We have a Non-Qualified Deferred Comp plan that allows our employees to defer a percentage of their income to that plan. Any deferral to the NQDC is not considered W2 wages. Because of this, 401(k) contributions should be calculated based on gross taxable compensation, less NQDC contributions.
Based on the constraints of Vista, we are not allowed to apply a pre-tax deduction as a basis for the 401(k) calculations. This results in an over-calculation/contribution to the employee's 401(k) and falls out of step with the Dept. of Labor and IRS requirements for these types of plans.
Debbi Phipps
| Company | Goodfellow Bros. |
| Job Title / Role | Payroll Manager |
| I need it... | Yesterday...Come on already |
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We are experiencing a similar challenge with pre-tax NQDC and pre-tax 401k & Catch-up and the 401k Employer Match liability. We used to process the NQDC as a negative earning using the Auto-Earnings setup, but we have had to move away from negative earnings due to filing Payroll tax documents using Aatrix which does not handle negative earnings. This was working until we had to move to using the Pre-Tax group on the 401k with the addition of the Roth to our plan.
In 2022, following instructions provided by Viewpoint support and the Knowledge base (attached), we set up NQDC as a deduction code, then set up 401k up with a Method of Rate of Net using a Garnish Group to define the Deductions/Earnings basis, which allows including the NQDC deduction (bypassing the normal basis codes) and a Pre-Tax group to apply the combined limits for the 401k/Roth/Catch-ups. This 'mostly' works, however with this setup the 401k catch-up codes do not start automatically like they are supposed to, necessitating significant manual monitoring. My support request under versions 2022 R1.08, 2023 R2.01,2023 R2.08, were set as Issue Related and there was an Issue created to fix this (103218), but after a year it has been closed with a status of "Closed as Designed", "No workaround. Customer will need to monitor and track limit".
In addition, for the employees who have both NQDC and 401k, the 401k match does not properly offset its calculation for the NQDC deduction, instead limiting based on total eligible earnings without considering the NQDC, even though it is in the basis codes. I submitted a ticket to support and was informed the system is working as designed and I should make a software suggestion.
This is a functionality provided by other ERPs, but in the Vista world it is apparently an 'enhancement request' as support has referred me to the suggestion box to try and get this fixed. After many years trusting the Vista Payroll system, I am starting to lose faith.
Hi Natallia, I'm working on setting this up for testing. We currently run our PR Post Auto Earnings process after the timecards are posted, and before the PR Payroll Process. I entered a test timecard, an then posted auto earnings, and nothing calculated. Is there a way you and I could talk about this and nail it down?? I feel like I'm missing something here and am not sure what it is.
Thank you,
Debbi
Debbi,
You would assign the earning code to applicable employees in PR Automatic Earnings form, then when payroll is processed you would run PR Post Auto Earnings process to calculate those deductions on pay checks for the pay period. These auto earnings come with Frequency codes just like employee based deductions and follow pay period setup (Assigned frequency codes) in PR Pay period control. Please let me know if you have any other questions.
Hi Natallia,
How do you set up a negative earnings on an employee level without having to touch their calculation each week? Is this an automatic calculation? Can you show me how this is set up?
Debbi
Debbi,
I spoke with Gary and did a bit more investigation on NQDC plans, and, if I did not miss anything, you should be able to use negative earnings to calculate NQDC contribution. In my test example, see attached screenshots, I have an employee setup with 10% NQDC and 15% regular 401K.
The employee has gross earnings of $2600.00 for a pay period, I am calculating $260.00 for NQDC using earning code 402, which is just reduction of earnings.
Now, let look at deductions. You can see that subject to standard 401K deduction code is 2600.00 gross less 260.00 for NQDC = $2340.00 and 15%b of that is $351.00.
Both NQDC and regular 401K deductions are reducing subject to FWT. 2600 - 260 - 351=$1989
And neither 401K or NQDC reduces subject to social security and Medicare.
I am not sure on your state withholding requirements, but for the fun of it, I made NQDC taxable for state taxes and 401K tax deferred for state purposes, mostly to show your flexibility. As the result we have 2600-351=2249 subject to state tax.
Please let me know if this covers your requirements.
Debbi,
Do you have a multiple NQDC codes that are used for a single employee and are subject to the same annual limit? Sort of like traditional 401K and Roth, an employee can contribute to both, but both can not exceed one annual limit. If not, you should be able to calculate your NCDC contributions in Vista today accurately. The Pre-Tax deduction check box in PR Deductions/ Liabilities form enables Pre-Tax Group field, which is the ability to apply one limit against multiple deduction codes. Basis codes tab of PR Deductions/ Liabilities form is used to actually define subject earnings and reductions for any deduction code. So, if you do NOT need a single limit across multiple NCDC codes for the same employee , you CAN leave Pre-Tax Deduction check box in the Info tab UNCHECKED, then add your traditional 401K deduction codes to the basis codes list to reduce subject wages by the amount of traditional 401K contributions. Please let me know if this is a suitable work around for you.