctly in the Employer and Employee Deductions sections.
        2. Verify that the deduction is assigned to the employee in their individual employee record.
        3. Ensure the deduction is marked as active.

        Issue: Incorrect W-2 reporting

        1. Ensure that the appropriate boxes for taxability are checked in the Employer Deductions setup.
        2. Verify that the correct W-2 box letter is entered (Box 12, 14, 11, or 10).
        3. Check that the deduction type is set correctly (Deduction vs. Match).

        Issue: Agency checks not generating

        1. If using Pay to Agency, confirm that the Pay Frequency is set correctly.
        2. Verify that agency information (name, address) is properly configured.
        3. Ensure that accumulated amounts meet the minimum threshold for payment.

        Issue: Employer match not calculating correctly

        1. Verify the employer match is set up as a Match item, not a Deduction.
        2. Check that the matching formula or percentage is configured correctly in the employer deduction setup.
        3. Confirm that the employee's contribution amount is being captured properly.

        See Also

        ← Back to Index