Configuring retirement deductions in ADP Workforce Now looks simple until the plan rules start affecting payroll. A 403(b) plan can have pre-tax and Roth deferrals, employer contributions, age-based catch-ups, and a special 15-year catch-up for some workers. A 457(b) plan adds a second set of rules, and those rules change again depending on whether the sponsor is a governmental entity or a private tax-exempt organization.
That distinction matters for nonprofit payroll teams. A private 501(c) organization with a non-governmental 457(b) plan can’t copy the settings used by a governmental employer because eligibility and plan features differ. ADP Workforce Now retirement plan setup should therefore begin with signed plan documents and recordkeeper specifications before payroll codes are built.
This guide explains how to build an ADP Workforce Now retirement plan setup for 403(b) and 457(b) plans without treating payroll as the plan document. It focuses on the choices payroll and benefits teams have to translate into ADP, the 2026 limits that affect those choices, and the tests that should happen before a live payroll is released.
TL;DR
Start with the plan document, employer type, recordkeeper rules, and employee eligibility before creating deductions. Keep 403(b) and 457(b) sources separate, and keep pre-tax and Roth money separate when the plan allows both. For 2026, the basic elective deferral limit is $24,500 for each plan type, but the catch-up rules and employer contribution rules differ. A private tax-exempt 457(b) plan also differs sharply from a governmental 457(b) plan, so the same payroll settings can’t be used for both. Test eligibility, limits, tax treatment, effective dates, employer contributions, recordkeeper files, and year-to-date balances before launch. Reconcile every payroll after launch and investigate rejects or limit exceptions before the next cycle.
Start With The Right Plan Type And Rules
The plan document is the source of truth for ADP Workforce Now retirement plan setup. Payroll should receive the current signed plan document, recordkeeper file specification, and written procedures that affect payroll. Those materials should identify eligibility, election timing, Roth availability, employer contributions, plan compensation, and any catch-up provisions the plan offers.
For a 403(b), the payroll team also needs to understand the annual employee deferral limit and the separate annual additions limit. The IRS 403(b) contribution limits show a $24,500 elective deferral limit for 2026 and a $72,000 annual additions limit, generally subject to 100% of includible compensation. The annual additions test includes employer contributions and most employee contributions, while age-based catch-up contributions receive separate treatment. That difference affects how a 403(b) plan setup should track employee deferrals against total plan additions.
A private tax-exempt organization’s 457(b) needs a separate review before anyone creates an employee deduction. The IRS explains that a non-governmental 457(b) is generally limited to a select group of management or highly compensated employees and remains unfunded, with assets subject to the employer’s general creditors. That arrangement can’t be configured like a broad-based governmental 457(b) plan. If HR sends payroll a list of all employees for a private nonprofit 457(b), stop the setup and confirm eligibility with the plan administrator.
Governmental and private tax-exempt 457(b) plans also differ on Roth contributions and age-50 catch-ups. The IRS 457(b) plan comparison states that governmental plans may allow designated Roth contributions, while tax-exempt non-governmental plans can’t. Governmental plans may also allow the age-50 catch-up, while non-governmental tax-exempt plans don’t have that feature. These differences should appear in the ADP retirement plan configuration before any employee election is loaded.
Design The Deduction Architecture Before You Touch Payroll
A clean deduction design keeps payroll sources easy to audit. The deduction architecture is the working core of an ADP Workforce Now retirement plan setup, so each source should have one clear purpose. At minimum, decide whether the plan needs separate deduction codes for 403(b) pre-tax deferrals, 403(b) Roth deferrals, governmental 457(b) pre-tax deferrals, and governmental 457(b) Roth deferrals. A private tax-exempt 457(b) won’t use a designated Roth source. Employer contributions should also have their own source mapping when the recordkeeper expects them separately from employee deferrals.
The code structure should match the recordkeeper file. Each source needs an agreed code, tax treatment, effective-date rule, accumulator, and plan mapping. ADP’s public deduction instruction guide shows worker deduction instructions under People > Pay > Pay Profile > Deductions. Menu labels and available fields can vary by release, purchased modules, security role, and client setup, so confirm the path in your tenant.
