Deduction Sequencing Issues When Deduction Method is 100% of Gross Wages

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Posted on by Tina Haerr

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We have employees who want 100% of gross wages to go to their 401K or the HSA account. We set the deduction method as 100% of gross wages and set the deduction sequencing to allow the other sheltered deduction to be taken first and then the 401k or HSA deduction after that. If there are only sheltered deductions in the build for this employee, it builds and calculates fine. However, if there are non sheltered deductions included in the build for this employee, we get an error messages that says

'employee listed on this report will not be paid in this pay run due to sequencing issues. Change will need to be made to employee deduction maintenance or employee sequencing before these checks can be processed. '

Why does this happens and Is there a way to set a 401K or HSA deduction to 100% of gross wages when non sheltered deductions are included in the build?

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CRUIZ2020 26 on at

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RE: Deduction Sequencing Issues When Deduction Method is 100% of Gross Wages

Hi Leslie - we have the same issue and want 100% of the wages after the pre-tax and post-tax deductions to go to 401K. How would we set this up without figuring out the exact amount or excluding the post-tax deductions.
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Thomas Franz 1,105 on at

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RE: Deduction Sequencing Issues When Deduction Method is 100% of Gross Wages

Tina,

The fundamental issue is that the 401k deduction is typically sheltered from federal taxes. As such, the system will:

Calculate Gross Wages

Calculate "target" deduction amounts for sheltered deductions (401k deduction would equal 100% of wages)

Calculate taxes

Calculate "target" deduction amounts for non-sheltered deductions

Start taking deductions in sequence order

When the system gets to the 401k deduction, other deductions have been taken already, so the system cannot "take" the "target" amount of the 401k deduction, so it reduces the deduction amount to what is remaining. This deduction was used when calculating taxes, therefore, taxes are now incorrect.

If the system then recalculated taxes, there would then be more money available in the check, thus the 401k deduction would be increased, and the cycle continues.

Due to this constraint, GP will instead kick the check out of the build and you get the report you mentioned.

Hope this helps clarify the why ... fixing this can be a challenge.
L Vail 65,271 on at

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RE: Deduction Sequencing Issues When Deduction Method is 100% of Gross Wages

Hi,

If there are non-sheltered deductions you cannot make a deduction to be 100% of gross wages. Gross is before any deductions. Don't you want 100% of left over wages after all of the deductions that come before it? Is a non-sheltered deduction sequenced such that it comes BEFORE the HSA deduction? Can you give us a simple example?

Kind regards,

Leslie