Pre-tax retirement payments

[Joetta Trimble]

One of the pastors wants to set aside a fixed monthly amount from his salary to pay into his 403(b)(9) retirement savings plan. The church will be sending a check to the retirement account each month, so the salary reduction needs to be tied to the payment. How should this be done in the payroll setup so that it doesn't appear on his W2 as income. Should it appear in box 12 on his W2?

Sample entries would be very helpful!

Thanks for any advice!

[cccwnc]

We handle it this way:

1. Make sure that you have a liability account setup for the deduction in your chart of accounts. This is where the deductions will be posted on your general ledger until you pay the retirement institution. Our account is 01-2280-000 Retirement Withheld.

2. In the Payroll module select Item Descriptions. You will setup the item deduction here. Ours is 820 - Retirement Deduction. Under item information select the deduction button, NONE should be in the default tax table. Debit the checking account from which you pay the payroll and credit the liability account you setup in #1. Our section reads like this:
DEBIT 01-1112-000 Checking Account
CREDIT 01-2280-000 Retirement Withheld

Under the W-2 tab select only the number 12 box and place E in the code box.

3. On the Maintain Employee Pay Items add the deduction to the pastor's pay items. (This is the deduction you setup in #2.) Select NONE for tax table and enter the amount to be withheld.

The deduction will now occur when the payroll is processed.

4. When you write the check to the instituion managing the retirement fund thru the accounts payable module you will debit the liability account setup in number #1. Example:
DEBIT 01-2280-000 Retirement Withheld
CREDIT 01-1112-000 Checking account.

I hope this helps!

Angie

[tborgal]

Joetta,

Since this is to be pre-tax income. The following thread explains how this is done very well. I have not tested this in V10 but in older versions when you enter the letter E next to box 12 it needed to be capitalized or it did not work. I would capitalize it to be safe.

http://www.powerchurch.com/forum/viewto ... light=403b

[Joetta Trimble]

Angie and Tom,

I think your posts will be most helpful. We are in V. 10.4, but I will capitalize the E in box 12 just to be safe. Thanks so much!

Joetta

[jordan2k510]

Thank you for this information as I have a similar scenario. I have set up everything as instructed yet need to account for the amount the church contributes to the pastor's retirement also (pastor contributes 6%, church 3%, then church pays total retirment to retirement institution.) Please detail as done previously in this post, very helpful to those of us who are new to PC.

[jordan2k510]

Retirement for our pastor is a combination of 6% of his salary and housing allowance deducted from his gross and 3% from the church. Questions: 1. The church's contribution is not showing up in the quarterly payroll report. Should it? Should it be included on his W2? If yes, should I add it as an item description/ pay item in addition to the one I added for his 6%? What accounts to DB and CR? 2. The moeny is ent to the retirement institute monthly by ACH. I have an expense account to account for this transaction. 2. How should I handle the housing allowance in payroll? item description/pay item, W2?