Don’t create a separate catch-up code merely because a worker is over age 50. First confirm how the ADP tenant and recordkeeper handle catch-up classification. Some setups can use the same elected deduction while plan limits and source logic determine when amounts become catch-up contributions. Other integrations need a distinct source value. The right answer comes from the plan terms and the recordkeeper file specification, not from a generic code list.
The same rule applies to nonprofit payroll deductions that use percentages. A 403(b) plan setup should state which earnings feed the percentage and how pre-tax and Roth elections interact. The compensation base must match the plan document, especially when bonus or other earning codes are treated differently from regular pay.
Configure The 403(b) Plan In ADP Workforce Now
The 403(b) plan setup should begin with eligibility because an incorrect eligible group can create missed deferrals before the first payroll runs. In an ADP Workforce Now retirement plan setup, the eligibility rule should come from the written plan rather than a payroll shortcut. The IRS universal availability rules generally require a 403(b) sponsor that permits elective deferrals for one employee to extend that opportunity to other employees unless a permitted exclusion applies. The plan document may contain exclusions, but payroll and benefits staff shouldn’t create broader exclusions based on job title, part-time labels, or local practice.
Once eligibility is confirmed, set up the 403(b) deduction sources. Create or confirm the pre-tax deduction and the Roth deduction if the plan permits Roth contributions. Check federal income tax treatment, Social Security and Medicare treatment, effective-date behavior, and the year-to-date accumulator. Confirm the plan’s rule for election changes.
Next, map the employee election. A percentage election needs the correct eligible compensation base. A flat-dollar election needs a per-pay amount that won’t produce an unintended annual excess. If an employee elects both pre-tax and Roth, the ADP retirement plan configuration should treat both as part of the same employee elective deferral limit for the 403(b), even though the tax treatment differs. The payroll team also needs a way to identify workers who qualify for any plan-permitted catch-up feature.
Employer contributions require another check. A nonprofit may use a fixed percentage, a match formula, or a nonelective contribution. The formula has to use the compensation definition in the plan document and must map to the correct recordkeeper source. ADP’s deduction setup guidance notes that company-level deduction setup can include an employer matching amount or percentage and that some deduction codes may be controlled through benefit enrollment. If a retirement deduction appears read-only, confirm whether Benefits Plan Setup owns that deduction before changing it elsewhere.
Finish the 403(b) plan setup by testing more than one worker type. This part of the 403(b) plan setup should also confirm how nonprofit payroll deductions behave when compensation changes within the year. Include new hires, election changes, Roth participants, eligibility edge cases, and catch-up participants. Verify the deduction, taxable wages, employer amount, year-to-date balance, and outbound source.
Configure The 457(b) Plan In ADP Workforce Now
A 457(b) plan setup starts by classifying the sponsor. That classification is a required control in an ADP Workforce Now retirement plan setup because it changes which 457(b) features are allowed. Governmental sponsors follow governmental 457(b) rules, while private tax-exempt organizations follow non-governmental tax-exempt rules. Keep the employer type visible in the setup record.
For a governmental plan, configure the permitted pre-tax source and a Roth source only if the plan document includes designated Roth contributions. The 457(b) plan setup should also state who approves special catch-up limits before payroll applies them. Confirm the basic annual limit and any plan-permitted catch-up feature. A governmental plan may allow the general age-50 catch-up and the special 3-year 457(b) catch-up, but a participant can’t use both in the same year. Payroll shouldn’t decide which catch-up applies from age alone because the special catch-up depends on the plan’s normal retirement age and prior unused deferral capacity.
For a private tax-exempt 457(b), keep the eligible population limited to the group authorized by the plan. Don’t enable a Roth 457(b) source for this plan type. Don’t add an age-50 catch-up source. The special 3-year catch-up can be available if the plan provides for it, but it requires historical information about unused deferrals and the participant’s relationship to the plan’s normal retirement age. A 457(b) plan setup that ignores those facts can create excess deferrals that are harder to correct later.
Employer contributions also require care because they count toward the 457(b) annual deferral limit. If the employer contributes $5,000 for a participant in 2026, the employee generally doesn’t retain a full $24,500 employee deferral allowance under the same 457(b) plan. The combined amount has to stay within the applicable 457(b) limit, subject to an allowed catch-up. This is different from the way a 403(b) can have a $24,500 employee elective deferral limit and a higher annual additions limit for combined employee and employer contributions.
