401(k) contributions are generally pre-tax deductions in which a specified percentage of the employee's gross wages is taken out prior to taxes and placed into a savings plan set up by the company. Both the savings plan and proceeds are tax-deferred by the U.S. Government. As an incentive, some companies will also match a percentage of the employee 401(k) contributions.
To quickly set up 401(k) defaults and payroll tax adjustments, use the Payroll Setup wizard. You can then enter the percentages of gross pay each employee wants to contribute to your company's 401(k) plan in their individual records.
Setting up a company 401(k) plan involves the following steps:
- Set up a 401(k) plan using the Payroll Setup wizard.
- Enter employee 401(k) contribution rates.
Note: If you don't subscribe to a Sage Business Care plan, the contribution details are for informational purposes only since payroll deductions will not be calculated. You will have to manually calculate and enter 401K amounts.