Defined Contribution (DFCT)

The Defined Contribution Plan Routine calculates an employee’s pay period retirement contributions, and the employer contribution match while ensuring that neither amount exceeds the contribution limits for the plan year.

The Defined Contribution Routine utilizes the following fields on Employee Fringe Benefit Plan (BENP) and Employer Fringe Benefit Plan (EFBP) reference pages:

  • Amount/Percent 1: Identifies the specific type of Defined Contribution Plan, valid values are 1 to 9. Note: Value 4 is not intended to be used for employer deductions on Employer Fringe Benefit Plan (EFBP).

  1. Pre-Tax Low Limit 401K Plan

  2. Pre-Tax High Limit 401K Plan

  3. Pre-Tax Catch-up Limit 401K Plan

  4. After-Tax 401K Plan

  5. Low Limit 457 Plan

  6. High Limit 457 Plan

  7. Catch-up Limit 457 Plan

  8. Accelerated Limit 457 Plan

  9. Pension 457 Plan

  • Amount/Percent 2: Annual Compensation Limit

  • Amount/Percent 3: Year-To-Date Dollar Limit

  • Amount/Percent 4: IRS Annual Plan Limit

  • Amount/Percent 5: Normal IRS Annual Plan Limit, this limit only applies to plans where Amount/Percent 1 = 3 or 7.

  • Formula ID 1-6: Identifies the Formula ID to use on the Special Routine Formula (SRFM) reference page. These formulas are utilized in specific processing that is dependent on the value of Amount/Percent 1.

  • Calculated Salary Type/Calculated Salary Plan: Identifies the specific Calculated Salary ‘reference’ deduction to be passed to Gross-to-Net (GTN) to attain the employee’s calculated salary. These fields are only utilized by Defined Contribution plans defined on Employer Fringe Benefit Plan (EFBP).

  • Maximum Percentage of Employee Deduction: This field is only utilized by Defined Contribution plans defined on Employer Fringe Benefit Plan (EFBP). The indicated percentage is used to limit the employer contribution match to that percentage of the employees pay period Defined Contribution deduction. The resulting employer deduction amount is the lesser of the maximum percentage or the calculated deduction amount.

When an employee is enrolled in a 401K Plan and a 457 Plan the deduction processing order on Employee Fringe Benefit Plan (BENP) and Employer Fringe Benefit Plan (EFBP) should be configured so that the plans are processed in the following order:

  • Pre-Tax 401K Employee Deduction

  • 457 Employee Deduction

  • 457 Employer Match

  • 401K Employer Match

  • After-Tax 401K Employee Deduction

The employee deduction and employer match  stops when an employee reaches their Annual Plan Limit as stated in Amount/Percent 4. The 401K employer match is not subject to the Annual Plan Limit. The 401K employer match cannot exceed the employee’s 401K Plan year-to-date contribution.

457 employer match deductions that are stopped due to reaching the Annual Plan Limit may be ‘poured over’ into the 401K Plan employer match if configured. The Secondary Deduction Type and Secondary Deduction Plan fields on EFBP determine the 401K Plan Employer match deduction that should be used. When an employee is not able to take any more for a 457 employer match, GTN attempts to take the amount for the 401K employer match, if properly configured. The 457 employer match amount is added to the 401K employer match and GTN then processes the 401K employer match as normal. In the case of a negative net pay situation, if the 457 employer match is reduced to zero, there will be nothing to ‘pour over’ to the 401K employer match.

The MEGAFLEX CONTRIB DED TYPES Site Specific Parameter (SPAR) defines MegaFlex Contribution Deduction Types to be used when calculating the Formula 3 401K Employer Match Base. When the employee is enrolled in a deduction type present on the SPAR, GTN add the calculated contribution from the CAFÉ_DED_DETL table to the Formula 3 401K Employer Match Base.

If the Deduction is rejected during payroll processing for lack of funds and has the ‘Include In Rejected Deduction Summary’ check box selected on the Deduction Plan page, the deduction and Subject Gross Amount is written to the REJ_DED_SUMM table. During payroll processing for a later pay period, these amounts from the REJ_DED_SUMM table is used by the Defined Contributions Special Routine as defined below.

The Defined Contribution Routine processes in the following way for each 401K or 457 plan:

  1. Employee Deduction Base - This value is calculated first for all 401K and 457 plans using Formula ID 2.

  1. The base amount is reduced, as necessary, if the year-to-date subject gross for the deduction is greater than Amount/Percent 2.

  • The subject gross amount for the deduction, if any, on REJ_DED_SUMM will be included in the year-to-date subject gross amount.

