Erased background won't translate to Encore

[cole5C48]

I'm very new to authoring and I've made menus for my project in photoshop. I've made my buttons into layer groups with transparent backgrounds. Whenever I go into Encore and make them buttons, both the selection preview (picture 1) and button routing preview thing (not sure what else to call it, picture 2) show it as selecting a giant area that isn't part of the layer group. Ideally, only the layer group (which encompasses the area I've hastily shown in picture 3) would be highlighted. Can someone help me do this?