Understanding Fringe Benefits

Topic Contents

1. Introduction

2. Fringe Examples

3. Setup Directions

1. Company Control Options

2. Define the Fringe

3. Define the Deduction

4. Assign the Deduction to the Employee

5. Setup the Tables

6. Assign Fringe Numbers to Employees

7. Create the Department Cross-Reference

8. Payroll Parameter Maintenance

4. Payroll Run Directions

1. Introduction

Fringe Benefits is an optional Payroll feature that provides the means to make payments for fringe benefits and certain taxes either manually or through the Vendor Invoices and Checks system.  A fringe benefit (also referred to simply as a fringe) covers the employer's contribution for a benefit.  In contrast, the employee's portion is covered by a deduction.  For example, if you have a benefit where the employee and employer split the cost, you must set up a deduction for the employee and link it to a fringe for the employer.

Automatic vs. Manual Fringe Distribution:  You can set a Company Control Option to automatically calculate the fringe amounts, where the fringe benefit is always assigned to a deduction.  The Payroll Post uses the Deduction Code to link to the fringe master and then automatically calculates the fringe distribution amounts.  Also, the Retirement Fringe Post automatically generates fringes for the MSRS.  To set up manual fringes, use Employee Fringe Maintenance, or a similar manual entry program, Fringe Distribution Entry.  For either the automatic or manual method, use the Fringe Distribution Post to load the generated invoice transactions into the Vendor Invoices and Checks feature for payment.

Tips:

• The Fringe Benefits feature is primarily used by municipal installations who have interfaced the Payroll module with the Fund Accounting module.

• If you do not want to make payments via the Vendor Invoices and Checks feature, you can simply run the Fringe Distribution Edit List without running the Fringe Distribution Post.  Use the edit list to create manual payments.

• Fringe benefits are automatically paid from a different department than salaries.

• For more information about paying vendors for fringes, see Understanding Vendor Invoices and Checks.

2. Fringe Examples

The following hyperlinks lead to examples for setting up fringes for some common business scenarios.  Each example relates to a different Fringe Calculation Code, which is explained in more detail in the Fringe Master Maintenance section of this topic.

Fringe Examples:

• Calculation Code 0:  Fringe Example - Regular FICA Setup

• Calculation Code 1:  Fringe Example - Flat Amount for Health Club

• Calculation Code 2:  Fringe Example - Percent of Gross Calculation for 401K

• Calculation Code 3:  Fringe Example - Birthday Club Using Fringe Amount

3. Setup Directions

These directions provide a guideline for setting up fringe benefits.  It will be helpful to refer to the fringe examples in the previous section, which provide more setup details for specific scenarios.

A. Company Control Options

The following Company Control Options are usually set during installation of the Invision application.

• Update During Post:  To activate the automatic update, set the Company Control Option for Update Employee Fringes During Post to (Y)es.  This directs the Payroll Post program to calculate fringes and automatically update the Employee Fringe file.

• Automatic Fringe Distribution:  To direct the Payroll Post to automatically distribute fringe amounts among expense accounts, set the Company Control Option for Automatic Fringe Distribution to (Y)es.  This method streamlines fringe processing by activating the Auto Fringe Distribution Maintenance program.

• Single or Dual Post:  To pay fringes via Vendor Invoices and Checks, set the Company Control Option for Create Automatic Vendor Invoices/Checks to 1 - Single Post or 2 - Dual Post.  For more information refer to the topic, Understanding Vendor Invoices and Checks.

Note:  You may need certain filesets created for your configuration.  Contact NDS Technical Support for more information.

B. Define the Fringe

Use Fringe Master Maintenance to create a Fringe Number for each benefit you plan to process through the system for the employer's portion of a fringe benefit.  Here you define the fringe and establish the codes that determine how the Payroll Post calculates the fringes and how to create invoice transactions for the Vendor Invoices and Checks feature.

Important Fields:

• Fringe Number:  For convenience, you can use the same number for both the Fringe Number and Deduction Code.
  Tip:  For a list of reserved Fringe Numbers, see the Standard Fringe Numbers and Deduction Codes topic.

• Vendor Number:  Enter the Vendor Number if using the Vendor Invoices and Checks feature.

