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greg140
October 1, 2023
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QB is capping the 401k deduction at $22500/yr even though the employee is >50yo and can do up to $30k/yr in 2023. Any recommendation on how to bypass this limit?

  • October 1, 2023
  • 2 replies
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Original commenter did not share additional details
Best answer by Daniela_A

Hi there, @greg140.

 

I'm delighted to offer you a thorough explanation of retirement plan deductions and contributions in QuickBooks Online Payroll.

 

We can create a catch-up payroll item so that QuickBooks will automatically allow a higher contribution limit for your employees.

 

A catch-up contribution refers to an optional additional contribution made by a participant who is 50 years of age or older, surpassing the statutory limit, plan-imposed limit, or the limit set by the actual deferral percentage (ADP) test for highly compensated employees (HCEs).

 

To begin, let's delete the 401k deduction item so that you can create the 401k catch-up item.

 

Here's how:

 

  1. On the left pane, choose Workers.
  2. Hit the Employees tab then select the employee's name.
  3. Under the employee's name, click the Edit Employee button.
  4. In section 4, tick the Pencil icon.
  5. Tap the trash bin icon beside the 401k item.
  6. Click Yes to confirm.

 

After that, let's set up the 401k catch-up deduction item.

 

Here's how: 

 

  1. Tap Workers, then hit the Employees tab.
  2. Choose the employee's name, then click Edit Employee under the employee's name.
  3. In section 4, click Add a new deduction.
  4. From the Deduction/contribution or garnishment drop-down, select Deduction/contribution.
  5. From the Deduction/contribution drop-down, select New deduction/contribution.
  6. From the Deduction/contribution type drop-down, select Retirement Plans.
  7. From the Type drop-down, select 401(k) Catch-up.
  8. Enter a description or the name of the provider for the retirement plan.
  9. Hit $ amount or % of gross pay for the Amount per pay period, and then enter the dollar amount or percent of the deduction or contribution per paycheck for this employee.
  10. Select OK.

 

Once you have set up the catch-up payroll item for one employee, you can easily assign it to other employees as well. QuickBooks will then consolidate and record all the transactions under a single deduction item.

 

I'm also adding this article that you can go through to learn more about 401k deductions:

 

 

Also, this link will show you how to run payroll-related reports: Run payroll reports.

 

Feel free to return to this Community thread if you still have other concerns about 401k and other payroll-related concerns.

2 replies

Daniela_A
Daniela_AAnswer
October 1, 2023

Hi there, @greg140.

 

I'm delighted to offer you a thorough explanation of retirement plan deductions and contributions in QuickBooks Online Payroll.

 

We can create a catch-up payroll item so that QuickBooks will automatically allow a higher contribution limit for your employees.

 

A catch-up contribution refers to an optional additional contribution made by a participant who is 50 years of age or older, surpassing the statutory limit, plan-imposed limit, or the limit set by the actual deferral percentage (ADP) test for highly compensated employees (HCEs).

 

To begin, let's delete the 401k deduction item so that you can create the 401k catch-up item.

 

Here's how:

 

  1. On the left pane, choose Workers.
  2. Hit the Employees tab then select the employee's name.
  3. Under the employee's name, click the Edit Employee button.
  4. In section 4, tick the Pencil icon.
  5. Tap the trash bin icon beside the 401k item.
  6. Click Yes to confirm.

 

After that, let's set up the 401k catch-up deduction item.

 

Here's how: 

 

  1. Tap Workers, then hit the Employees tab.
  2. Choose the employee's name, then click Edit Employee under the employee's name.
  3. In section 4, click Add a new deduction.
  4. From the Deduction/contribution or garnishment drop-down, select Deduction/contribution.
  5. From the Deduction/contribution drop-down, select New deduction/contribution.
  6. From the Deduction/contribution type drop-down, select Retirement Plans.
  7. From the Type drop-down, select 401(k) Catch-up.
  8. Enter a description or the name of the provider for the retirement plan.
  9. Hit $ amount or % of gross pay for the Amount per pay period, and then enter the dollar amount or percent of the deduction or contribution per paycheck for this employee.
  10. Select OK.

 

Once you have set up the catch-up payroll item for one employee, you can easily assign it to other employees as well. QuickBooks will then consolidate and record all the transactions under a single deduction item.

 

I'm also adding this article that you can go through to learn more about 401k deductions:

 

 

Also, this link will show you how to run payroll-related reports: Run payroll reports.

 

Feel free to return to this Community thread if you still have other concerns about 401k and other payroll-related concerns.

G
greg140Author
October 1, 2023

Thank you!

A
ArielI
October 1, 2023

It's good to hear that you have managed to perform the steps required, @greg140 . I'll inform them of your "thank you" message. Don't hesitate to leave us your comments below if you have other payroll-related inquiries. Have a great day!

J
Jeff_S
January 2, 2025

Let me share information about setting up your 401(k) contribution retirement plan and how it works here in QuickBooks Online (QBO), @vthornton.

 

In QBO, you can only pick one deduction for your 401(k) contribution when creating a retirement plan for your employees. This might be why you're getting an error that you cannot have a 401(k) Catch-up and a 401(k) at the same time.

 

To successfully set up a distribution plan, you need to delete the regular retirement deduction from your employee's account. This won't erase the payroll amount for the year so far. It simply removes the old deduction and applies the remaining balance to the new catchup plan.

 

Let me show you how:

 

  1. Go to Payroll.
  2. Select Employees, then choose which employee.
  3. Scroll down until you find Deductions & Contributions, then click Edit.
  4. Click the Trash bin icon on the 401(k) deduction you want to remove.
     


Once you're finished, you can add the 401(k) Catch-up retirement plan. While still on the Deduction & Contribution page for your specific employee, follow these steps:

 

  1. Click the + Add deduction/contribution.
  2. Select + Add deduction/contribution in the Deduction/contribution dropdown.
  3. In the Deduction/contribution type, select Retirement plans.
  4. Then choose between 401(k) Catch-up or 401(k).
  5. Type in the necessary details, then hit Save.
     


Moving forward, setting up or adjusting a retirement plan can significantly impact long-term financial health and employee satisfaction. Refer to this article: Set up or change a retirement plan.

 

Additionally, well-managed payroll schedules are crucial for the smooth operation and financial health of your business, as well as the well-being and satisfaction of your employees.

 

Moreover, improve your financial path by teaming up with our Explore QuickBooks Payroll team. These financial experts will simplify your processes and offer tailored advice for your specific business needs. Visit the link now to start a new chapter of financial clarity and success.

 

This wraps up our guide on how to adjust your 401(k) contributions and set up a catch-up retirement plan in QBO, @vthornton. If you have more questions, don't hesitate to contact us or look up additional resources. Thanks for using QBO for your payroll. We're here to help you handle your business finances efficiently.

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