FAQs

What is a 401(k) plan?

What is a 401(k) plan?

A 401(k) plan is a profit-sharing plan that allows for an employee to take money from his/her paycheck to be deposited to the plan.  The plans are called 401(k) because this provision is outlined in Section 401(k) of the Internal Revenue Code.

Are contributions tax-deductible?

Are contributions tax-deductible?

Yes.  Employee contributions are typically done on a pre-tax basis.  Contributions are exempt from federal and state withholding, but are subject to all other payroll taxes including employer payroll taxes.

For example:  If my paycheck is $1,000, and I save $50 in the plan that period, federal and state income tax withholding is calculated as if I only earned $950 that period.  In this case, my take home pay wouldn’t drop by $50, but maybe $42.  The $8 difference is from the reduced tax rate.

401(k) contributions are reported on Form W-2 prepared by employers at the end of the year, so employees don’t have to do anything else on their personal income tax return at the end of the year.

Are after-tax contributions also available?

Are after-tax contributions also available?

Some plans also offer an after-tax option for employees called a Roth 401(k) option.  Any plan that offers a Roth option must also offer a pre-tax option.  The employer may allow you to do one or the other option, or a combination of the two.

How much can I deduct from my payroll for the 401(k) plan each year?

How much can I deduct from my payroll for the 401(k) plan each year?

Every calendar year you can save 100% of your pay up to a maximum of $17,000 (this is the 2012 limit, and will change for 2013).  The $17,000 is the maximum whether you make a pre-tax or Roth contribution.  This is your personal contribution limit.  You may be restricted to less than this maximum if you are considered a “Highly Compensated Employee.”  See the question about “testing” below for more information.

If your employer makes a contribution to the plan it does not reduce your personal $17,000 limit.  If you are age 50, or if your 50th birthday will be this year, you may also save an additional $5,500 for an increased total contribution of $22,500 (in 2012).  This is called a “catch-up” contribution.

Can my employer make contributions to the plan?

Can my employer make contributions to the plan?

Yes, your employer can make one of two types of contributions to the plan:

  • Matching contribution – this is a match of your personal contributions.  If you make no contributions to the plan, then you will get no match.
  • Employer contribution – this is a contribution made to employees who are eligible for the plan.  You are not required to make personal contributions to be eligible for the employer contribution.

Employer contributions are deductible on the business tax return, and are always treated as a pre-tax contribution.  Employer contributions are typically optional in a 401(k) plan except in certain circumstances.

Can the employer restrict who gets to share in the contributions they make?

Can the employer restrict who gets to share in the contributions they make?

Yes, sometimes there may be restrictions to the employer contributions.  You may be required to:

  • Meet the plan’s eligibility requirements before you become eligible to receive the employer contributions
  • Work a minimum number of hours during the year
  • Be considered an active employee at the end of the year
  • Work for a minimum number of years before you are “vested” in your employer contributions

Can I start a 401(k) plan on my own?

Can I start a 401(k) plan on my own?

401(k) plans must be set up (sponsored) by an employer.  If you are a sole proprietor you may be able to set up a 401(k) plan for your business.

What is a safe harbor 401(k) plan?

What is a safe harbor 401(k) plan?

The Top Heavy, ADP, and ACP tests may be skipped for the year if the employer makes a “Safe Harbor” contribution of either:

  • a matching contribution equal to 4% of an employee’s pay, or
  • an employer contribution equal to 3% of an employee’s pay

The Safe Harbor contribution must be declared before the beginning of the plan year and must be in place for a minimum of three months during the year for new plans.  All Safe Harbor contributions are immediately 100% vested.

Where are the plan contributions sent?

Where are the plan contributions sent?

There are a variety of options for managing funds within a 401(k) plan.  Most mutual fund companies, insurance companies, brokerage houses, and banks have 401(k) products.  Funds may be managed by professional money managers or by the plan participants themselves.  Contact your favorite investment advisor and ask for a referral to someone who specializes in retirement plan asset management.

When can money be withdrawn from the plan?

When can money be withdrawn from the plan?

