Best Practices
- We always recommend that when creating a new Deduction Description, you use an existing deduction as a template. For general instructions on how to create a new Deduction Description, please go to Help → OpenRDA Answers/Documentation, and search for the online documentation on the Deduction Description Master Browse
Prerequisite
- Prior to creating the deductions, create a Vendor Master for MissionSquare (Effective 1/2/25 the new vendor will be Voya Financial). This is the vendor for the new Defined Contribution plan. Organizations can choose ACH Debit or Credit. If Credit is chosen, then the 457 and 401 plan amounts must be sent separately (to different bank accounts), which means two vendor IDs are needed (Vendor Withholding ACH file would be used for credit)
- Important fields are defined below. For general instructions on how to create a Vendor Master, please refer to the OpenRDA Answers document entitled Create Vendor Masters. Click here to view the document.
- Percentages on Deduction Descriptions are used for example in setup. Always verify for the correct percentages.
| FIELDS | Opt. | Rec. | Req. | Description |
|---|
| Pay Vendor | — | ♦ | — | It is recommended that vendors used in Payroll are flagged as Payroll Vendor so that Accounts Payable staff is aware that the associated vouchers will be in the Payroll module, rather than in Vendor Payments |
| Electronic Transfer | ♦ | — | — | Since payments to ICMA-RC must be made electronically, this needs to be flagged |
| Direct Draft | ♦ | — | — | If you will pay ICMA-RC electronically, whereby you will authorize payment for a direct draft from your account, then this needs to be flagged (in addition to the Electronic Transfer flag) |
| Opt. = Optional Rec. = Recommended Req. = Required |
Deduction Setup
- You will create a minimum of 6 Deduction Descriptions: 4 for mandatory deductions, and 2 for voluntary deductions. If you need to compute/transmit payments based on Professional and Non-Professional, additional deductions may need to be set up. Or, if you transmit based on Contract Months, instead of Pay Frequency Months, then that will also impact the number of deductions that are needed.
- Defined Benefit (DB) Component: Both the employee and employer make contributions. Employees contribute 4% of their creditable compensation. The employer contribution amount is an actuarially-determined amount, less any employer contributions to the Defined Contribution Component of the plan. Vendor checks and reports are sent to VRS.
- Defined Contribution (DC) Component: It is mandatory for the employee and employer to each make a 1% contribution. It is voluntary for an employee to contribute an additional 4%, in 0.5% increments; the employer must match the first 1% of these voluntary contributions, and 0.25% of each additional 0.5%. Vendor checks and reports are sent to ICMA-RC.
- If Deduction Descriptions are set up per contract month, on any contract month amount less than 12 months the percentage would need to be increased since the deduction will not be computing 12 times. The formula to calculate the percentage is:
Annual percentage x Pay Frequency / contract months so for example a 10 month employee that is paid 12 times with a 4% annual percentage would be 4 x 12 / 10 = 4.8%
Employee-Paid Defined Benefit
- Create a Deduction Description ID for the Employee-Paid Defined Benefit.
Populate the fields on the Type tab as shown below:
Type Tab - Employee Defined Benefit
| FIELDS | Opt. | Rec. | Req. | Description |
|---|
| Deduction Description ID | — | — | ♦ | If you will need only one deduction for the employee-paid defined benefit, we recommend an ID similar to VRS RET-DB MANDATORY EMPLOYEE. If you have multiple such deductions, remember that the ID for each deduction must be unique. Due to the limited space available in the ID field, abbreviations will be necessary. For example, VRS RET-DB MAND EE 40131. |
| Short Description | — | — | ♦ | Normally (depending on GSV), this is what displays on employees' check stubs; it is not necessary to use a specific name |
| Deduction Type | — | — | ♦ | Required; select RETIREMENT FS |
| Computation Level | — | — | ♦ | Dictates the order in which deductions compute; it is set at the Deduction Type level, and displays on the Deduction Description for informational purposes; it's not important what the number is, as long as it is a lower number than the Deduction Type(s) it shelters; the Computation Level may have to be changed to match that of other Deduction Descriptions, in the event that certain deductions must be grouped together in conjunction with Pay Type setups |
| Vendor Identification | — | — | ♦ | Select the Vendor ID you use for the VRS Retirement System |
| Identification | — | — | ♦ | Required. Populate this field with the Plan Identification; the ID is required for the EMPLOYEE DEDUCTION MASTERS REPORT FOR VRS-RET PLAN IDENTIFICATIONS report (VRSDEDMREPORT); Must be VRS RET-DB MANDATORY as shown in screen shot below; this employee deduction and its counterpart employer deduction must share the same ID |
| W2 Deduction Type | — | — | ♦ | Required; select 414H |
| Opt. = Optional Rec. = Recommended Req. = Required |
- On the Compute tab, choose the appropriate Compute Type, and enter 41, as shown below. This reflects the mandatory 4% of creditable compensation.
