How to set up this payroll item?

The issue with selecting 401(k) is that the retirement contributions will then be reported in box 12 on the W-2s.  The instructions for the W-2s state that required employee contributions cannot be reported in this box, but may be reported in box 14.

I did try that already.  The problem is that when I get to the taxes selection screen, it won't allow me to check Federal withholding.  It does allow me to check State withholding however.  So in the end, I was unable to use this option, as I need these deductions to be exempt from both Federal and State withholding.  We tried to over-ride this on their end, but it didn't work.  I ended up just using the "none" tax tracking type, as it allowed me to select both types of taxes.  It doesn't report the contributions in box 14 however.   I would have preferred to report the contributions in box 14 of the W2, but according to the instructions, it is an option, not a requirement.  And there just isn't an option offered in QuickBooks to make the deduction pre-tax and report in box 14.  This needs to be updated on their end.

I did get clarification to my other question and this is an important one for everyone out there.  When selecting taxes for a payroll item, if it is a deduction you are setting up, the taxes you check off indicate that the deduction is exempt from those taxes (ie:  pretax).  If you are setting up a compensation item, then the taxes you check will be applied to that compensation.  So it is the opposite, depending on whether you are setting up a deduction or compensation item.  Many Intuit advisors/customer support members I spoke to advised me incorrectly with this.  I did report it to them and asked that this issue be escalated to their trainers.

I have 2012 Premier.  It won't let me check Federal withholding taxes.  It overrides it and unchecks it.  It will allow me to check State withholdin taxes, but I do get the warning for that one.  Interesting that 2011 allows you to check Federal.

I just tried this in QB Ppro 2012 and it works fine. I can check mark the Federal Withholding item on the Tax screen.
I am not sure why you are having the problem.
Is the item you created to make this deduction a "Deduction" in the "Type" column of your payroll item list?.

Yes, it's a deduction.  So it seems that the QB Premier product is having the issue.  You can select Federal Withholding in both 2011 and 2012 Pro, but I can't select it in Premier.  Who should I report this issue to?  Intuit should send out an update to correct this feature.