Ceravolo Consulting

Doral, FL

Difficulty Level: Intermediate Level AccountMate User

Version(s) Affected: AccountMate 7 for SQL, Express and LAN

Module(s) Affected: PR

DESCRIPTION

In AccountMate, there are three methods to compute the employer's matching contribution to an employee's deduction. One of these methods is to compute the employer matching/contribution by percentage based on the employee's net pay. There is one standard formula to compute the employer matching contribution regardless of the matching base amount. The formula is discussed in Article, Understanding the Employer Matching/Contribution by Percentage Method Formula.

This Technical Note is a supplement to above mentioned article and provides an illustrative example about how AccountMate calculates the Employer Matching/Contribution by Percentage Based on Net Pay Method.

SOLUTION

The discussion in the following sections will be based on the following information:

Employer Matching/Contribution (M/C) Table in the Employee Maintenance function:

Matching % Over % of Gross But Not Over
25% 0.00 10%
15% 0.00 20%
10% 0.00 100%


Employee's Gross Earnings = $600
Employee's Net Pay Amount = $369.73
Deduction Amount = $90

Step 1: Identify the Employer Matching/Contribution (M/C) by Percentage Method used; then, determine the Employer M/C Base Amount (A).

The Employer M/C Method by Percentage Method selected is based on the employee's net pay amount; therefore, the Employer M/C Base Amount (A) is $369.73, which is the employee's net pay amount.

Step 2: Calculate the maximum employer matching/contribution amount for each percentage of gross earnings. The 1st Maximum Employer M/C Amount (B1) is $60, the 2nd Maximum Employer M/C Amount (B2) is $120, and the 3rd Maximum Employer M/C Amount (B3) is $600. These are computed as follows:

B1 = Gross Earnings X 1st % of Gross Earnings
B1 = $600 X 10%
B1 = $60

B2 = Gross Earnings X 2nd % of Gross Earnings
B2 = $600 x 20%
B2 = $120

B3 = Gross Earnings x 3rd % of Gross Earnings
B3 = $600 x 100%
B3 = $600


Step 3: Calculate the 1st Employer M/C Amount (C1). The 1st Employer M/C Amount (C1) is $15. Comparing the results of A and B1 in steps 1 and 2 above, the lesser value between A ($369.73) and B1 ($60) is B1. To compute the 1st Employer M/C Amount (C1) is B1 multiplied by the 1st Employer Matching % (see the given data on Employer M/C Table). The value is computed as follows:

C1 = B1 x 1st Employer Matching %
C1 = $60 x 25%
C1 = $15


Step 4: Compute the Difference between the 2nd and 1st Maximum Employer M/C Amount (D1). The 2nd Maximum Employer M/C Amount (B2) is $120 as computed in step 2 and the 1st Maximum Employer M/C Amount (B1) is $60, which is also computed in step 2. The difference between B2 and B1 is $60. The value is computed as follows:

D1 = B2 - B1
D1 = $120 - $ 60
D1 = $60


Step 5: Compute the Difference between the Employer M/C Base Amount and the 1st Maximum Employer M/C Amount (D2). The Employer M/C Base Amount (A) is the employee's net pay amount of $369.73 while the 1st Maximum Employer M/C Amount (B1) is $60. The difference between A and B1 is $309.73. The value is computed as follows:

D2 = A - B1
D2 = $369.73 - $60
D2 = $309.73


Step 6: Determine the 1st Available Deduction Amount (E1). The 1st Available Deduction Amount (E1) is $60, which is the lesser value between D1 and D2 as computed in steps 4 and 5. The computed value for D1 is $60 and the computed value for D2 is $309.73; therefore E1 is $60, which is the computed amount in D1.

Step 7: Calculate the 2nd Employer M/C Amount (C2). The 2nd Employer M/C Amount (C2) is $9. The formula to compute the 2nd Employer M/C Amount (D2) is the 1st Available Deduction Amount (E1) multiplied by the 2nd Employer Matching %. The value is computed as follows:

C2 = E1 X 2nd Employer Matching %
C2 = $60 X 15%
C2 = $9


Note: The resulting Employer M/C amount should not be lower than zero. If in the abovementioned example the 1st Available Deduction Amount (E1) results in a negative value, the 2nd Employer M/C amount (C2) is automatically zero.

Step 8: Compute the Sum of the 1st and 2nd Maximum Employer M/C Amount (D3). The 1st Maximum Employer M/C Amount (B1) is $60 and 2nd Maximum Employer M/C Amount (B2) is $120. The sum of B1 and B2 is $180. The value is computed as follows:

D3 = B1 + B2
D3 = $60 + $120
D3 = $180


Step 9: Compute the Difference between the 3rd Maximum Employer M/C Amount and the Sum of the 1st and 2nd Maximum Employer M/C Amount (D4). The 3rd Maximum Employer M/C Amount (B3) is $600 and the Sum of the 1st and 2nd Maximum Employer M/C Amount (D3) $180. The difference between B3 and D3 is $420. The value is computed as follows:

D4 = B3 - D3
D4 = $600 - $180
D4 = $420


Step 10: Compute the Difference between the Employer M/C Base Amount and the 2nd Maximum Employer M/C Amount (D5). The Employer M/C Base Amount (A) is the employee's net pay amount of $369.73 while the 2nd Maximum Employer M/C Amount (B2) is $120. The difference between A and B2 is $249.73. The value is computed as follows:

D5 = A - B2
D5 = $369.73 - $120
D5 = $249.73


Step 11: Determine the 2nd Available Deduction Amount (E2). The 2nd Available Deduction Amount (E2) is the lesser value between D4 and D5. The value for D4 is $420 and the computed value for D5 is $249.73. The lesser value between D4 and D5 is $249.73: therefore, the E2 amount is $249.73.

Step 12: Calculate the 3rd Employer M/C amount (C3). The 3rd Employer M/C Amount (C3) is the 2nd Available Deduction Amount (E2) multiplied by the 3rd Employer Matching %. The 3rd Employer M/C Amount (C3) is $24.97. The value is computed as follows:

C3 = E2 X 3rd Employer Matching %
C3 = $249.73 X 10%
C3 = $24.97


Step 13: Calculate the Final Employer Matching/Contribution Amount (F). The Final Employer Matching/Contribution Amount (F) is the sum of the 1st, 2nd, and 3rd Employer M/C Amounts computed in the previous steps. The Final Employer M/C Amount (F) is $19.50, which is computed as follows:

F = C1 + C2 + C3
F = $15 + $9 + $24.97
F = $48.97


The discussion above provides information to help you better understand how AccountMate computes the employer's contribution to an employee's deduction. We used the employee's net pay amount as the basis to compute the employer's matching contribution by Percentage. Understanding how AccountMate computes the employer matching/contribution easy review and verification of the employer matching/contribution amounts.

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