Contribution Limits for Deferred Compensation Plans
The IRS has established limits on how much an employee can contribute to their deferred compensation plans. The payroll process can enforce these limits at the payroll statutory unit (PSU) or tax reporting unit (TRU) levels.
This helps ensure all employees stay in compliance.
The payroll process enforces these limits based on a variety of factors, such as:
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Age of the employee, such as eligibility for catch-up contributions
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Their seniority, such as whether or not they're eligible for the 15 Years-of-Service rule
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Number of years before retirement, such as eligibility for the 457 (b) Special Catch-Up limit
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Type of plan
Contribution Limits
The IRS Internal Revenue Code has established the following limits on how an employee may contribute to their plans.
|
Contribution limit |
What it does |
|---|---|
|
Adjusted Deferred Compensation Limit 403b |
Special limit for employees eligible for the 15 Years-of-Service rule. The payroll process enforces this limit when you enable Adjusted Deferred Compensation Limit on the person's card. For further info, see 403 (b) Plan 15 Years-of-Service Rule in the Help Center. |
|
Deferred Compensation 401k Annual Limit Deferred Compensation 403b Annual Limit Deferred Compensation 457 Annual Limit |
This is the annual limit for base and Roth contributions of the appropriate plan types. It doesn't include any employer-match, after-tax, or catch-up contributions. Note:
If your employee contributes to both 401 (k) and 403 (b) standard or Roth plans, the payroll process enforces the deferred compensation annual limit across both plans. |
|
Deferred Compensation 401k Catch-Up Annual Limit Deferred Compensation 403b Catch-Up Annual Limit Deferred Compensation 457 Catch-Up Annual Limit |
This is the annual limit for catch-up and Roth catch-up contributions of the appropriate plan types. It doesn't include employer-match contributions. Note:
If your employee contributes to both 401 (k) and 403 (b) standard or Roth plans, the payroll process enforces the deferred compensation annual limit across both plans. |
|
Deferred Compensation 401k Puerto Rico Annual Limit |
This is the annual limit for Puerto Rico 401 (k) or CODA contributions. |
|
Deferred Compensation 401k Puerto Rico Catch Up Annual Limit |
This is the annual limit for Puerto Rico 401 (k) or CODA catch-up contributions. |
|
Elective Deferral Limit Elective Deferral Limit 403b Elective Deferral Limit 457 |
This is the combined pretax and after-tax annual limit for all employee and employer contributions to the appropriate plan types. It applies to all contribution types for the appropriate element types. |
|
Eligible Compensation Annual Limit Eligible Compensation Annual Limit 403b |
This limit sets the maximum amount of compensation considered when calculating employer and employee contributions to the appropriate plan types. The payroll process uses this to determine the amount available for contributions and employer matching. It applies to all contribution types for the appropriate element types. |
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Employer Contribution Limit Percentage |
This limit is the maximum amount of matching contributions an employer can provide, measured as a percentage of the employee's pay per period. The default is 6% of the person's pay per pay period. |
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Employer Contribution Percentage |
Percentage of employee 401 (k) base contributions matched by the employer. The default is 50% of the person's pay per pay period. |
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Percentage for Employer Contribution |
Percentage of employee 403 (b) and 457 (b) base contributions matched by the employer. The default is 50% of the person's pay per pay period. |
|
Special Catch-Up Limit |
This is a special 457 (b) plan limit for employees 3 years from retiring. Note:
This payroll process applies this limit if you set one of these to Yes.
For further info, see Set Up 457 (b) Deferred Compensation Plans in the Help Center. |
To view these limits:
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Start the Calculation Value Definition task.
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Select your US LDG, and search for the Pretax Deductions value definition group.
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Select the appropriate value to view its statutory limits.
Enforce Annual Compensation Limits for Your Organization
The payroll process automatically enforces these limits at the PSU level. This helps ensure all employees belonging to any TRU in that PSU stay in compliance.
To change the enforcement of these limits:
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To configure them at the PSU level, start the Legal Entity Calculation Cards task.
To enforce them for a TRU, start the Legal Reporting Unit Calculation Cards task.
Settings on the TRU override those on the PSU.
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Select Benefits under Component Groups.
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Under Calculation Components, click Create.
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Select the Pension Plan calculation component.
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Select the appropriate pension type, and click OK.
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In Pension Plan: Details, select Enterable Calculation Values on Calculation Cards.
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Click Create.
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Select Enforce Eligible Compensation Annual Limit Check in Name.
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Select Yes to enforce the limit. If you don't want to enforce the annual limit, select No.
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Click OK.
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Click Save and Close.
If you set this override to No, the payroll process continues to perform employee deductions up to the annual deduction limit, even if the annual compensation limit has been reached.
Override IRS Limits for Individual Employees
There are cases when you need to override these limits, such as:
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An employee has changed companies.
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An employee has more than one type of deferred compensation plan.
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An employee is eligible for the 15 Years-of-Service rule.
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An employee is eligible for special 457 (b) catch-up contributions.
How you set the override depends on the kind of plan you're managing.
|
What you want to do |
How you do it |
|---|---|
|
Override limits for a 401 (k) plan for a specific employee |
Use the Element Entries task to override limit values. |
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Override limits for a 403 (b) or 457 (b) plan for a specific employee |
|
The following overrides are available.
|
Override name |
How you use it |
|---|---|
|
Override IRS Annual Compensation Limit |
Overrides these limits for base and employer-matching contributions.
|
|
Override IRS Annual Limit Catch-Up |
Overrides these limits.
|
|
Override IRS Employer Annual Compensation Limit |
Overrides this limit for employer-matching contributions.
|
|
Override IRS Employer Catch-Up Annual Compensation Limit |
Overrides this limit for employer-matching catch-up contributions.
|
|
Override IRS Limit |
Overrides these limits.
For example, if an employee has been contributing to multiple plans, use the Override IRS Limit value for each plan. Change the individual values so their sum doesn't exceed the statutory maximum. |
The default value of each of these overrides is 0 USD.
Override Limit Checking
For 401 (k) plans, you can override your organization-eligible compensation limit checks when you define the element. You can also use the Element Entries task to override limit values for a 401 (k) plan for specific employees.
For 403 (b) and 457 (b) plans, you override these limits on the person's Benefits and Pensions card.
All of these limits are enabled by default.
|
401 (k) limits |
403 (b) and 457 (b) limits |
|---|---|
|
Enforce Compensation Limit |
Enforce Eligible Compensation Limit Enforce Employer Catch-Up Contribution Limit Enforce Employer Contribution Limit |
Employees with Multiple Contribution Plans
Employees can participate in multiple plans of different types, such as 401 (k) and 403 (b). As their employer, you're responsible for tracking all elective deferrals contributing to the imposed statutory limit.