When both a 403(b) and 457(b) are offered, use distinct deduction codes and accumulators. The 457(b) plan setup should remain independent from the 403(b) controls even when the same employee uses both plans. Keep the plan identifiers separate in the recordkeeper feed as well. The separation makes it easier to test limits, investigate rejected records, and prove which plan received each payroll contribution.
Set 2026 Contribution Limits And Catch-Ups
The 2026 limits should be loaded only after the plan features are confirmed. In an ADP Workforce Now retirement plan setup, annual limit values should sit behind the plan rules rather than replace them. The IRS catch-up contribution rules set the general age-50 catch-up at $8,000 for 2026 for 403(b) plans and governmental 457(b) plans that permit the feature. Participants who turn ages 60 through 63 during 2026 may have a higher catch-up limit of $11,250 when the plan permits it. A payroll limit table should therefore consider date of birth and plan terms rather than using one catch-up amount for everyone over age 50.
The base 2026 elective deferral limit is $24,500. The IRS 2026 limit notice also confirms the $72,000 defined contribution annual additions limit and the $150,000 prior-year wage threshold used for the 2026 Roth catch-up requirement. For plans subject to that Roth catch-up rule, an eligible participant whose 2025 FICA wages from the plan sponsor exceeded $150,000 must make age-based catch-up contributions as designated Roth contributions. That rule matters for 403(b) plans and governmental 457(b) plans with the relevant catch-up feature, while a private tax-exempt 457(b) doesn’t have the age-50 catch-up.
| 2026 Item | 403(b) | Governmental 457(b) | Private Tax-Exempt 457(b) |
| Basic deferral limit | $24,500 | $24,500 | $24,500 |
| General age-50 catch-up | $8,000 if plan permits | $8,000 if plan permits | Not available |
| Age 60 through 63 catch-up | $11,250 if plan permits | $11,250 if plan permits | Not available |
| Special plan catch-up | Up to $3,000 under the 15-year rule when eligible and permitted | Special 3-year catch-up may apply | Special 3-year catch-up may apply |
| Annual additions limit | Generally $72,000 or 100% of includible compensation if lower | 457(b) annual limit controls employee and employer amounts | 457(b) annual limit controls employee and employer amounts |
| Roth employee deferrals | May be allowed | May be allowed | Not allowed as designated Roth 457(b) |
The 403(b) 15-year catch-up needs its own review. It isn’t a general seniority bonus for every employee with 15 years of service. The employer must be a qualifying organization, the plan must allow the feature, and the amount depends on prior use and prior deferrals. If both the 15-year and age-based catch-ups apply, the ordering rules matter when deferrals exceed the basic limit.
The special 457(b) catch-up is also history-based. It can apply during the 3 taxable years before the participant reaches the plan’s normal retirement age, and the amount depends on unused limits from prior eligible years. Build an approval process around that calculation. Payroll should receive an approved annual limit for the participant rather than trying to reconstruct years of plan history during payroll processing.
Handle Employees Who Use Both Plans
Employees who participate in both plans can have 2 separate basic deferral limits because 457(b) deferrals aren’t aggregated with 403(b) deferrals for the regular elective deferral limit. The ADP retirement plan configuration should preserve that separation across all employee and employer sources. The IRS guidance on multiple plan deferrals explains that 403(b) deferrals are generally combined with certain other elective deferrals, while 457(b) plans have a separate limit. That can let an eligible employee defer $24,500 to a 403(b) and another $24,500 to a 457(b) in 2026 when both plans allow the full amount and compensation supports the elections.
ADP Workforce Now retirement plan setup should therefore use separate year-to-date accumulators for the 403(b) and 457(b). A shared limit can stop valid contributions too early. The opposite problem is also possible if multiple 403(b) sources don’t roll into the same 403(b) elective deferral control. Pre-tax and Roth 403(b) deductions must be combined when testing the 403(b) employee deferral limit.
A dual-plan employee is a good test case before go-live. Run an employee with both plans, then confirm the 403(b) and 457(b) deductions calculate independently and reach the correct recordkeeper sources. Add employer contributions where applicable and confirm that the 457(b) employer amount reduces the remaining 457(b) capacity while the 403(b) employer amount is tested under the 403(b) annual additions rule.