1 - If you are not deducting over 12 months, then you will have to adjust the rate accordingly so that 4% of each employee's creditable annual compensation is deducted. The formula for adjusting the rate is: (12-month amount X 12) divided by the # of times the deduction will compute.
- Note: In this example, the computation is based on Retirement Salary. If you do not use Retirement Salary, select Percentage of Gross, rather than Percentage of Retirement Salary.
- Review the Flags tab to be sure that Reduce net is true/flagged, as shown below:
Employer-Paid Defined Benefit
- Create a Deduction Description ID for the Employer-Paid Defined Benefit. This Deduction Description will pick up the difference (i.e., the actuarial rate, less all other contributions).
- Populate the fields on the Type tab as shown below:
Type Tab - Employer Defined Benefit
| FIELDS | Opt. | Rec. | Req. | Description |
|---|
| Deduction Description ID | — | — | ♦ | If you will need only one deduction for the employee-paid defined benefit, we recommend an ID similar to VRS RET-DB MANDATORY EMPLOYER. If you have multiple such deductions, remember that the ID for each deduction must be unique. Due to limited space available in the ID field, abbreviations will be necessary. For example, VRS RET-DB MAND ER 40131. |
| Short Description | — | — | ♦ | Normally (depending on GSV), this is what displays on employees' check stubs; it is not necessary to use a specific name |
| Deduction Type | — | — | ♦ | Required; select RETIREMENT M |
| Computation Level | — | — | ♦ | Dictates the order in which deductions compute; it is set at the Deduction Type level, and displays on the Deduction Description for informational purposes; it's not important what the number is, as long as it is a lower number than the Deduction Type(s) it shelters; the Computation Level may have to be changed to match that of other Deduction Descriptions, in the event that certain deductions must be grouped together in conjunction with Pay Type setups |
| Vendor Identification | — | — | ♦ | Select the Vendor ID you use for the VRS Retirement System |
| Identification | — | — | ♦ | Required. Populate this field with the Plan Identification; the ID is required for the EMPLOYEE DEDUCTION MASTERS REPORT FOR VRS-RET PLAN IDENTIFICATIONS report (VRSDEDMREPORT); Must be VRS RET-DB MANDATORY as shown in screen shot below; this employer deduction and its counterpart employee deduction must share the same ID |
| W2 Deduction Type | — | — | ♦ | Required; select RETIREMENT |
| Opt. = Optional Rec. = Recommended Req. = Required |
- On the Compute tab, choose the appropriate Compute Type. Note: In this example, the computation is based on Retirement Salary. If you do not use Retirement Salary, select Elected Percentage of Gross, rather than Elected Percentage of Retirement Salary. Elected Percentage of Retirement Salary is a new Compute Type, which was created to allow for maintaining the percentage at the employee level, instead of the Deduction Description level.
- Review the Flags tab to be sure that Reduce Net is false/not flagged, as shown below:
Employee-Paid Defined Contribution
- Create a Deduction Description ID for the Employee-Paid Defined Contribution.
