Setting up 403b EE Non-Minister Contribution

[onemore4gsus]

Could use help setting up the Item Description for a non-minister employee (non-matched) contribution to the church's 403b plan.

I get that I choose "Other Deduction" and choose "Retirement" for the Tax Option since it is non-ministerial and therefore subject to FICA but not Fed tax.

I'm a little lost on what to put for:
Liability _________
and
Bank ___________

I added a COA Liability account for "Retirement Contributions," so I'm assuming that account number goes in the first box.
Do I need to set up another account, or just put the checking account number in the second space?

When I pay the invoice, I merely debit the Liability account and credit the checking account, right?

Am I missing anything?

[onemore4gsus]

And Selecting
"Box 12, Code E" is correct also?

[NeilZ]

Could use help setting up the Item Description for a non-minister employee (non-matched) contribution to the church's 403b plan.

I get that I choose "Other Deduction" and choose "Retirement" for the Tax Option since it is non-ministerial and therefore subject to FICA but not Fed tax.

I'm a little lost on what to put for:
Liability _________
and
Bank ___________

I added a COA Liability account for "Retirement Contributions," so I'm assuming that account number goes in the first box.
Do I need to set up another account, or just put the checking account number in the second space?

When I pay the invoice, I merely debit the Liability account and credit the checking account, right?

Am I missing anything?

Um .. you shouldn't be seeing a 'Bank Account' on that Item Description. All you should see is the Liability account which should be the same as the retirement liability account that you use for the ministers; unless its a totally different retirement scheme in which you would setup a separate liability account.

When you go to pay the retirement invoice, just select the Create Accounts Payable Entries function from the Payroll Menu, selct the VENDOR ID that the retirement payment is going to, and whether its a Invoice (print a check) or Manual Check (EFT payment).

Add the date and a reference, and the system will use the accounts setup for the Vendor to create the invoice or manual check entry.

You would then print the check, or setup the EFT in the manner the retirement agency has setup.

[NeilZ]

And Selecting
"Box 12, Code E" is correct also?

If the contribution is to a 403(b) and its an elective by the employee, yes.

[onemore4gsus]

I don't know what I "should" be seeing, but that's what the screen says.

I would attach a photo if I knew how.

[onemore4gsus]

[NeilZ]

You should not be seeing a bank account on that Item Description. Other deduction is exactly that, a deduction from the Employee's salary, and no bank account should be associated with it.

Are you using Powerchurch local version or Online ?? I just checked the Powerchurch Online version and it shows that bank account on the Other Deduction Item Description setup, and it SHOULD NOT be there.

[onemore4gsus]

Yes, online version 11.55

[NeilZ]

Yes, online version 11.55

I think there's an issue there, and have notified Zorak about it.

[onemore4gsus]

Thank you, Neil. I really appreciate your time and assistance.

[Zorak]

The way that Payroll transactions are built, the full gross salary is taken out of the bank account (credit), then with each deduction, regardless of what kind of deduction it is, the money is put back into the bank account (debit). The difference is the net check amount coming out of the bank.

Employer liability items don't affect the bank account. That's probably what you're thinking of.

As far as the Maintain Item Descriptions screen showing both debit and credit fields, that is "Advanced mode" in Payroll. As a new install and a new Payroll setup, PowerChurch defaults to not be in Advanced mode. Converting data from a prior version or if the user specifically chooses Advanced mode, then both debit and credit fields will show.

[NeilZ]

The way that Payroll transactions are built, the full gross salary is taken out of the bank account (credit), then with each deduction, regardless of what kind of deduction it is, the money is put back into the bank account (debit). The difference is the net check amount coming out of the bank.

Employer liability items don't affect the bank account. That's probably what you're thinking of.

As far as the Maintain Item Descriptions screen showing both debit and credit fields, that is "Advanced mode" in Payroll. As a new install and a new Payroll setup, PowerChurch defaults to not be in Advanced mode. Converting data from a prior version or if the user specifically chooses Advanced mode, then both debit and credit fields will show.

Evidently you can turn off advanced mode under Preferences -> Accounting on the Payroll tab, as it really doesn't make much sense with deductions.

[onemore4gsus]

Neil and Zorak,

I found the option to "turn off" Advanced Accounting mode, but I'm hesitant to do so until I know what else it affects.

Back to the original question, I *think* the Item Description setup as displayed above is correct
BECAUSE
it is set up just like the Federal Tax withholding, which is a similar deduction:
1) the EE is requesting the deduction as with FIT,
2) the deducted amount is credited to an ER liability account (held until paid) as with FIT,
3) when the retirement vendor is paid, I'll debit that ER liability account while crediting the Checking account as I do with FIT payments.

I had to set up a new liability account since only one EE is deducting for retirement contribution. In addition, this is a non-ministerial EE retirement deduction, which differs in taxability to a ministerial EE retirement deduction (although we currently have none).

Zorak & Neil, thanks again for all your help.

If I am wrong in the Item Description setup, let me know. Otherwise, I'll run it for the first time this week and hopefully find any discrepancies when I cut the first vendor check at the end of the month.

[NeilZ]

Neil and Zorak,

I found the option to "turn off" Advanced Accounting mode, but I'm hesitant to do so until I know what else it affects.

Nothing else really ...

Back to the original question, I *think* the Item Description setup as displayed above is correct
BECAUSE
it is set up just like the Federal Tax withholding, which is a similar deduction:
1) the EE is requesting the deduction as with FIT,
2) the deducted amount is credited to an ER liability account (held until paid) as with FIT,
3) when the retirement vendor is paid, I'll debit that ER liability account while crediting the Checking account as I do with FIT payments.

The only reason the FITW is showing the banking account line is because the 'advanced' display is turned on. Again, FITW is taken out of SALARY, which is setup using an expense account where the salary is basically coming from. The Checking Account is referenced on the Maintain List of Employeesfunction's Payroll Information tab and does not need to be referenced anywhere else. Unless there are specific reasons why other asset (bank) accounts need to be accessed.

I had to set up a new liability account since only one EE is deducting for retirement contribution. In addition, this is a non-ministerial EE retirement deduction, which differs in taxability to a ministerial EE retirement deduction (although we currently have none).

Again not really needed if the VENDOR that receives all the retirement payments is the same as any other retirement payment. That is if your denomination has a retirement agency that all churches use, then the same liability account can be used for all

Zorak & Neil, thanks again for all your help.

If I am wrong in the Item Description setup, let me know. Otherwise, I'll run it for the first time this week and hopefully find any discrepancies when I cut the first vendor check at the end of the month.