You can use the PR Deductions/Liabilities form to set up deduction codes for any pre-tax salary reduction plans. Some examples of pre-tax salary reduction plans are health insurance premiums, 401(k) and cafeteria plans for U.S. users, and pre-tax union dues for Canadian users.
Prior to creating a pre-tax deduction, you must set up a pre-tax deduction group. The system uses the group to apply limits across multiple deductions. For more information, see
Set up a Pre-Tax Deduction Group.
Setting up pre-tax deduction codes is very similar to creating a standard deduction code, but there are a few differences in how you implement them in the system.
For detailed information about setting up pre-tax deductions for 401(k) and Roth, see Set Up a Standard 401(k) Deduction and Set Up a Roth 401(k) Deduction.
To set up other pre-tax deductions:
- Create a deduction code in PR Deductions/Liabilities for the pre-tax deduction. In particular, keep these steps in mind:
- Keep pre-tax deductions separate from other deductions.
- Set the Calculation Category to E-Employee.
- Set the Method field to A-Amount or G-Rate of gross.
- Do not enter an amount in the Amount field in the Limit section. The limit for this deduction code is determined by the pre- tax deduction group.
- Select the Pre-Tax Deduction checkbox.
- In the Pre-Tax Group field, enter the appropriate pre-tax deduction group number. When multiple deductions require a combined annual limit, use the same pre-tax deduction group for all.
- Assign the pre-tax deduction code to the calculation basis for all applicable deduction codes. By assigning pre-tax deductions to the Basis Codes tab in PR Deductions/Liabilities, you ensure that the pre-tax deduction is not included in calculating the basis of the standard deduction code.
- Associate the pre-tax deduction code with all applicable earnings codes in PR Earnings Codes.
Note: You must associate pre-tax deductions with earnings codes to ensure the system processes payroll correctly.