- Populate the fields on the Type tab as shown below:
Type Tab - Employee Defined Contribution
| FIELDS | Opt. | Rec. | Req. | Description |
|---|
| Deduction Description ID | — | — | ♦ | If you will need only one deduction for the employee-paid defined benefit, we recommend an ID similar to VRS RET-DC MANDATORY EMPLOYEE. If you have multiple such deductions, remember that the ID for each deduction must be unique. Due to limited space available in the ID field, abbreviations will be necessary. For example, VRS RET-DC MAND EE 40131. |
| Short Description | — | — | ♦ | Normally (depending on GSV), this is what displays on employees' check stubs; it is not necessary to use a specific name |
| Deduction Type | — | — | ♦ | Required; select 401A |
| Computation Level | — | — | ♦ | Dictates the order in which deductions compute; it is set at the Deduction Type level, and displays on the Deduction Description for informational purposes; it's not important what the number is, as long as it is a lower number than the Deduction Type(s) it shelters; the Computation Level may have to be changed to match that of other Deduction Descriptions, in the event that certain deductions must be grouped together in conjunction with Pay Type setups |
| Vendor Identification | — | — | ♦ | Select ICMA-RC |
| Identification | — | — | ♦ | Required. Populate this field with the Plan Identification; the ID is required for the EMPLOYEE DEDUCTION MASTERS REPORT FOR VRS-RET PLAN IDENTIFICATIONS report (VRSDEDMREPORT) as well as the ICMA CONTRIBUTION FILE; Must be VRS RET-DC MANDATORY as shown in screen shot below; this employee deduction and its counterpart employer deduction must share the same ID |
| W2 Deduction Type | — | — | ♦ | Required; select 414H |
| Opt. = Optional Rec. = Recommended Req. = Required |
- On the Compute tab, choose the appropriate Compute Type, and enter 11, as shown below. This reflects the mandatory 1% of creditable compensation.
1 - If you are not deducting over 12 months, then you will have to adjust the rate accordingly so that 1% of each employee's creditable annual compensation is deducted. The formula for adjusting the rate is: (12-month amount X 12) divided by the # of times the deduction should compute.
Note: In this example, the computation is based on Retirement Salary. If you do not use Retirement Salary, select Percentage of Gross, rather than Percentage of Retirement Salary.
- Review the Flags tab to be sure that Reduce Net is true/flagged.
Employer-Paid Defined Contribution
- Create a Deduction Description ID for the Employer-Paid Defined Contribution.
- Populate the fields on the Type tab as shown below:
Type Tab - Employer Defined Contribution
| FIELDS | Opt. | Rec. | Req. | Description |
|---|
| Deduction Description ID | — | — | ♦ | If you will need only one deduction for the employee-paid defined benefit, we recommend an ID similar to VRS RET-DC MANDATORY EMPLOYER. If you have multiple such deductions, remember that the ID for each deduction must be unique. Due to limited space available in the ID field, abbreviations will be necessary. For example, VRS RET-DC MAND ER 40131. |
| Short Description | — | — | ♦ | Normally (depending on GSV), this is what displays on employees' check stubs; it is not necessary to use a specific name |
| Deduction Type | — | — | ♦ | Required; select 401A-EMPLOYER |
| Computation Level | — | — | ♦ | Dictates the order in which deductions compute; it is set at the Deduction Type level, and displays on the Deduction Description for informational purposes; it's not important what the number is, as long as it is a lower number than the Deduction Type(s) it shelters; the Computation Level may have to be changed to match that of other Deduction Descriptions, in the event that certain deductions must be grouped together in conjunction with Pay Type setups |
| Vendor Identification | — | — | ♦ | Select ICMA-RC |
| Identification | — | — | ♦ | Required. Populate this field with the Plan Identification; the ID is required for the EMPLOYEE DEDUCTION MASTERS REPORT FOR VRS-RET PLAN IDENTIFICATIONS report (VRSDEDMREPORT) as well as the ICMA CONTRIBUTION FILE; Must be VRS RET-DC MANDATORY as shown in screen shot below; this employer deduction and its counterpart employee deduction must share the same ID |
| W2 Deduction Type | — | — | ♦ | Required; select RETIREMENT |
| Opt. = Optional Rec. = Recommended Req. = Required |
- On the Compute tab, choose the appropriate Compute Type, and enter 11, as shown below. This reflects the mandatory 1% of creditable compensation.
1 - If you are not deducting over 12 months, then you will have to adjust the rate accordingly so that 1% of each employee's creditable annual compensation is deducted. The formula for adjusting the rate is: (12-month amount X 12) divided by the # of times the deduction should compute.
