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Administrator Guide
Last Updated: 2024-02-23
Example: Define a 401(k) Roth Post-Tax Deduction (USA)

Example: Define a 401(k) Roth Post-Tax Deduction (USA)

John earns 114,000 USD/year, or 9,500 USD/month. He's elected to contribute the maximum of 15% of his monthly salary to his 401(k) Roth retirement savings. The payroll administrator creates a deduction for the 401(k) employee Roth contribution, subject to these current IRS limits:
  • Employee elective deferrals.
  • Employee and employer total contributions.
Your company has created a 401(k) Roth retirement savings plan.
A
Retirement Savings Eligible Wages
 pay component group.
A
Retirement Savings Eligible Wages > 0
 worker eligibility rule.
(Optional) Define the
401(k) Pre-Tax
 deduction.
(Optional) These pay accumulations if there's another employee deduction, or an employer match:
  • 401(k) Total Contributions: EE [USA]
  • 401(k) Total Contributions: EE + ER [USA]
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
    Setting
    Name
    401(k) Roth
    Code
    ROTH
  3. Enter these settings on the
    Effective Dated
     tab:
    Option
    Setting
    Effective Date
    Current date
    Run Category Eligibility
    Regular
    Bonus
    Worker Eligibility
    Row 1:
    • Retirement Savings Eligible Wages > 0
    • Benefits: Benefit Plan Percentage Exists (and <> 0)
    Workday recommends you review your benefit plan configuration for worker elections.
    Calculation
    Base (unprorated) * Percent
    Recalculate during Retro
    Workday recommends that you don't select this check box for percentage-based deductions.
  4. Enter these settings in the
    Related Calculations
     grid:
    Related Calculation
    Override Calculation
    Base (unprorated)
    Retirement Savings Eligible Wages > 0
    Percent
    Benefits: Benefit Plan Percentage
  5. Enter these settings in the
    Limits
     grid (below the
    Related Calculations
     grid):
    Value
    Balance Period
    Based On
    Include Current Value
    Elective Deferral Annual Limit for 401(k), 403(b), 457(b) and 408(k) SEP Plans
    YTD - Current Calendar Year (based on Payment Date)
    401(k) Total Contributions: EE [USA]
    401(k) Pre-Tax [USA]
    IRS Annual Contributions Limit Value (only looks at the specified dollar value / not at annual compensation)
    YTD - Current Calendar Year (based on Payment Date)
    401(k) Total Contributions: EE + ER [USA]
    401(k) Pre-Tax [USA]
  6. Enter these settings on the
    Non-Effective Dated
     tab:
    Option
    Setting
    Groups
    Post Tax Deductions
    Withholding Order (All): Retirement Plan Deductions [USA]
    Benefit Plans
    Select the relevant benefit plan.
  7. (Optional) Once you’ve created a
    401(k) Pre-Tax
     deduction, update the
    401(k) Total Contributions: EE [USA]
     pay accumulation:
    1. Access the
      Edit Pay Accumulation
       task.
    2. Select these
      Deductions
       on the
      Add and Subtract Calculations
       tab:
      • 401(k) Pre-Tax
      • 401(k) Roth
    3. Access the
      Calculate/Display Exceptions
       tab and enter these settings:
      Option
      Description
      Option
      Calculate and display only if specified Earning/Deduction exists
      Specified Earnings/Deductions
      401(k) Pre-Tax
      401(k) Roth
  8. (Optional) Once you’ve created a
    401(k) Employer Match
     deduction, update the
    401(k) Total Contributions: EE + ER [USA]
     pay accumulation:
    1. Access the
      Edit Pay Accumulation
       task.
    2. Select these
      Deductions
       on the
      Add and Subtract Calculations
       tab:
      • 401(k) Pre-Tax
      • 401(k) Roth
      • 401(k) Employer Match
    3. Access the
      Calculate/Display Exceptions
       tab and enter these settings:
      Option
      Description
      Option
      Calculate and display only if specified Earning/Deduction exists
      Specified Earnings/Deductions
      401(k) Employer Match
Workday takes the 401(k) pre-tax deduction first, then deducts the 401(k) Roth post-tax employee contribution.
His payroll result for the first month displays the result for his 401(k) Roth post-tax employee contribution on the
Gross to Net
 tab:
Pay Component
Amount (USD)
YTD (USD)
Related Calculation
Amount (USD)
401(k) Roth
1,425
1,425
Base (unprorated)
9,500
Percent
0.15
The 2021 elective deferral annual limit is 19,500 USD. John's 401(k) pre-tax and Roth deductions combined exceed the annual limit in the sixth month. Workday takes the final pre-tax deduction of 1,900 USD in the sixth month first, then takes the remaining 975 USD up to the limit for the Roth deduction.