Payroll administrators and implementation consultants, using the Payroll Setup > Deferred Compensation and Pension Plans feature, can configure Dayforce to limit contributions to deferred compensation plans, pension plans, and RRSPs automatically.
Both deferred compensation plans and pension plans involve employees paying a portion of their earnings into an account, such as a 401(k) or an RRSP account, usually for retirement. Some employers contribute to deferred compensation plans or pension plans on behalf of their employees, often matching a percentage of employees' contributions.
Deferred compensation and pension plan calculations are determined in part by employee salary or wages, what mandatory limits have been established for specific types of deferred compensation and pension plans, as well as to the amounts employees and employers contribute based on the following:
- Employee Contributions: Deferred compensation plans can limit the total amount an employee can contribute within a year. For example, using a plan that limits employee contributions to $22,500 per year for 401(k) accounts, Dayforce stops making deductions from employees who have reached the annual limit.
- Matches Combined with Contributions: Deferred compensation plans can also limit the combined amount of both employee contributions and any employer contributions or matches. For example, if an employee contributes 10% of their wages (via a deduction), and the employer matches half of this amount (via an earning), a deferred compensation plan can be configured so that the combined total of deduction and earning amounts does not exceed $50,000 a year. After the limit is reached for the year, Dayforce stops making deductions from the employee and reduces the employer match earning to zero.
| Tab | Description |
|---|---|
| Deferred Compensation Plans | This tab is used for US employees. Deferred compensation plans determine what limits the application automatically applies to contributions made to the plan, as well as which employees are eligible to contribute, based on their salary or wages. See The Deferred Compensation Plans Tab. |
| Pension and RRSP Plans | This tab is used for Canadian employees. Pension and RRSP plans are used to limit the amount employees can contribute. See The Pension and RRSP Plans Tab. |
| Pension Limits (UK) |
This tab is used for UK employees. Pension limits are used to limit the amount employees can contribute.See The Pension Limits (UK) Tab. |
Configuring the application to support deferred compensation and pension plans involves setting up the following:
- Deductions for Deferred Compensation and Pension Plans
- Earnings for Deferred Compensation and Pension Plans
- Deduction and Earning Groupings
- Assign Deferred Compensation and Pension Plans to Employees
- Configure Deferred Compensation Plans for US Employees
- Configure Pension and RRSP Plans for Canadian Employees
- Configure UK Pension Limits