Issue/Symptom/Question

How does PENTA handle the Catch-up amount for 401K when a Shared Limit is used?

Applies To

Master Deduction Setup

Shared Annual Limit Deductions

Deducting after a limit has been exceed of another deduction

Resolution/Fix/Answer

As employees have the amount deducted throughout the year, PENTA tracks the deductions against the annual limit of the first deduction. Once the limit is exceeded, the catch-up would turn on, when the Deduct only if the Annual Limit Amount has been exceeded for ded # field is used.  PENTA only allows the shared limit primary deduction # to be used in this field.  In the example below, #201 is the primary deduction for 401K.  The Roth Deduction would be using the limit entered on #201.

Example:

Employee John Smith is 60 years old and has a salary of $120,000 and wants 25% to go to 401K (ded # 201 is Traditional 401K and # 204 is Catch-up). Assume paid monthly, so $10,000 a month earnings.
January thru July would have $2500 deducted, which is $17,500.

On the August check, the $2500 would be split: $1000 applied against the Deduction # 201 and $1500 would go to Deduction #204.

September would have $2500 to Ded # 204, and October would have $2000 go to Ded #204 to reach the $24,500 total limit for someone aged 60 years