Open Forum

Illinois 401(k)

  • 1.  Illinois 401(k)

    Posted Aug 01, 2019 11:43 AM
    Good Day!

    The state of Illinois says that employee contributions to a 401(k) plan do NOT reduce total wages, and that EMPLOYER contributions INCREASE total wages. In other words, I'm paid $1,000 gross, contribute $50 to my 401(k), and my employer contributes another $50. My total wages per the state of Illinois should be $1,050.

    I can't think of a way to accomplish this in SL's payroll. Any ideas?

    Maurice Shallow
    Chief Financial Officer
    Association of Illinois Electric Cooperatives
    Springfield IL

  • 2.  RE: Illinois 401(k)

    Posted Aug 01, 2019 01:30 PM
    Hi Maurice,

    Maybe move from  :)

    I would think that if you're on a supported version of SL, shouldn't that be part of tax update package?  Maybe someone from Plumbline can chime in on that....

    I looked at the earnings and deduction types and didn't see a way either....

    Will be interested to see what the solution is....


    Michael O'Neill
    Director of Finance
    Eastex Telephone Cooperative
    Henderson TX

  • 3.  RE: Illinois 401(k)

    Posted Aug 02, 2019 06:56 AM

    Tax updates only address the tax rates, not necessarily what will be taxed so I don't think that will be in any releases for these updates.

    The elimination of the sheltered contribution should be easy as you will just need to remove the item from the exemption tab of your IL state tax deductions in the Deduction Setup.

    Deduction Setup
    The second will probably involve a "process" adjustment in your payroll.  Most companies have a matching "company paid" deduction setup for the 401K match or an amount is simply determined by the company to add to the employee's plan.  Either way, this amount should be added as an earnings type and only specify the IL tax deductions in the Deduction listing and it will NOT contribute to net pay and IS excluded from disposable earnings.  When the employer contribution is determined, it will need to be added under that Earnings Type in Time and Dollar.  This will take care of the employees check.
    You will need to contact the manager of the plan because if you have the calculation done at the time of the payroll calculation and it is not an arbitrary amount, you will need to calculate, get the amount for the match, uncalculate the payroll, enter the contribution in Time and Dollar, then recalculate (what a mess).  Or, if your plan allows, this amount could be calculated and added to the employee's next check.  Most contributions simply must be submitted but it would probably be OK to add to the employee's check calculation in the next pay period much like you would add additional life insurance premium earnings.

    There is still one more issue.  I am not sure if not associating the employer's contribution with a Federal Tax (FED1, FED2, etc.) would actually exclude the earnings from the W2 if it is a "Regular" earnings type.  That is something you could test by running a W2 calculation in a test environment after the process is put in place.

    Maybe another issue also in that most exclusions for SUTA also follow the state tax laws so may want to pay attention to that also.

    I do like Michael's idea of relocation.  Could open a small headquarters office in St. Louis, only 2 hours away.  I am sure if this works for IL other states will follow since their all broke and need more tax money.

    David Callery
    Coe & Company, LLC
    Jefferson LA

  • 4.  RE: Illinois 401(k)

    Posted Aug 02, 2019 08:31 AM

    Thank you for your suggestions.  You mention quite a few items I just never considered. I will test.

    We do our match using time/dollar and are required to submit three days prior to the pay date.  

    I'm sure there are going to be a few people moving out of Illinois in the next few years.  Apparently this has been around for years, but no one knows about it.

    One of our members has already been audited and two more, that I know of, are scheduled for August.  The member that has been audited hasn't seen the final review from the state, so they don't know of any penalties/fees at this time.

    State is also looking at independent contractors and whether or not they should be classified as employees.

    Maurice Shallow
    Chief Financial Officer
    Association of Illinois Electric Cooperatives
    Springfield IL