- Note: In this example, the computation is based on Retirement Salary. If you do not use Retirement Salary, select Percentage of Gross, rather than Percentage of Retirement Salary.
- Review the Flags tab to be sure that Reduce Net is false/not flagged.
VOLUNTARY - Employee Contributions
- Create a Deduction Description ID for the additional VOLUNTARY contributions that Employees may choose to contribute toward the defined contribution. Employees are able to voluntarily contribute up to an additional 4%, in .5% increments.
- Populate the fields on the Type tab as shown below:
Type Tab - Employee VOLUNTARY Contributions
| FIELDS | Opt. | Rec. | Req. | Description |
|---|
| Deduction Description ID | — | — | ♦ | If you will need only one deduction for the employee-paid defined benefit, we recommend an ID similar to VRS RET-DC VOLUNTARY EMPLOYEE. If you have multiple such deductions, remember that the ID for each deduction must be unique. Due to limited space available in the ID field, abbreviations will be necessary. For example, VRS RET-DC VOL EE 40131. |
| Short Description | — | — | ♦ | Normally (depending on GSV), this is what displays on employees' check stubs; it is not necessary to use a specific name |
| Deduction Type | — | — | ♦ | Required; select 457 DEFERRED |
| Computation Level | — | — | ♦ | Dictates the order in which deductions compute; it is set at the Deduction Type level, and displays on the Deduction Description for informational purposes; it's not important what the number is, as long as it is a lower number than the Deduction Type(s) it shelters; the Computation Level may have to be changed to match that of other Deduction Descriptions, in the event that certain deductions must be grouped together in conjunction with Pay Type setups |
| Vendor Identification | — | — | ♦ | Select ICMA-RC |
| Identification | — | — | ♦ | Required. Populate this field with the Plan Identification; the ID is required for the EMPLOYEE DEDUCTION MASTERS REPORT FOR VRS-RET PLAN IDENTIFICATIONS report (VRSDEDMREPORT) as well as the ICMA CONTRIBUTION FILE; Must be VRS RET-DC VOLUNTARY as shown in screen shot below; this employee deduction and its counterpart employer deduction must share the same ID |
| W2 Deduction Type | — | — | ♦ | Required; select 457B |
| Opt. = Optional Rec. = Recommended Req. = Required |
- On the Compute tab, choose the appropriate Compute Type. Note: In this example, the computation is based on Retirement Salary. If you do not use Retirement Salary, select Elected Percentage of Gross, rather than Elected Percentage of Retirement Salary. The additional amount that each employee chooses to contribute will be set up in the employee's deduction master.
- Review the Flags tab to be sure that Reduce Net is true/flagged.
VOLUNTARY - Employer Contributions
- Create a Deduction Description ID for the Employer matching of the additional VOLUNTARY contributions that employees may choose to contribute toward the defined contribution. The employer must match the first 1% of the employee's voluntary contribution with 1%. Each additional 0.5% employee contribution must be matched with 0.25%.
- Populate the fields on the Type tab as shown below:
Type Tab - Employer VOLUNTARY Contributions
| FIELDS | Opt. | Rec. | Req. | Description |
|---|
| Deduction Description ID | — | — | ♦ | If you will need only one deduction for the employee-paid defined benefit, the ID should be VRS RET-DC VOLUNTARY EMPLOYER. If you have multiple such deductions, remember that the ID for each deduction must be unique |
| Short Description | — | — | ♦ | Normally (depending on GSV), this is what displays on employees' check stubs; it is not necessary to use a specific name |
| Deduction Type | — | — | ♦ | Required; select 401A-EMPLOYER |
| Computation Level | — | — | ♦ | Dictates the order in which deductions compute; it is set at the Deduction Type level, and displays on the Deduction Description for informational purposes; it's not important what the number is, as long as it is a lower number than the Deduction Type(s) it shelters; the Computation Level may have to be changed to match that of other Deduction Descriptions, in the event that certain deductions must be grouped together in conjunction with Pay Type setups |
| Vendor Identification | — | — | ♦ | Select ICMA-RC |
| Identification | — | — | ♦ | Required. Populate this field with the Plan Identification; the ID is required for the EMPLOYEE DEDUCTION MASTERS REPORT FOR VRS-RET PLAN IDENTIFICATIONS report (VRSDEDMREPORT); as well as the ICMA CONTRIBUTION FILE; Must be VRS RET-DC VOLUNTARY as shown in screen shot below; this employer deduction and its counterpart employee deduction must share the same ID |
| W2 Deduction Type | — | — | ♦ | Required; select RETIREMENT |
| Opt. = Optional Rec. = Recommended Req. = Required |
- On the Compute tab, choose the appropriate Compute Type. Note: In this example, the computation is based on Retirement Salary. If you do not use Retirement Salary, select Elected Percentage of Gross, rather than Elected Percentage of Retirement Salary.
