Payroll Help

Your Payroll Software questions answered here

Deduction and Contribution Limits

Background

What Are Deductions and Contributions?

  • Contributions: Employer-paid amounts displayed on pay stubs for informational purposes only. Contributions do not affect paycheck amounts.
  • Deductions: Money withheld from an employee’s paycheck to cover taxes, insurance, garnishments, or other payments.

Using Deduction and Contribution Limits in Patriot Software

Deductions and Contributions can include optional dollar limits. Once a set limit is reached, the Deduction or Contribution will automatically stop. If no limit is needed, simply leave the field blank.

💡NOTE: The software will stop at the IRS elective deferral limit for employees, but employers will need to set limits on the employer contribution to ensure the contribution does not exceed the IRS or plan limits. Contribution limits and requirements can vary based on the specific plans and in some instances combined employee/employer limits also apply. It’s crucial to review your plan’s details or consult with your advisor or administrator to understand the applicable limits.

  • Pay date limits are most often used with employee-level child support and other garnishment deductions.  These deductions are normally a specific percentage of disposable income, up to a specific dollar amount each pay date.  If there is not enough net pay to deduct the entire child support or garnishment amount, the deduction will still calculate on the percent of disposable income.
  • A monthly limit is useful for benefit premiums that are the same each month regardless of how many pay dates are in the month.  Once the monthly limit has been reached, the deduction or contribution would stop, and then automatically start again on the first pay date of the next month.  For example, if you are paid biweekly, a monthly limit would prevent the deduction/contribution from happening if there is a third pay date in the month.
  • The calendar year annual limit is most often used with IRS contribution limits such as 401(k) and HSA contributions.  Once the annual limit has been reached, the deduction or contribution will stop, and then automatically start again on the first pay date of the next calendar year.  Calendar year limits will automatically be set for the following deduction types:
    • 401(k) and Roth 401(k)
    • 403(b) and Roth 403(b)
    • 457(b) and Roth 457(b)
    • Simple IRA
    • HSA Single
    • HSA Family
    • FSA
    • FSA Dependent Care

💡 If you use multiple deductions with the same deduction types in the above list, each year-to-date deduction total will count toward the combined IRS contribution limit. For example, if you use two different 401(k) deductions on an employee, both deductions would stop for the year when the combined deduction limit reaches the IRS limit for the year for 401(k)s for employees under 50. 

  • Catch Up Limits: You can choose one of two different catch up limits when setting up the employee’s deduction to allow for a higher catch-up limit.
    • No (default)
    • Yes: 50+ this calendar year
    • Yes: 60-63 this calendar year (Super Catch Up)
  • Lifetime limits are most often used with long-term deductions such as wage garnishments or loan repayments that are not based on time intervals. Once the lifetime limit has been reached, the deduction would stop and not restart again unless the lifetime limit is increased or removed by the user.

Also check out the following help articles for more information: Company-Level Deduction Setup: Field-Level Help, and Employee-Level Deductions in Patriot Software.


Your feedback will not receive a reply. If you have a specific issue, please reach out to our support team here.