• Vendor Payment Method:  (C, I, CN, N)  This code specifies how the Payroll Post generates vendor invoice transactions for the Fund Accounting payment method or the Payroll A/P payment method.
  Tip:  If you are not using Vendor Invoices and Checks, you can set this code to (N)one.

• Fringe Calculation Code:  This code specifies how the Payroll Post calculates the fringe distribution amount.  The following codes are available:

• 0 - Enter an amount:  The Payroll Post program calculates the Fringe Distribution Amount and automatically enters it into the Employee Fringe file.  The Fringe Distribution Amount matches the calculated amount for the associated deduction.  The Fringe Distribution Amount can vary among pay periods according to the calculation.  For more information refer to the topic, Fringe Example - Regular FICA Setup.

• 1 - Flat amount:  The Payroll Post program calculates the Fringe Distribution Amount, and automatically enters it into the Employee Fringe file.  The Fringe Distribution Amount matches the calculated amount for the associated deduction.  The Fringe Distribution Amount is usually the same every pay period.  For more information refer to the topic, Fringe Example - Flat Amount for Health Club.
  
  Note:  There is no distinction in the programs between codes 0 and 1.  The difference is for your clarification only.
   

• 2 - Percent of Gross:  The Payroll Post program uses the Fringe Amount as a factor to calculate a percent of the gross pay.  The Payroll Post automatically enters the calculated Fringe Distribution Amount into the Employee Fringe file.  The Fringe Distribution Amount does not necessarily match the calculated amount for the associated deduction.  For more information refer to the topic, Fringe Example - Percent of Gross Calculation for 401K.

• 3 - Use Fringe Amnt:  The Payroll Post program uses the Fringe Amount as the Fringe Distribution Amount in the Employee Fringe file.  The Fringe Distribution Amount does not necessarily match the calculated amount for the associated deduction.  For more information refer to the topic, Fringe Example - Birthday Club Using Fringe Amount.

C. Define the Deduction

Use Deduction Master Maintenance to create a Deduction Code for the employee's portion of a benefit.  For the Payroll Post to be able to access the fringe information, you must assign the Fringe Number to a Deduction Code.

Tip:  For convenience, you can use the same number for the Deduction Code and the Fringe Number.

Important Fields:

• Deduction Code:  For convenience, you can use the same number for both the Fringe Number and Deduction Code.
  Tip:  For a list of reserved Deduction Codes, see the Standard Fringe Numbers and Deduction Codes topic.

• Vendor Number:  Always enter the Vendor Number for the automated mode.  This is required for payment through the Vendor Invoices and Checks feature.

• Vendor Payment Method:  (C, I, CN, N) This code specifies how the Payroll Post generates vendor invoice transactions for the Fund Accounting payment method or the Payroll A/P payment method.
  Tip:  If you are not using Vendor Invoices and Checks, you can set this code to (N)one.

• Fringe Number:  You must assign a Fringe Number to a Deduction Code for the Payroll Post program to be able to calculate the fringe distribution amount.

D.  Assign the Deduction to the Employee

To assign a Deduction Code to an employee, use the Employee Master Scheduled Deductions Area in Employee Master Maintenance.

Tip:  Not all Deduction Codes have to be assigned to an employee.  The following section describes tables that contain codes that are handled automatically, without assigning the codes to the employees.

E. Setup the Tables

The following tables control how the post programs create invoice transactions for standard withholding amounts for taxes, retirement, and net direct deposit.  In each table, you assign a Deduction Code to the type of standard withholding, such as Federal Tax Withholding and Regular FICA Withholding.

• PRINVCHK Table:  Designates the Deduction Codes for retirement, federal, and FICA tax withholding.
  Note:  You can use the Deduction Code for the DIR DEP entry to pay the bank for direct deposits of the employees' net check amounts.  In turn, the Deduction Code is linked to a Fringe Number.  For more information refer to the topic, Fringe Example - Regular FICA Setup.

• PRVNDST Table:  Designates the Deduction Codes for state tax withholding amounts.  In turn, the Deduction Code is linked to a Fringe Number.  For more information refer to the topic, Fringe Example - Regular FICA Setup.

