401K setup

[JudyFortune]

We are having trouble calculating our 401K company match when our 401K pre-tax limit is met in a given pay cycle and would like any/all assistance/ideas on PDBA setup in JDE.

Our company match is based on what percent the employee elected. If an employee meets the limit set on a PDBA in a given pay period and is unable to take their full election percent, then we need to calculate the % actually taken and use that to determine our new company match.

For example:
•Our company match is:
* Match 100% up to 3%
- 1% employee contribution = 1% company match
- 2% employee contribution = 2% company match
- 3% employee contribution = 3% company match
* Match an additional 50% for employee elections greater than 3% up to 6%
- 4% employee contribution = 3.5% company match
- 5% employee contribution = 4.0% company match
- 6% or more employee contribution = 4.5% company match


• For this example, the employee pre-tax election is 10% which equals $600 per pay period.

• On this pay cycle, the employee could only deduct 5.23% ($313.80) of their 10% election before hitting their PDBA limit.

• The company match should be calculated on the 5.23% actually deducted.
* Determine the % of company match.
- First: if more than 3%, then determine what the additional 50% will be for over 3%. This is (5.23%-3%)/2
- Second: add that to 3% matched at 100%. This is [3% + (5.23%-3%)/2] = 4.12%

* Calculate company match % = 4.12% / 5.23% = 78.78%

* Calculate actual company match amount = 78.78 % of $313.80 = $247.21.

 

[phoward]

Hi Judy,
Our match was similar in that it was a tiered match. What we did was set up multiple PDBA's for the match. In your case, I would try to first have the 100% match on the first 3% contribution, then another PDBA for the additional 50% match up to 6%. Ours was a bit different because it was $ matches instead of % but I would think something similar would work. Our payroll manager is on vacation this week, but when she returns I can get more details if you would like.
Pam

 

[KSmithCPA]

Judy,

Hi. Pam is correct. A multiple DBA code approach is generally how 401k's with tiered matches are set up.

Example:

DBA 1: 401k Deduction 1 to 3%
DBA 2: 401k Deduction 4 to 6%
DBA 3: 401k Deduction greater than 6% (if needed)
DBA 4: 401k Match 100% of DBA1
DBA 5: 401k Match 50% of DBA2

Then in the Advanced DBA setup, you can set a Group Limit Code and Limit Method to stop the deductions when the 401k limit is met by the combined DBAs.

Hope this helps. Good luck.