  1. Employee Deduction Amount - The deduction amount is calculated using the Employee Deduction Base. GTN then goes through a series of checks to ensure the deduction amount does not exceed limits for the plan year.

  1. The Deduction Base is multiplied by the deduction rate defined on the plan or the employee override rate on DED_PARM.

  • If the deduction is an Accelerated 457 plan and Amount/Percent 2 = 1 the deduction amount is equal to the employee override amount on DED_PARM instead.

  • If the deduction is an Accelerated 457 Plan and Amount/Percent 2 = 2 the Deduction Base is multiplied by the employee override rate on DED_PARM.

  1. The deduction amount is reduced if greater than the current pay period taxable wages as calculated using Formula ID 4.

  2. If the deduction is a Pre-Tax Catch-up 401K plan and Amount/Percent 4 is not zero, add the year-to-date employee contribution to the current deduction amount. If this total is greater than or equal to the value in Amount/Percent 5, no Annual Additions Test is needed. If the total is lesser, proceed to the Annual Additions Test.

  3. Annual Additions Test: If the plan is a 401K plan, subtract the lesser of the employee’s year-to-date Maximum Subject Gross or the amount in Amount/Percent 3 from the employee’s ‘Annual Additions’. If this result is greater than zero, subtract the result from the current deduction amount.

  • Employee’s Annual Additions are calculated using Formula 5.

  • Year-to-date Maximum Subject Gross is calculated using Formula 6. The FEDERAL TAX DEDUCTION SPAR is used to retrieve the category code for calculating the YTD federal tax subject gross.

  • The subject gross amount for the deduction, if any, on REJ_DED_SUMM will be included in the year-to-date subject gross amount.

  1. If the deduction is a 457 plan, limit the deduction amount, as necessary, if the Formula 1 result is greater than the employee’s year-to-date Maximum Subject Gross

  • Year-to-date Maximum Subject Gross is calculated using Formula 6.

  • The subject gross amount for the deduction, if any, on REJ_DED_SUMM will be included in the year-to-date subject gross amount.

  1. Reduce the current deduction amount, as necessary, if the Formula 1 Result is greater than the amount in Amount/Percent 4. If Amount/Percent 4 is not greater than 0, skip this test.

  • Pre-Tax Low Limit 401K plans use Formula 3 instead of Formula 1.

  • Pre-Tax Low Limit 457 plans use Formula 5 instead of Formula 1.

  • Accelerated 457 plans use the Goal Amount on DED_PARM instead of Amount/Percent 4.

  1. The deduction amount at this point is the final deduction amount. Note: A negative net pay situation would potentially reduce this amount further if applicable.

  1. Employer Deduction Match Base - This value is calculated first for all 401K and 457 Employer match deductions using Formula ID 3. The employee’s Calculated Salary is used for calculating the Deduction Match Base as defined on EFBP.

  1. Pension 457 plans will use Formula 2 instead of Formula 3.

  2. The employer match base amount is reduced, as necessary, if the year-to-date base amount is greater than Amount/Percent 2.

  1. Employer Deduction Match Amount - The deduction match amount is calculated using the Employer Deduction Match Base. GTN then goes through a series of checks to ensure the deduction amount does not exceed limits for the plan year.

  1. The Deduction Match Base is multiplied by the deduction rate defined on the plan or the employee override rate on DED_PARM.

  • If a ‘Pour-Over’ 457 match occurred, add the ‘Pour-Over’ 457 match amount to the 401K match amount.

  1. If the deduction is a 457 employer match, limit the deduction to the lesser of the current deduction amount or a percentage of the employee’s 457 deduction amount using the value in the ‘Maximum Percentage of Employee Deduction’ field on EFBP.

  • The employee’s 457 deduction amount used for this step is the amount calculated before Step F in the Employee Deduction Amount section.

  1. Annual Additions Test: If the plan is a 401K employer match, subtract the lesser of the employee’s year-to-date Maximum Subject Gross or the amount in Amount/Percent 3 from the employee’s ‘Annual Additions’. If this result is greater than zero, subtract the result from the current deduction amount.

  • Employee’s Annual Additions are calculated using Formula 5.

  • Year-to-date Maximum Subject Gross is calculated using Formula 6. The FEDERAL TAX DEDUCTION SPAR is used to retrieve the category code for calculating the YTD federal tax subject gross.

  1. If the deduction is a 457 employer match, limit the deduction amount, as necessary, if the Formula 1 result is greater than the employee’s year-to-date Maximum Subject Gross.

  • Year-to-date Maximum Subject Gross is calculated using Formula 6. The FEDERAL TAX DEDUCTION SPAR is used to retrieve the category code for calculating the YTD federal tax subject gross.

