401k and Roth IRA Contributions

Does your company offer both a pretax 401k deferral and an after tax Roth IRA deferral to your employees? This can be difficult to handle with the separate taxability’s and the fact that the federal contribution limit for each year (eg. 2010 is $16,500) must be allocated between the two deductions based on each employee’s contribution. There is also the factor of tracking employee’s who reach the age of 50 who may wish to defer an additional amount to both of these deferrals and that limit too must be allocated based on the yearly limit (eg. 2010 is $5,000).

If you have this type of situation at your company and looking for a payroll software solution, this is one of the items you may want to investigate. The payroll software system should be able to determine the percentage of the annual contribution limit and the annual catch-up contribution limit for both the amount deferred and any company match based on each employee’s election. Also, a payroll software system with its own Alerts product would be able to notify you when an employee reaches the age of 50, where these employees’s could be notified of their option to defer an additional catch-up amount. The Alert can go to the HRIS software solutions administrator, the employee or both.

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Payroll Sabari , FCI

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