Employer contributions - Graduated table example

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While entering employer contribution information in the Setup > Payroll Items screen, you may need to use a graduated table to calculate a match amount based on a particular amount, rate, or percentage, such as a fixed amount, an employee's hourly rate, a percentage of gross pay, and so forth. The most likely scenario would be using a graduated table based on a percentage of an employee's deduction for configuring a safe harbor matching contribution.

We want to calculate the contribution based on:

To accomplish this calculation, the grid in the Graduated Table dialog should be set up in the following way.

Grad table payroll items

In this example, let's assume that the employee's gross pay is $1000.00 and their 401(k) deduction is $100

(Note that the maximum employer contribution amount that it can calculate is $50.00, because the maximum limit is 5%, and 5% of $1,000.00 gross pay is $50.00.)

  1. First, Accounting CS takes 100% of the 401(k) deduction ($100.00) with a limit of up to 3% of gross pay (1000 x .03 = $30) and it calculates $30.00 for that portion, due to the limit.
  2. Next, it uses 50% of the remainder amount to calculate the second tier.  So, $50.00 (maximum amount) - $30.00 (first tier amount) = $20.00 (remainder amount).  50% of $20.00 = $10.00.
  3. Accounting CS then calculates the employer contribution amount as $40.00. $30.00 from the first tier calculation + $10.00 from the second tier calculation = $40).

 

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