Example: Set Up a Health Care Benefit Plan (USA)
Demonstrates 1 way to calculate deductions and earnings for health care benefits.
Create separate pay components to calculate:
- Employee pre- and post-tax contributions.
- Employer taxable and nontaxable contributions.
- Imputed income from health care benefits.
Both Paul and his employer contribute to Paul's health care plan. A portion of Paul's contribution is pretax and the rest is post-tax. To calculate these contributions, create 2 deductions.
A portion of the employer contributions is nontaxable and the rest is taxable. To calculate these contributions, create 2 deductions.
In addition, Paul has to pay tax on the imputed income from the taxable benefit the employer pays. Create this earning.
- Define a deduction for the employee pretax health care contribution.
- Define a deduction for the employee post-tax health care contribution.
- Define a deduction for the taxable employer contribution to health care benefits.
- Define an earning to calculate the imputed income that employees receive from the employer taxable health care contribution.
Workday calculates taxes on imputed income from employer-paid health care benefits.