Retirement plans like a 401(k) have restrictions on when funds can be withdrawn.  Benefits (other than Roth accounts) are subject to tax when withdrawn, and if withdrawn prior to age 59½ may also be subject to a federal excise tax of 10% of the amount withdrawn.  Distributions are reported on a Form 1099R.  Times when funds can be withdrawn include:

  • Triggering events.  If one of these events happen, a withdrawal is allowed:
    • Retirement age is reached (this age is defined in the plan document)
    • Disability of the participant (typically means total and permanent disability)
    • Death of the participant (funds are paid to the participant’s beneficiary)
    • Termination from service with the employer
  • Hardship.  Some plans may allow for an employee to withdraw funds if they are suffering a personal financial hardship such as:
    • Medical expenses not covered by insurance
    • Purchasing a primary residence
    • College tuition expenses
    • Funeral expenses
    • Disaster recovery
  • In-service withdrawals.  Some plans may allow for employees to withdraw funds while they are still working.  Withdrawals may be limited to:
    • Employees age 59½ or older
    • Employer contributions that have been in the plan for two years or more

What about loans?

What about loans?

A plan may allow for employees to borrow funds from their accounts.  In general, loans have strict rules:

  • The maximum loan is 50% of your vested account balance, but no more than $50,000.
  • Loans must be paid back with interest.  The interest charged is often tied to the Prime Rate charged by banks plus some percentage (e.g., prime rate + 2%).
  • Loan payments must be made at least once per quarter, but are typically paid through payroll deduction.  It is up to you to make sure your loan payments are made!  You can’t blame the payroll department if they fail to process your payments properly.
  • Loans must be fully repaid within five years.  Some plans may offer a longer payment period for residential loans.
  • Most plans limit the number of loans an employee can have at one time.

Are there any mandatory filings for a 401(k) plan?

Are there any mandatory filings for a 401(k) plan?

Yes, there is an annual Form 5500 filing required for most plans.  This filing must be submitted to the Department of Labor within 7½ months after the end of the plan year.  If there are more than 100 employees eligible for the plan, a CPA audit must be attached to the annual Form 5500 filing.

Who can help me customize a 401(k) plan for my company?

Who can help me customize a 401(k) plan for my company?

Most companies rely on the services of a Third Party Administrator (TPA) to help them with:

  • Plan design – drafting a customized retirement plan document that suits their needs
  • Testing – making sure all testing is performed accurately and in a timely manner, and corrected if there is a problem
  • Filings –usually preparing the Form 5500 filing for you

If you have more questions, please contact us!

Why am I being charged for an employee's unemployment claim when he resigned?

Why am I being charged for an employee's unemployment claim when he resigned?

When an employer accepts an employee’s resignation earlier than the date specified by the employee, the employer may be subject to charges to the EDD reserve account. Unless the termination was processed early due to the employee’s misconduct, the employer is determined to be the moving party.

Can I pay everyone as a salaried employee and avoid the time keeping hassle?

Can I pay everyone as a salaried employee and avoid the time keeping hassle?

Sorry, this is risky business. Be very careful about his wage and hour landmine for CA employers.  A “salaried” employee is not necessarily exempt from overtime. Ensure your employees are classified correctly as required in state and federal wage and hour laws. Your Industrial Wage Order is the first place to start.

Can I keep all employee medical information in the personnel file?

Can I keep all employee medical information in the personnel file?

No.  Each employee’s medical related information must be kept in a separate and confidential medical file apart from the personnel file. This includes doctor’s release notes, insurance applications with medical history, and leave of absence requests with medical related information noted.

When do I have to pay final pay for a terminating employee?

When do I have to pay final pay for a terminating employee?

California employers are required to pay involuntarily terminated employees on the last work day. Employees who resign must be paid final pay within 72 hours of the resignation notice or the last workday, if later.

Can I set dress standards for my crew?

Can I set dress standards for my crew?

Yes.  Allowable employee workplace appearance and attire may be outlined by the employer in a dress code policy, including tattoos and piercings. A word of caution is necessary if the employee’s appearance is based on his/her religious beliefs.

When can I reach an HR consultant through Vistacore?

When can I reach an HR consultant through Vistacore?

Our HR consultants are available Monday through Friday from 9 am to 4 pm.  Contact us through the Vistacore line at 916.277.8177.  Our Vistacore clients receive unlimited phone access to our certified HR consultants.

Can I allow employees to combine meal and rest breaks or leave early if they've been skipped during the day?

Can I allow employees to combine meal and rest breaks or leave early if they've been skipped during the day?

Sorry, but not in this case.  Rest breaks for non-exempt employees must be not less than 10 consecutive minutes for each 4 hours worked and scheduled as close to the middle of the work period as possible. Meal and rest breaks may not be combined, taken at the end of the day for early departure, or be allowed for late arrivals.

California employers are required to provide a third rest break if more than 10 hours are worked in a day. Employers are required to ensure that non-exempt employees are authorized and permitted to take their rest breaks or the employer is required to pay an additional 1 hour wage for each day that a rest break is missed.