Configure Employer Contributions And Payroll Tax Treatment
Tax treatment should be tested at the deduction-code level before employee elections are loaded. The ADP retirement plan configuration should show the expected federal income tax and FICA effect for each retirement source. The 2026 IRS Employer’s Tax Guide states that salary reduction contributions to 403(b) plans are generally excluded from federal income tax wages but remain subject to Social Security and Medicare taxes. Employee salary reductions to governmental 457(b) plans are generally excluded from federal income tax wages at deferral, while Social Security and Medicare treatment follows the governmental employee’s applicable coverage. For a nongovernmental tax-exempt 457(b), FICA timing depends on vesting: immediately vested annual deferrals are generally subject to Social Security and Medicare taxes at deferral, while amounts subject to a substantial risk of forfeiture are generally taken into account for FICA when that risk lapses. Roth deferrals are after-tax for federal income tax purposes.
Employer contributions need their own plan-specific treatment. A 403(b) employer contribution is generally part of the 403(b) annual additions calculation. A 457(b) employer contribution counts toward the 457(b) annual limit, and FICA treatment can depend on the nature and timing of the deferred compensation. Payroll teams should confirm the tax setup with the plan’s tax adviser when a 457(b) includes employer-funded amounts or vesting conditions.
Year-end reporting provides another control. The IRS list of Form W-2 codes identifies code E for 403(b) elective deferrals, code BB for designated Roth 403(b) contributions, code G for governmental or non-governmental 457(b) deferrals and employer contributions, and code EE for designated Roth governmental 457(b) contributions. A private tax-exempt 457(b) shouldn’t produce code EE because it can’t offer a designated Roth account.
Use year-end coding as a configuration test during implementation instead of waiting until December. That check gives the ADP retirement plan configuration a second control beyond the deduction calculation itself. Take each deduction and employer source, identify its expected W-2 treatment, and compare that result to a sample payroll register. This catches taxability errors while the setup is still easy to change.
Connect The Recordkeeper And Map The Payroll Feed
The recordkeeper feed should be designed with the nonprofit payroll deductions. Within an ADP Workforce Now retirement plan setup, map each payroll code to its recordkeeper source before production files are created. The file should define employee identifiers, payroll dates, contribution amounts, corrections, and any fields used to identify Roth or catch-up money.
ADP Workforce Now retirement plan setup can fail even when payroll calculates the right dollar amount if the outbound file maps that amount to the wrong source. A 403(b) Roth deduction sent as pre-tax can cause tax and recordkeeping differences. A governmental 457(b) contribution sent to a 403(b) source can affect both plan limits and participant records. Use a source-mapping worksheet that shows the ADP code beside the recordkeeper code and expected tax treatment.
Employee deduction ownership also matters. ADP’s public guidance describes cases where deductions managed by benefits enrollment appear read-only in the payroll profile. Before changing a deduction manually, find out whether the election should originate in ADP Benefits, a recordkeeper integration, an API, or payroll. One source of ownership reduces the chance that an automated update overwrites a manual change after payroll staff think the issue is fixed.
Build a reject process before the first live file. The ADP retirement plan configuration should identify who owns each reject type and which system holds the correct source value. Assign who receives file errors, how quickly they must be reviewed, who can approve a payroll correction, and how corrected amounts return to the recordkeeper. A rejected retirement contribution shouldn’t remain in a suspense state without an owner because the employee’s paycheck has already reflected the deduction. For nonprofit payroll deductions, the reject log should show the employee, source, amount, correction date, and final recordkeeper status.
Test The Setup Before The First Live Payroll
Testing should use realistic employee cases instead of a single clean test employee. A sound ADP Workforce Now retirement plan setup needs test cases that reflect the actual plan population and payroll calendar. A useful test pack covers normal elections, edge cases, annual limits, tax treatment, effective dates, and recordkeeper output. Run the test through the same payroll preview and export process the production team will use.
Use at least these cases for a 403(b) plan setup:
· An eligible employee making a pre-tax percentage election.
· An eligible employee making a Roth election.
· An employee splitting an election between pre-tax and Roth sources.
· A participant age 50 or older with the plan-permitted catch-up.
· A participant age 60 through 63 whose catch-up limit differs from the general age-50 amount.
