What's covered in this guide?

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:

Boxes 3, 5, and their corresponding tax amounts in Boxes 4 and 6 must reflect wages subject to FICA and Medicare respectively
Box 1 amounts should exclude pre-tax deductions like 401(k) contributions and health insurance premiums
Multiple Box 12 items should be reported separately with appropriate codes
Box 14 is optional and can be used for additional information as needed
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.