California employers are required to provide a third rest break if more than 10 hours are worked in a day. Employers are required to ensure that non-exempt employees are authorized and permitted to take their rest breaks or the employer is required to pay an additional 1 hour wage for each day that a rest break is missed.

What is Online Payroll?

What is Online Payroll?

Online Payroll is an easy to use, do-it-yourself payroll solution for small businesses that want a fast, cost-effective way to manage payroll. It is a web-based application that updates continually to ensure you always conform to the latest tax laws.

How does Online Payroll work?

How does Online Payroll work?

VistaCore's payroll partner BluePoint Payroll Solutions (BPPS) will setup your company, enter employee information, and enter prior payroll data. When you sign into the application, Online Payroll automatically populates a list of all employees within the pay period. You can enter hours worked, make adjustments or accept the values and BPPS calculates the taxes and deductions for you immediately. BPPS allows you to file and pay your federal taxes electronically and populates and formats your state and local forms. The service includes standard reports.

What features does payroll include?

What features does payroll include?

  • On-screen and email reminders
  • Calculation of Federal, State, and Local taxes
  • Automatic tax table updates
  • e-filed payroll tax forms for Federal and State tax jurisdictions
  • Real-time payroll reports available as soon as payroll processes
  • Pay employees by check or create a direct deposit file that you can process through your bank
  • Print checks directly from the online payroll program or desktop accounting software
  • Generate and print W2s, W3s, and 1099s
  • Detailed payroll data export to the most accounting software applications
  • QuickBooks integrated Job Costing

What do the optional features cost?

What do the optional features cost?

Time Tracking is $4/EE/Mo. There are no additional charges for optional features, such as direct deposit, electronic tax filing, W2's or payments.

What do I need to start payroll?

What do I need to start payroll?

You need the following requirements to start payroll:

  • High-speed internet access
  • Internet Explorer 6.0 or higher
  • Adobe 6.1 or higher
  • Windows XP (recommended) or higher

Can I transfer my payroll info from the old payroll to the new solution?

Can I transfer my payroll info from the old payroll to the new solution?

You cannot transfer data from the legacy payroll application directly to the BPPS -hosted payroll service, however, there are tools in the new solution that guide you through the process of entering your firm, employee, and prior payroll data. You can always contact VistaCore for help entering year-to-date balances.

What about my payroll history?

What about my payroll history?

BPPS will gather your current year payroll data and integrate it into the online payroll system.

What if I need to print a check or checks for bonuses or vacation pay?

What if I need to print a check or checks for bonuses or vacation pay?

Flexibility is one of the major factors in choosing VistaCore. You can print on-demand checks for bonus or vacation pay.

How do I add payroll information to my set of books?

How do I add payroll information to my set of books?

Entries automatically post to via One Click export with QuickBooks®, QuickBooks for Mac, QuickBooks Online Edition, Quicken and Peachtree® Additionally, exports class information into accounting software as well as exports Job costing.

Will I need to get new checks to use with this payroll solution?

Will I need to get new checks to use with this payroll solution?

No. Print payroll checks directly from the VistaCore program.

How secure is Online Payroll?

How secure is Online Payroll?

We encrypt all electronic transmissions with 128-bit secure socket layer technology.

How do I generate payroll reports?

How do I generate payroll reports?

Once you process your payroll, select from a list of standard reports that you can review onscreen, print, or download.

How do I pay my employees?

How do I pay my employees?

You can print the checks directly from the BPPS program or automatically with Direct Deposit. Alternatively, BPPS can mail checks to you for signature (Postage fees apply).

Contact BPPS Support at 1-800-282-8914 for help setting up direct deposit for an employee.

How do I file employee federal and state taxes?

How do I file employee federal and state taxes?

You can file and pay federal payroll taxes electronically by selecting the e-File and e-Pay feature.

How do I handle 401K and other deductions?

How do I handle 401K and other deductions?

Online Payroll calculates the deductions and provides report data so you can track and send payments. VistaCore will handle electronic feeds to transfer those deductions to other providers.

Does VistaCore Online Payroll support W2s and 1099s?

Does VistaCore Online Payroll support W2s and 1099s?

Yes. You receive a reminder when it is time to issue your year-end forms.

Do I pay extra for support?

Do I pay extra for support?

No. Unlimited service and support is available to help you with the setup and processing of your payroll. You can contact VistaCore Monday through Friday between the hours of 8:30 a.m. and 5:30 p.m. PST.

What if I need help or have questions during setup?

What if I need help or have questions during setup?

Help is available through the application as it relates to the feature you are using. Toll-free unlimited support is also available to help you every step of the way. (800) 282-8914

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