· A worker whose plan eligibility needs a specific review under the employer’s written terms.
· A participant receiving an employer match or nonelective contribution.
The 457(b) plan setup needs different cases. This part of the 457(b) plan setup should include the sponsor type and the exact source rules used for nonprofit payroll deductions. Include a governmental participant with a regular deferral, a governmental participant using Roth if the plan allows it, a participant with an approved catch-up limit, and a private tax-exempt participant if that plan is in scope. Add a case in which an employer contribution reduces the remaining 457(b) employee capacity.
For each case, compare gross pay, eligible compensation, deduction amount, federal taxable wages, Social Security and Medicare wages, employer contribution, year-to-date limit balance, and recordkeeper file output. Then test a change effective in the middle of a pay cycle according to the organization’s administrative rule. The test is complete only when the payroll result and recordkeeper result agree.
Reconcile Contributions After Every Payroll
Reconciliation should compare payroll to the recordkeeper after each payroll file. The ADP Workforce Now retirement plan setup should make that comparison easy by keeping source totals and year-to-date balances separate. Match the employee contribution total by source, employer contribution total by source, participant count, and rejected records. If the totals differ, resolve the difference before the next payroll creates another layer of activity.
The process should also watch year-to-date balances. For nonprofit payroll deductions, year-to-date review is the quickest way to spot a limit issue that one payroll register won’t show. A midyear hire may bring prior deferrals from another employer that affect a 403(b) elective deferral limit across plans. A 457(b) has a separate limit from the 403(b), but the participant’s annual deferrals under all eligible 457(b) plans of all employers must be aggregated for the individual 457(b) limit. A rehire can create duplicate deduction instructions if the prior instruction wasn’t stopped correctly. A transfer between company codes can also break a feed when the employee identifier or deduction ownership changes.
Contribution timing matters for ERISA-covered participant-contribution arrangements, such as applicable 403(b) plans. The Department of Labor’s timely contribution guidance says participant contributions must be forwarded as soon as they can reasonably be segregated from employer assets, and it describes a 7-business-day safe harbor for small plans with fewer than 100 participants. This remittance framework shouldn’t be applied to a private tax-exempt 457(b), which must remain unfunded and whose assets remain property of the employer and available to general creditors. The 15th business day of the following month isn’t a routine target date when contributions can reasonably be sent sooner.
Keep evidence of each reconciliation. Nonprofit payroll deductions should be traceable from the payroll register to the recordkeeper confirmation and any later correction. A payroll register, contribution file total, recordkeeper confirmation, reject report, and correction log create a useful audit trail. For nonprofit payroll deductions, that record also helps explain why an employee’s year-to-date amount changed after a correction or late election.
Correct Setup And Payroll Errors
Retirement errors should be classified before they are fixed. When an ADP Workforce Now retirement plan setup produces the wrong result, the correction should target the exact rule or mapping that failed. A missed 403(b) election, an excess 403(b) deferral, a wrong eligible employee population, an incorrect Roth source, and a late remittance can require different actions. The IRS page on 403(b) operational failures notes that many failures involve operating the plan differently from its written terms, including failures related to universal availability and contribution limits.
Don’t reverse a retirement deduction simply because the recordkeeper rejected it. First determine whether the payroll result was wrong, the file mapping was wrong, or the recordkeeper setup was wrong. A payroll reversal changes employee taxable wages and year-to-date retirement amounts. If the money should have remained a valid plan contribution, reversing it can create a second problem.
Excess 457(b) amounts need fast review because the correction rules differ by plan type. The IRS 457(b) excess guidance explains that excess deferrals can threaten eligible plan status if they aren’t corrected on time and that governmental and tax-exempt non-governmental plans can have different correction requirements. Escalate excesses to the plan administrator and qualified adviser instead of relying on the same correction procedure used for a 403(b).
After any correction, retest the ADP retirement plan configuration that caused the issue. Check the employee instruction, deduction code, limit control, effective date, tax treatment, and outbound file. Then document the cause and the exact change made so the same setup error doesn’t repeat in the next payroll.
