Salary Cap of $345,000 in 2024 and Retirement Plan Contributions

lmbart · ‎June 11, 2024

For Quickbooks DESKTOP....

Does anyone know if Quickbooks handles the annual salary cap for employer matching contributions (max salary of $345,000 for 2024). If so, where do I find it or set it up?

This came to our attention when our TPA did our annual testing and we found one employee made more than the annual salary cap in 2023 and because of this our company had over contributed the matching contribution. We had to manually remove the ineligible matching contributions from the employee's 401(k) Plan.

The only way I can think of fixing it to stop contributing is manually calculating and entering the maximum an employee can receive. In our case we match 4%, so the annual max matching contribution would be $13,800 ($345,000*4%). If I do it this way, then I need to go into the payroll item for the employer match each year to change it to the new years maximum. Thank you in advance for any insight.

RoseJillB · ‎June 11, 2024

I appreciate the additional details about the retirement contribution set to your employee, @lmbart.

In QuickBooks Desktop (QBDT), the company's contributions will always depend on your employee's salary, not on their taxable income. If the employee has nearly reached their limit, which is $345, 000.00, we'll have to manually check it to keep track of the amount. Once reached, we can temporarily remove the payroll items and add them once the compensation resets.

You were also correct about manually calculating and entering the annual maximum contribution. Moreover, please take note to make changes if there are annual changes to the contribution limits as the system will calculate based on the actual deduction.

To remove a payroll item, please refer to the steps below:

Go to the Employees menu and select Employee Center.
Choose the employee, and navigate to the Payroll Info tab.
Under the Additions, Deductions, and Company Contributions section, select the amount and the item name, then press Delete.
Then, click OK.

QuickBooks provides detailed payroll reports with employee gross pay, deductions, and tax info. These reports can help when filling out tax forms. You can find more info in this article: Run payroll reports.

If you need further assistance with payroll or any QuickBooks-related issues, feel free to reply to this thread. The Community is here to support you whenever you need help. Stay well!

View solution in original post

ZackE · ‎June 11, 2024

Thanks for reaching out to the Community, lmbart. I appreciate your detailed information.

QuickBooks automatically tracks employee contribution limits.

Here's a list of limits for 2024:

You can set or change a limit on existing retirement plans while editing them.

Here's how:

In the top menu bar, go to Lists, then Payroll Item List.
Right-click your item and choose Edit Payroll Item.
Make any necessary changes to the Limit field.
Select Finish.

I've also included a detailed resource about working with retirement plans which may come in handy moving forward: Set up or change a retirement plan

If there's any additional questions, I'm just a post away. Have a lovely Tuesday!

lmbart · ‎June 11, 2024

I am not referencing the maximum the employee can contribute in one year. There is a different rule called the "Annual Compensation Limit" which limits how much of the employee's income can be used to determine the EMPLOYER'S matching contribution. Example: Employee earns $500,000/year in 2024; Annual Compensation Limit is $345,000. Matching contributions can only be made on the first $345,000, not the full $500,000 earned. I am referencing the following https://www.irs.gov/retirement-plans/401k-plans-deferrals-and-matching-when-compensation-exceeds-the.... I hope this helps clarify my questions.

RoseJillB · ‎June 11, 2024

I appreciate the additional details about the retirement contribution set to your employee, @lmbart.

In QuickBooks Desktop (QBDT), the company's contributions will always depend on your employee's salary, not on their taxable income. If the employee has nearly reached their limit, which is $345, 000.00, we'll have to manually check it to keep track of the amount. Once reached, we can temporarily remove the payroll items and add them once the compensation resets.

You were also correct about manually calculating and entering the annual maximum contribution. Moreover, please take note to make changes if there are annual changes to the contribution limits as the system will calculate based on the actual deduction.

To remove a payroll item, please refer to the steps below:

Go to the Employees menu and select Employee Center.
Choose the employee, and navigate to the Payroll Info tab.
Under the Additions, Deductions, and Company Contributions section, select the amount and the item name, then press Delete.
Then, click OK.

QuickBooks provides detailed payroll reports with employee gross pay, deductions, and tax info. These reports can help when filling out tax forms. You can find more info in this article: Run payroll reports.

If you need further assistance with payroll or any QuickBooks-related issues, feel free to reply to this thread. The Community is here to support you whenever you need help. Stay well!

Topics

Training

Community

Resources

Salary Cap of $345,000 in 2024 and Retirement Plan Contributions