• MSR DEDS:  This table relates to the Maine State Retirement system.  It contains a list that relates a retirement Deduction Code to each Run Code.  For more information, refer to the topic Understanding Retirement Fringe Benefits.

Tips:

• You do not need to assign the standard Deduction Codes contained in these tables to any employees, because the tables handle all of the processing.

• For information about reserved Deduction Codes contained in these table, see the Standard Fringe Numbers and Deduction Codes

F. Assign Fringe Numbers to Employees

Use Employee Fringe Maintenance to assign the applicable Fringe Numbers to each participating employee.

Important Fields:

• Employee Number:  For each employee, you must assign the list of applicable fringes.

• Fringe Number:  Add each Fringe Number that relates to the employee.

• Fringe Calculation Code:  Defines how the Payroll Post calculates the Fringe Distribution Amounts.

• Clear Flag:  Defines which portion of the Employee Fringe record is cleared by the Fringe Distribution Post program.  For the automated update, 1 - Clear Amounts Only is the best option, although 0 - Clear All is acceptable.  For the manual entry of fringe amounts, specify 3 - Do Not Clear.

• Amounts & Department Numbers:  For the automated update, leave all of the amounts and Department Numbers blank.  The Payroll Post fills in these fields.

Note:  The Fringe Distribution Entry program performs the same function as Employee Fringe Maintenance.  Data Entry may be quicker with Fringe Distribution Entry, however Employee Fringe Maintenance is recommended, because it provides greater visibility into the records and more validation to prevent errors.

G. Create the Department Cross-Reference

If you are using the automated update, you must create a cross-reference that links Appropriations Account Numbers to Department Numbers for distributing the fringe amounts.  During Auto Fringe Distribution Maintenance, enter all of the Department Numbers for employees that might be associated with a Fringe Number.  Link each Department Number to an Appropriations Account Number (expense account), which is sometimes the same number.

Notes:

• For the program to appear on the menu, you must set the Company Control Option for Automatic Fringe Distribution to (Y)es.

• Important:  If there are employees with Department Numbers missing from this cross-reference, the Payroll Post creates a record anyway, listing the invalid Department Number 99999999.  You must correct all 99999999 Department Numbers before running the Fringe Distribution Post.

H.  Payroll Parameter Maintenance

Your system administrator or NDS Technical Support sets up Payroll Parameter Maintenance during the system installation.  Specify if you want to allow zero Deduction Amounts for deductions associated with fringes.

Payroll Run Directions

So you can see where the Fringe Benefits programs fit in, the following list describes the basic flow for processing Vendor Invoices and Checks during the Payroll Run:

1. Payroll Post:  Generates the Fringe Distribution Amounts for the appropriate departments in the Employee Fringe file.

2. Retirement fringe programs*.

3. Fringe posting to Vendor Invoices and Checks programs**.

4. Payroll Fund Accounting Accounts Payable programs, if applicable.

5. Payroll Accounts Payable programs, if applicable.

Tip:  For specific timing information, refer to the Payroll Runbook.

* Retirement Fringes:

The following programs load transactions to the Employee Fringe File for the Maine State Retirement System (MSR).  For more information see the Understanding Retirement Fringe Benefits topic.

• Monthly Retirement Report:  This report generates transactions for MSR retirement to be processed within the fringe benefits system.

• Retirement Fringe Journal:  Lists the transactions created by the Monthly Retirement Report.

• Retirement Fringe Post:  Loads the transactions into the Employee Fringe File.

** Fringe Posting to Vendor Invoices and Checks:

The following programs load the employee fringes into the Fund Accounting A/P or Payroll A/P files within the Vendor Invoices and Checks system.

• Fringe Distribution Edit List:  Prints a list of fringe amounts distributed to departments in the Employee Fringe File.
  
  Important:  If there are employees with Department Numbers missing from the cross-reference created during Auto Fringe Distribution Maintenance, the Payroll Post creates a record anyway, listing the invalid Department Number 99999999.  You must correct all 99999999 Department Numbers in Employee Fringe Maintenance before running the Fringe Distribution Post.  Also make the corrections in Auto Fringe Distribution Maintenance before the next Payroll Run.

• Fringe Distribution Post:  Creates invoice transactions in the appropriate Vendor Invoices and Checks method from the Employee Fringe file.