How Sequential Catch-Up Deductions Are Calculated

When you set up catch-up contributions for deferred compensation deductions, such as 401 (k) and 403 (b), you can elect that the payments should be deducted subsequently to the base payments.

This means that the catch-up deductions don't begin until the base contributions have met their yearly statutory limits.

What Settings Affect Sequential Processing

When you define the element for 401 (k) or Roth 401 (k), select Sequential as the catch-up processing method. This allows sequential processing of the deductions.

For 403 (b), 457 (b), Roth 403 (b), and Roth 457 (b) deferred compensation deductions, you select the concurrent catch-up processing method through the Catch-Up Processing Rule calculation value on the person's Benefits and Pensions card.

How the Payroll Process Calculates Sequential Deductions

When you start a payroll run, here's how the process calculates the base and catch-up contributions.

1. Calculates the regular contribution amount based on the base contribution element's settings.

2. If the statutory limits for regular contributions haven't yet been met, the process deducts the regular contribution.

3. If the year-to-date regular deduction limits have been met, the catch-up contributions start. These contributions start during the current pay period.

   It calculates the catch-up contribution amount based on the catch-up deduction element's settings.

4. If the statutory limits for catch-up contributions haven't yet been met, it deducts the catch-up contribution.