- Review the Flags tab to be sure that Reduce Net is false/not flagged.
Supplementary Setups
- Deduction Accounts: Remember to add Deduction Accounts (in the Payroll module, under Setup → Deductions) to each of the new deductions.
- Retirement Plans: In order to identify which plan each employee is participating in for the purpose of creating the ICMA-RC VRS Hybrid Plan Payroll Interface File and when running the Employee Deduction Masters Report for VRS-RET Plans (because the actuarial rates will be different for each group of employees), Retirement Plans will need to be set up and assigned to employees. To do this, go to the Personnelmodule, and follow these steps:
- Personnel → Setup → Generic Setup Variables → Benefits Plans tab: Flag Use Retirement Plan.
- Sign Out / log out of OpenRDA entirely, then go back into the Personnel module (this is necessary for the Retirement Plan option to be available on the menu)
- Setup → Benefit Plans → Retirement Plans: Add each plan. Retirement plan names must begin with the 5 digit agency code assigned in VRS Navigator in order to properly identify the employees in the ICMA-RC file. For example, 41234 HYBRID and 51234 HYBRID
- Personnel Demographics → Benefits tab: Populate each employee's Retirement Plan field as appropriate.
- NOTE: Effective with the 12/06/2013 program release, a report will be available to assign Retirement Plans in mass to employees. This report will be located on the Benefit Plans menu: Setup → Benefit Plans → Set Retirement Plan
Additional Considerations
- Additional Deductions: Deductions like the 6 above are the minimum you will need to create. If you need to compute/transmit payments based on Professional and Non-Professional, additional deductions may need to be set up. Or, if you transmit based on Contract Months, instead of Pay Frequency Months, then that will also impact the number of deductions that are needed.
- Deduction Classes: You may want to add the new deductions to your Deduction Classes (in the Position Tracking module, under Setup → Deductions), as applicable, so they can be included in the group of deductions that can be added to new employees via the Add Standard Deductions process.
Reporting
- The Employee Deduction Masters Report for VRS-RET Plans Usecan be run from:
- Other → Virginia State Reports → VRS Reporting
- Deduction Description Master Maintain Screen, to the right of the Plan Identification Report button
- Use this report to verify employee and employer percentages.
- The employer total should be the actuarial rate.
- Warnings will display on the report for the following scenarios, so the necessary corrections can be made:
- An employer match is not correct for the associated employee %
- An employee total % exceeds the maximum, or an employer total exceeds the actuarial rate
- A Range on Retirement Plan is available, so the report can be run separately for Professional and Non-Professional employees, since the actuarial rate will be different for each group of employees. The prerequisite for using this range criteria is setting up Retirement Plans, and assigning them to employees. This setup is explained above, under Supplementary Setups.
- The ICMA-RC VRS Hybrid Plan File can be run to electronically report Defined Contributions.
- Other → Virginia State Reports → VRS Reporting
- The file reports by pay date and ranging can be done by Employer Identification if necessary
- Note that the file pulls in Deductions with the Deduction Types of 401A, 401A-EMPLOYER, ROTH CONTRIB, and Deductions starting with 457 DEF
- Once run, click on the down arrow to download text file
Employee Contribution Changes
- Employees can change their elections quarterly, which necessitates changing the voluntary employee and employer deduction percentages, as well as the Defined Benefit (DB) percentage, since that is the deduction that makes up the difference.
