Life over 50k Non-cash Pay is calculating at the same amount as the Life Insurance Deduction Withholding

Owned by Knowledge Assistant
Mar 16, 2023
3 min read



Description of Issue

The imputed income pay code for Life over 50k is showing the same amount as the Employee withholding amount in payroll. 

If I change the Payroll Control Setting for Include Employee Contribution Difference from Y to N, then the amount calculates at 0.00.



Context

  • Payroll

  • Employee Deductions

  • Deduction and Benefit Master

  • Payroll Start and Status

  • Earnings and Deductions 



Cause

With the Payroll Control Setting for Insurance-Include Employee Contribution Difference set to Y and the Deduction is Employee or Both Pays and the Employee withholding amount is more than the non-cash calculation, the system will use the Employee Withholding amount as the Non-cash pay amount. 



Resolution

  1. Go to Payroll Control Settings (Payroll>Payroll Setup>Payroll Control Settings) and note the Insurance Category Settings. 

    1. Note the Include Employee Contribution Difference is set to Y

    2. Note what the Annualize Calculations setting is set to. (If this is set to Y, use step 19 after step 15)

    3. Note the Federal Insurance Table setting and the table linked. 

  2. Go to Deduction and Benefit Master (Payroll>Payroll Setup>Deduction and Benefit Master)

  3. Search for the deduction and click Life Table in the toolbar. 

  4. Search for the Federal Insurance table and click Accept. 

    1. Determine where the employee lands on the table based on age and payroll date (See additional information) and note the rate. Click Return.

      1. In our Example the Employee's age is 40 and the rate/1000 will be .43

  5. Note the Empe/Empr field. 

    1. In the example this will be a Both Pays deduction.

  6. Click the Insurance tab and note the Non-Cash pay code. 

  7. Click Search and define the non-cash pay code. Click Accept. 

    1. Note if there are other deductions using the same Non-Cash pay code. 

      1. In the example there will only be one deduction using that non-cash pay. 

  8. Go to Employee Deductions (Payroll>Employee Maintenance>Employee Deductions)

  9. Search for the employee and Deduction code. Click Accept. 

  10. Click the Insurance Tab. Note the Employee Ins. Amt. and Employer Ins Amt. fields. 

    1. In this example they will be 40,000 Employee Ins Amt. and 80,000 Employer Ins Amt. 

  11. Click the Cycles tab. Note the number of checked cycles. 

    1. The example is biweekly and has 3 cycles checked.

  12. Add the Employer and Employee Ins amounts together. 

    1. 40,000+80,000=120,000

  13. Subtract 50,000 to get the amount over 50k that should be taxed.

    1. 120,000-50,000=70,000

  14. Divide that amount by 1000

    1. 70,000/1,000=70

  15. Multiply that by the rate on the federal life table based on age

    1. 70 x .43=30.10

  16. Divide the amount by the number of cycles. 

    1. 30.10/3=10.03

  17. Within the payroll, the Employee Contribution (withholding) amount is 17.20 and the Employer Contribution amount is 34.40.

  18. With the Payroll Control Setting set to Y to Include Employee Contribution Difference, we do not subtract the employee contribution amount, instead, if the non-cash calculation is less than the Employee Withholding, we use that Employee Contribution amount as the Non-Cash amount. 

    1. In this case the Non-Cash pay code amount would be 17.20

    2. Note: If the Control Setting for Include Employee Contribution difference was set to N, it would subtract the employee contribution amount from the non-cash calculation resulting in a negative, in which case the system would just take 0.00 non cash amount. 

      1. 10.03-17.20=-7.17 so Non-Cash pay code would be 0.00

  19. NOTE - If in Payroll Control Settings (Payroll>Payroll Setup>Payroll Control Settings) the setting for Insurance - Annualize Calculations is set to Y, the calculation would be as follows:

    1. 30.10 x 12 months = 361.20

    2. 314.64/ (number of pays on base pay in Employee Job/Salary) example, 26 = 13.89 (Since 13.89 is less than the 17.20 Employee withholding amount, the Non-cash would be 17.20)

    3. If this Payroll Control Setting is set to N, the calculation would stop at Step 16.



Additional Information

  • Typically a Life Insurance Deduction over 50k is Both or Employer Pays and the amount that calculates over 50k for the non-cash is typically the employer paid portion.

    • If the deduction is an Employee Pays the site will need to determine if they should be using the non-cash imputed income to tax the employee for the amount over 50k.

  • (From Step 4) The Federal Life Table used to determine an employee's age is based on the end of the Check Date year of the payroll, (12/31/XX).

    • For Example, if an employee's birth date is 01/15/81 and the payroll check date is between 01/01/2021 - 01/14/21, it will still evaluate their age as of 01/01/2021-12/31/2021. In this example it would still calculate their age as 40, even though the check date is prior to their 40th birthday. 

    • To find the employee's birth date go to Employee Master (Payroll>Employee Maintenance>Employee Master) and click on the Dates tab.

  • Life over 50k

  • The Non-cash pay code should not be attached in Employee Job/Salary.