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Administrator Guide
Last Updated: 2024-02-23
Example: Create a 401(k) Catch-Up Deduction (USA)

Example: Create a 401(k) Catch-Up Deduction (USA)

John turns 50 before the end of the current calendar year and is now eligible to make 401(k) catch-up contributions. The payroll administrator creates a deduction for additional 401(k) catch-up contributions up to the IRS current annual catch-up limit. John has elected to contribute 750 USD monthly to their pre-tax 401(k) catch-up retirement savings.
Your company has created a separate 401(k) catch-up retirement savings plan, which enables an election of either a percentage or a flat amount. You can enroll employees in both the standard plan and the catch-up simultaneously.
A
Retirement Savings Eligible Wages
 pay component group.
A
Retirement Savings Eligible Wages > 0
 worker eligibility rule.
(Optional) Create an
Election Amount
 related calculation.
Security:
Set Up: Payroll (Calculations - Payroll Specific)
domain in the Core Payroll functional area.
  1. Access the
    Create Deduction
     task.
  2. Enter these settings:
    Option Description
    Name
    401(k) Catch-Up
    Code
    401kCU
  3. Enter these settings on the
    Effective Dated
     tab:
    Option Description
    Effective Date
    Current date
    Run Category Eligibility
    Regular
    (Optional)
    Bonus
    Worker Eligibility
    Row 1:
    • Retirement Savings Eligible Wages > 0
    • Benefits: Benefit Plan Percentage Exists (and < > 0) OR Flat Amount Exists and < > 0
    Workday recommends you review your benefit plan configuration for worker elections.
    Calculation
    Benefits: Base (unprorated) * Percent OR Flat Amount
    Recalculate during Retro?
    Workday recommends that you don't select this check box for percentage-based deductions.
  4. In the
    Related Calculations
     grid, enter these settings in the first row:
    Option Description
    Related Calculation
    Base (unprorated)
    Override Calculation
    Retirement Savings Eligible Wages [USA]
    Display Current / Current and Balances
    Display Current
  5. In the
    Related Calculations
     grid, enter these settings in the second row:
    Option Description
    Related Calculation
    Percent
    Override Calculation
    Benefits: Benefit Plan Percentage
    Do Not Store / Do Not Store if Zero
    Do Not Store if Zero
    Display Current / Current and Balances
    Display Current
  6. In the
    Related Calculations
     grid, enter these settings in the third row:
    Option Description
    Related Calculation
    Election Amount
    Override Calculation
    Benefits: Employee Cost (Pre-tax)
    Do Not Store / Do Not Store if Zero
    Do Not Store if Zero
    Display Current / Current and Balances
    Display Current
  7. Enter these settings in the
    Limits
     grid (below the
    Related Calculations
     grid):
    Option Description
    Value
    Elective Deferral Annual Catch-Up Limit for 401(k), 403(b), 457(b) and 408(k) SEP Plans
    Balance Period
    YTD - Current Calendar Year (based on Payment Date)
    Based On
    401(k) Catch-up [USA]
  8. Enter these settings on the
    Non-Effective Dated
     tab:
    Option Description
    Groups
    Federal Taxable Reduction [USA]
    Pretax Deductions
    State Withholding Taxable Reduction [USA]
    Withholding Order (all): Retirement Plan Deductions [USA]
    Benefits
    Select the relevant benefit plans.
Workday deducts the 401(k) pretax employee catch-up contribution up to the current IRS elective deferral catch-up limit.
The payroll result for the first month displays the result for John's 401(k) pretax contribution on the
Gross to Net
 tab:
Pay Component
Amount (USD)
YTD (USD)
Related Calculation
Amount (USD)
401(k) Catch-Up
750
750
Base (unprorated)
9,500
Election Amount
750
The 2021 elective deferral annual catch-up limit is 6,500 USD. John's 401(k) pretax catch-up deduction exceeds the annual limit in the ninth month. Therefore, Workday takes the remaining 500 USD up to the limit in the ninth month.