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Deduction and Contribution Limits

In this article:

Available on: Patriot Payroll (Basic and Full Service).

Deductions and contributions in Patriot Payroll can be configured with optional dollar limits. Once a limit is reached, the deduction or contribution automatically stops. If no limit is needed, leave the limit field blank.

Definitions:

  • Deduction — Money withheld from an employee’s paycheck to cover taxes, insurance, garnishments, loan repayments, or other payments.
  • Contribution — An employer-paid amount that appears on pay stubs for typically informational purposes only. Employer-only contributions that are nontaxable and not paid as cash usually do not change the employee’s net pay. In some instances, employer contributions can change an employee’s pay only when they are taxable or affect taxable wages.

Limit Types

Pay Date Limit

A pay date limit sets the maximum amount that can be deducted in a single pay period. This is most often used for child support and other garnishment deductions (court-ordered withholding from an employee’s paycheck to satisfy a debt), which are normally calculated as a percentage of disposable income up to a specific cap per pay date.

Note: If there is not enough net pay to deduct the full garnishment amount, the deduction will still calculate based on the percentage of disposable income — it will not be zero simply because the cap was not reached.

Monthly Limit

A monthly limit caps how much is deducted or contributed in a calendar month, regardless of how many pay dates fall in that month. Once the monthly limit is reached, the deduction or contribution stops and automatically restarts on the first pay date of the next month.

This is most often used for benefit premiums that are a fixed monthly amount. For example, if employees are paid biweekly, a monthly limit prevents a third deduction in months with three pay dates.

Calendar Year Annual Limit

A calendar year limit caps the total deducted or contributed within the calendar year. Once the limit is reached, the deduction or contribution stops and automatically restarts on the first pay date of the next calendar year.

This is most often used for IRS contribution limits such as 401(k) and HSA contributions.

Lifetime Limit

A lifetime limit caps the total amount deducted over the entire time the deduction is active, with no automatic restart. Once the lifetime limit is reached, the deduction stops permanently — until the limit is manually increased or removed.

This is most often used for long-term obligations such as wage garnishments or employee loan repayments that are not tied to a calendar cycle.

IRS Elective Deferral Limits and Calendar Year Deduction Types

Patriot automatically enforces the IRS elective deferral limit (the maximum amount an employee can contribute to a retirement or tax-advantaged plan per year, as set by the IRS) for employee contributions on the following deduction types:

  • 401(k) and Roth 401(k)
  • Starter 401(k) and Starter Roth 401(k)
  • 403(b) and Roth 403(b)
  • 457(b) and Roth 457(b)
  • SIMPLE IRA and Roth SIMPLE IRA
  • HSA Single
  • HSA Family
  • FSA
  • FSA Dependent Care

Calendar year limits are automatically applied for these deduction types. You do not need to enter them manually for employee contributions. Patriot will stop the deduction when the IRS limit is reached.

Employer contributions are not automatically capped. Patriot enforces IRS elective deferral limits for employee contributions only. You must manually set a limit on employer contribution deductions to ensure they do not exceed your plan’s limits. Contribution limits and requirements vary by plan type, and combined employee/employer limits may apply. Review your plan documents or consult your plan advisor or administrator to determine the correct limits.

If you use multiple deductions of the same type (for example, two separate 401(k) deductions assigned to the same employee), Patriot tracks the combined year-to-date total against the IRS limit. Both deductions will stop when the combined total reaches the IRS annual limit for that deduction type.

IRS Catch-Up Limits

For employees who are eligible for catch-up contributions (higher contribution limits allowed by the IRS for employees who are age 50 or older), you can configure the catch-up setting when setting up the employee’s deduction. There are three options:

  • No (default) — Standard IRS limit applies. No catch-up allowance.
  • Yes: 50+ this calendar year — Applies the standard catch-up limit for employees who are age 50 or older.
  • Yes: 60–63 this calendar year (Super Catch-Up) — Applies the higher SECURE 2.0 super catch-up limit for employees who are ages 60, 61, 62, or 63. This higher catch-up limit was introduced by the SECURE 2.0 Act for 401(k), 403(b), and governmental 457(b) plans.

Important Notes

  • Employer limits must be set manually. Patriot does not automatically cap employer contribution amounts. You are responsible for entering the correct limit based on your plan’s terms.
  • Combined limits across multiple deductions. If an employee has two deductions of the same IRS-tracked type (for example, two 401(k) deductions), Patriot sums the year-to-date totals and stops both deductions when the combined total hits the IRS limit.
  • Changing a limit mid-year. If a limit needs to be adjusted (for example, a garnishment order is updated), you can edit the limit amount on the deduction setup at any time. Changes take effect on the next payroll.
  • Lifetime limits do not restart automatically. Unlike calendar year and monthly limits, a lifetime limit does not reset. If an employee’s garnishment is satisfied or a loan is paid off, remove or deactivate the deduction.

For more information, see: Company-Level Deduction Setup: Field-Level Help and Employee-Level Deductions.


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