  1. If the deduction is a 457 employer match, reduce the current deduction amount, as necessary, if the Formula 1 result is greater than the amount in Amount/Percent 4. If Amount/Percent 4 is not greater than 0, skip this test. The following exceptions apply to this rule:

  • If the deduction is a Pre-Tax Low Limit 457 employer match, use Formula 5 instead of Formula 1. If the deduction amount is reduced, the amount the deduction is reduced by is ‘Poured Over’ into the corresponding 401K employer match as described in step A.

  • If the deduction is a Pre-Tax High Limit 457 or a Pre-Tax Catch-Up Limit 457 employer match and the deduction amount is reduced, the amount the deduction is reduced by is ‘Poured Over’ into the corresponding 401K employer match as described in step A.

  • If the deduction is an Accelerated 457 employer match and the deduction amount exceeds the Goal Amount on DED_PARM. The amount the deduction is reduced by is ‘Poured Over’ into the corresponding 401K employer match as described in step A.

  • Note: The above deductions are only eligible for a ‘Pour-Over’ match if a 401K employer match plan is defined in the Secondary Deduction Type and Deduction Plan fields on EFBP and the employee is enrolled in that 401K employer match plan.

  1. If the deduction is a 401K employer match, or the result of a ‘Pour-Over’ match, ensure that Formula 2 does not exceed Formula 1 and limit the deduction amount as necessary. The following exceptions apply to this rule:

  • The employee has qualified for a ‘Pour-Over’ Match and the deduction is a Pre-Tax Low Limit 401K Employer Match, and the employee has reached the Annual Cap Amount.

  • The employee has qualified for a ‘Pour-Over’ Match and the deduction is a Pre-Tax Low Limit or Pre-Tax Catch-Up Limit 401K Employer Match, and the employee has not reached the Annual Cap Amount but has received the full 401K Employer Match each previous payday within the year. The employee has received the full 401K Employer Match each payday if the employee’s Subject Gross year-to-date multiplied by the Match Percentage is equal or less than the 401K Employer Match year-to-date contributions.

  • The employee has qualified for a ‘Pour-Over’ Match and the deduction is a Pre-Tax Low Limit or Pre-Tax Catch-Up Limit 401K Employer Match, and their Year-To-Date 401K Plan Employee Deduction has reached the Annual Cap Amount.

  1. The deduction amount at this point is the final deduction amount. Note: A negative net pay situation would potentially reduce this amount further if applicable.

GTN calculates the Employee Deduction Base, Employee Deduction Amount, Employer Deduction Match Base and Employer Deduction Match amount by utilizing the Formula IDs defined for the specific plan being processed. Below is an overview of the purpose for each Formula ID field. Note: Formula Base refers to values included in calculating the Formula value that are not specified on the Special Routine Formula (SRFM) reference page.

Formula ID Field

Formula Description

Formula Base

Plans (Amount/Percent 1)

1

Annual Plan Limit Formula

N/A

1 to 9

2

Pay Period Employee Deduction Base Formula

Include/Exclude Pay Events (BPPC, EFPC)

This includes all pay amounts. The Include/Exclude logic on BPPC/EFPC for each plan is used to determine this base amount.

1 to 9

2

401K Employer Match Formula

N/A

1,2,3 
(Use for Employer Match when Amount/Percent 4 = 0)

3

457 Employer Match Base Formula

Calculated Salary and Retro Salary Changes

5,6,7,8

3

401K Employer Match Base Formula

Calculated Salary, Retro Salary Changes, MegaFlex Cafeteria Contribution Amount

1,2,3

3

Pre-Tax Low Limit 401K Employee Deduction Annual Limit Test

Formula 1 Result

1

4

Pay Period Federal Taxable Wages Formula

Formula 2 result minus the Cafeteria Plan Salary Reduction

GTN will retrieve the Cafeteria Plan Salary Reduction from the CAFÉ_DED_DETL table

1 to 9

5

Annual Additions Formula - Pre-Tax Low or High Limit 401K Employee

Formula 1 result plus current deduction amount

1,2,3,4

5

Low Limit 457 Employee/Employer Match Annual Limit Test

Formula 1 Result

5

6

Year-To-Date Maximum Subject Gross

Formula 2 Result plus Year-To-Date Net Federal Tax Subject Gross and Year-To-Date Cafeteria Plan Salary Reduction

Year-To-Date Cafeteria Plan Salary Reduction is retrieved from CAFÉ_DED_DETL_SUM

The FEDERAL TAX DEDUCTION SPAR is used to retrieve the category code for calculating the YTD federal tax subject gross.

1 to 9

Note: The functionality described above is only available when utilizing the Next Generation Payroll service.