Page 249 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
Pensions and Other Savings Plans
An employer may offer several types of savings plans to its employees. In
its simplest form,a business may arrange to make regular deductions from
employee paychecks and deposit these funds in any number of pension

plans.A slightly more complex arrangement is for the company to match
some portion of the contributed funds and deposit them together with
the employee funds.These contributions may vest immediately or at some
point in the future; vesting gives ownership in the company-contributed
amount to the employee. The company may also retain the contributed
funds and pay back employees with company stock.
If funds are being matched by the company, there will be an upper
limit on the amount of matching, as well as a matching percentage. For
example, a company may contribute 50 percent of the amounts con-

tributed by its employees,up to a maximum of 6 percent of an employ-
ee’s total pay.
This topic was covered in considerable detail in the section titled
“Pension Plan Benefits,” in Chapter 6,“Benefits.”

Student Loans

The government can mandate the garnishment of an employee’s wages in
order to pay back the overdue portion of an outstanding student loan.
Garnishment orders can be issued either by the Department of Education
or a state guarantee agency, depending on which is guaranteeing the loan.
Upon receipt of the order, the employer must give an employee 30 days
notice prior to making deductions from his or her wages. An employee
cannot be fired from work because of the garnishment order; an employ-
er that does so is liable for the employee’s lost wages.Also, if an employer
neglects to withhold the authorized garnishment amount, it is liable for

the amount that was not withheld.

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