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Administrator Guide
Last Updated: 2025-11-14
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.
This is a basic 401(k) deduction example. We strongly advise you to take into account recent amendments to the tax code, specifically the Secure 2.0 Act. Please consult with your legal counsel and refer to your 401(k) Plan Documents for the exact requirements pertaining to your specific deduction configuration.
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.