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Employer Contributions: System Overview

Create, assign, and view contributions on pay runs Employer contributions represent additional funds employers provide beyond an employee's base compensation. These contributions are important for benefits, retirement, and compliance purposes.

Updated over a month ago

Here's a comprehensive overview of common contribution types, step-by step instructions are included as you follow along.

Contribution Examples

Retirement Contributions

401(k) Matching

  • Employer matches a percentage of employee's retirement contribution

  • Ranges vary as a percentage an of employee's salary in most cases

  • Often structured as dollar-for-dollar or partial matching

  • Of course, the company must offer a 401k plan in order for such a contribution to apply.

Health and Welfare Contributions

Health Insurance Premiums

  • Employers often cover a portion of health insurance costs

  • The amount of the premium covered by the employer would typically be a percentage of the premium or a fixed amount.

Health Savings Account (HSA) Contributions

  • Additional funds deposited into employee's HSA

  • Supports employee healthcare savings

  • Tax-advantaged contribution method

  • Employer must offer a qualifying high deductible health plan (HDHP)

Compliance and Mandatory Contributions

Social Security Employer Match & Medicare Employer Contribution

  • Required 6.2% contribution on employee wages

  • Part of Federal Insurance Contributions Act (FICA)

  • Required 1.45% contribution

  • Supports national healthcare for seniors

Additional Specialized Contributions

  • Disability Insurance

  • Life Insurance Premiums

  • Tuition Reimbursement Funds

Considerations for Payroll Setup

  • Contribution percentages

  • Eligibility requirements

  • Tax implications

Key Takeaways:

Employer contributions are strategic tools for:

  • Attracting top talent

  • Supporting employee financial wellness

  • Providing competitive compensation packages

  • Ensuring regulatory compliance

Setting up the System: Contributions

Now that you have an overview of contributions, are able to go into the system and begin adding these contributions to the organization table for use with employee payroll profiles.

Payroll Configuration > Employer Contribution Types

  • Navigate to the Payroll Ribbon and select Payroll Settings from the drop down menu.


  • Select Employer Contribution Types

  • Select the New Button

  • From here you will set up your contribution. To provide some guidance, examples of common account mapping for expenses and liabilities are provided below.

Name the Contribution

  • Assign the proper expense and or liability account

  • Health Benefit Box - tick if the contribution is tied to a health benefit

  • Taxable - tick if the contribution is considered a taxable contribution ( the IRS Fringe Benefits Guide link is embedded in the product)

    • Example 1: Group Term Life Insurance (employer-paid premiums with coverage exceeding $50,000)

    • Example 2: Personal Use of Company Car

Examples for common expense | liability account code:

Contributions expense (CON-01)

- 401(k) employer matching

- Health insurance employer contributions

- HSA employer contributions

Deductions (DED-01)

- Employee health insurance premiums

- 401(k) employee contributions

- Garnishments

- Life insurance premiums

Employer tax expense (TAX-01)

- FICA employer portion

- Medicare employer portion

- State unemployment tax

- Federal unemployment tax

Employer tax payable (LIB-03)

- Accumulated tax liabilities

- Quarterly tax payment amounts

- Estimated tax obligations

Reimbursements (SUS-01)

- Business expense reimbursements

- Travel expenses

- Home office supplies

- Training and conference costs

Wages Expense (WAG-01)

- Regular salary/hourly wages

- Overtime pay

- Bonuses

- Commissions

Wages Payable (LIB-01)

- Accrued but unpaid wages

- Pending payroll cycle amounts

- End of period wage liabilities

Withholding Payable (LIB-02)

- Federal income tax withholdings

- State income tax withholdings

- Local tax withholdings

- Retirement contribution withholdings

W-2 Classifications - Classify each contribution for proper W-2 box placement

W-2 Box Classification Examples by Account Category

Contributions Expense (CON-01)

  • Not reported on W-2: 401(k) employer matching if traditional account.

  • Box 12 (Code W): Employer HSA contributions

  • Box 12 (Code DD): Health insurance employer contributions (Informational, not taxable)

Deductions (DED-01)

  • Box 12 (Code D): 401(k) employee contributions

  • Box 14: Employee health insurance premiums (if after-tax), pre-tax not reported

  • Box 12 (Code C): Group term life insurance premiums

  • Special handling: Garnishments (not reported on W-2)

Employer Tax Expense (TAX-01)

  • Not reported on W-2 (employer portion only):

    • FICA employer portion

    • Medicare employer portion

    • State unemployment tax

    • Federal unemployment tax

Employer Tax Payable (LIB-03)

  • Not reported on W-2 (tracking account only):

    • Accumulated tax liabilities

    • Quarterly tax payment amounts

    • Estimated tax obligations

Reimbursements (SUS-01)

  • Not reported on W-2 if accountable plan:

    • Business expense reimbursements

    • Travel expenses

    • Home office supplies

    • Training and conference costs

Wages Expense (WAG-01)

  • Box 1: Federal taxable wages

    • Regular salary/hourly wages

    • Overtime pay

    • Bonuses

    • Commissions

  • Box 3: Social Security wages (up to limit)

  • Box 5: Medicare wages

Wages Payable (LIB-01)

  • Not reported on W-2 (tracking account only):

    • Accrued but unpaid wages

    • Pending payroll cycle amounts

    • End of period wage liabilities

Withholding Payable (LIB-02)

  • Box 2: Federal income tax withheld

  • Box 17: State income tax withheld

  • Box 19: Local income tax withheld

  • Box 12 (Code D): Retirement contribution withholdings

Additional Important Notes:

  1. Boxes 3, 5, and their corresponding tax amounts in Boxes 4 and 6 must reflect wages subject to FICA and Medicare respectively

  2. Box 1 amounts should exclude pre-tax deductions like 401(k) contributions and health insurance premiums

  3. Multiple Box 12 items should be reported separately with appropriate codes

  4. Box 14 is optional and can be used for additional information as needed

  5. State and local information goes in Boxes 15-20

Assigning the Contribution to the employee

Once the contribution codes have been configured, they are available to be assigned to employee profiles. Proper contribution assignment ensures employees receive their correct benefits while maintaining compliance with tax and regulatory requirements. Each employee's unique combination of retirement, health, and supplemental benefits must be accurately tracked and processed to guarantee correct deductions, employer matches, and tax treatment - making proper initial setup and ongoing maintenance a critical payroll function that impacts both employee compensation and organizational reporting obligations.

Let's proceed. Go to:

Payroll > Staff

Navigate to the Payroll ribbon, then the Staff selection

Search for the employee either by scrolling the list and selecting or simply by typing the staff members name in the Search Staff window

Assign the appropriate contribution to the employee profile. You can double check your work by going to Staff section, selecting the impacted employee and click their Payroll Tab and then the Payroll Details, as shown below.

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