100% contribution to 401k accounts

Our retirement account plan recently changed, allowing employees to contribute 100% of their earnings to our 401k and Roth 401k accounts. We changed the contribution limits on our BN15 prior to this week's payroll.

After running payroll, we noticed that the only employee who elected the 100% contribution now has a PR39 record with his 401k deduction in arrears equal to the amount of his FICA tax. It looks like the 401k deduction wants to take the literal 100% of gross wages, and isn't taking the FICA deduction into account and subtracting that amount from the gross.

Has anyone else ever run across this problem or have a suggestion for what we can do?

Thank you - Jenn

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Legacy Contributor

Hi Jenn -- yes, we also encountered that issue. Our solution was to make the maximum contribution 92% on BN15 ( to allow for FICA, etc). It has worked fine for us being set up that way.

I'll be anxious to see how others have handled this situation as well.

marty

Hi Cyndie,
Thank you so much for the quick response? One follow up question. Do you have "leftovers" when using a straight 92% considering that the FICA and Medicare are 7.65%? My payroll specialist is wondering if we should change the contribution to 92.35%?
Thank you again!

Legacy Contributor

Hi Jenn:

We seldom have anyone that elects 92% as their deferral, so I have not tested it with 92.35%. I image there is a very small amount "left over", but it has not seemed to be any issue.

marty

Again, thank you so much.

marshr

Hi Jenn,

We have an employee that chooses to contribute 100%. Ours is working as expected (no PR39 arrears) without modifying the contribution amount. On the PR05/PR14 we have the "Arrears" flag set to "N - Net To Zero - No Arrears".

b-40796.zip

Legacy Contributor

We allow our employees to contribute 100%, we also have the PR05 Arrears flag set to N - Net to Zero - No Arrears. We also do not need to limit the contribution amount.

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