Run A Year-End Control Review
Year-end review should begin before the final payroll. An ADP Workforce Now retirement plan setup should be reviewed against the full year’s elections and plan limits before W-2 processing starts. Compare each participant’s year-to-date 403(b) and 457(b) amounts against the applicable 2026 limit and any approved catch-up amount. Review employees who changed company codes, were rehired, received large bonus payments, changed Roth elections, or entered a catch-up age band during the year.
Next, compare payroll source totals with recordkeeper year-to-date totals. Investigate every difference, including cents, because a small difference can point to a missing correction or a rejected file row. Review W-2 Box 12 coding for E, BB, G, and EE as applicable, then confirm that the retirement plan indicator and taxable wage treatment match the plan setup.
Finally, prepare the next year’s limit changes before the first payroll of January. This annual refresh should be a scheduled part of the ADP retirement plan configuration and the 403(b) plan setup. Update limit tables only after the IRS releases the new amounts and the plan administrator confirms which features remain available. Preserve the prior-year settings in the implementation record so later audits can show which limits were used for each calendar year.
Keep The Plan Document And Payroll Logic Aligned
A reliable ADP Workforce Now retirement plan setup is a translation of written plan rules into payroll controls. The key work happens before the first deduction is entered: classify the employer and plan correctly, confirm eligibility, separate contribution sources, map tax treatment, and define how limits will be enforced. Testing then proves that the payroll result reaches the recordkeeper in the expected source.
For nonprofits that offer both plans, the main risk is treating a 403(b) and 457(b) as interchangeable retirement deductions. They aren’t. Keep the 403(b) plan setup and 457(b) plan setup separate in ADP, keep governmental and private tax-exempt 457(b) rules separate, and reconcile the payroll-to-recordkeeper path after every run. That discipline keeps the system closer to the plan document throughout the year.
FAQs
Can ADP Workforce Now Handle Both 403(b) And 457(b) Deductions For The Same Employee?
Yes. ADP Workforce Now can hold separate worker deduction instructions for different retirement sources when the client setup supports those codes. The 403(b) and 457(b) should use separate codes and year-to-date controls because the plans have separate limits and different rules. Test the recordkeeper mapping before the employee uses both plans in a live payroll.
What Is The 2026 403(b) Employee Deferral Limit?
The basic 2026 elective deferral limit is $24,500. A plan may also permit catch-up contributions for eligible participants. The general age-50 catch-up is $8,000 for 2026, while the higher catch-up for participants who turn ages 60 through 63 is $11,250 when the plan permits it.
What Is The 2026 457(b) Deferral Limit?
The basic 2026 457(b) limit is $24,500. Employer and employee contributions generally share that annual 457(b) limit. Governmental plans may permit age-based catch-ups, and both governmental and tax-exempt plans may permit the special 3-year catch-up when the plan terms and participant history support it.
Can A Nonprofit Employee Max Out Both A 403(b) And A 457(b)?
An eligible employee may be able to use the full basic limit in both plans because 457(b) deferrals have a separate annual limit from 403(b) elective deferrals. Compensation, plan terms, employer contributions to the 457(b), and catch-up rules can affect the actual amount. Payroll should maintain separate accumulators for the 2 plans.
Should Pre-Tax And Roth 403(b) Contributions Use Separate ADP Codes?
They should be kept as distinct payroll sources because their federal income tax treatment differs and their W-2 codes differ. The exact deduction-code design depends on the ADP client setup and recordkeeper file. Both sources still count toward the participant’s 403(b) elective deferral limit.
Can A Private Tax-Exempt 457(b) Plan Offer Roth Contributions?
No. A non-governmental tax-exempt 457(b) plan can’t offer a designated Roth account. Roth 457(b) contributions are a feature available to governmental 457(b) plans when the written plan permits them. The ADP setup should therefore exclude a Roth source for the private tax-exempt plan.
Can A Private Tax-Exempt 457(b) Plan Use The Age-50 Catch-Up?
No. The age-50 catch-up is available to governmental 457(b) plans when the plan permits it. A private tax-exempt 457(b) can use the special 3-year catch-up if the plan includes it and the participant meets the historical and retirement-age requirements.
How Should ADP Handle The 403(b) 15-Year Catch-Up?
First confirm that the employer and participant meet the statutory requirements and that the written plan allows the 15-year rule. The permitted amount depends on years of service, prior use of the catch-up, and prior deferrals. Payroll should receive an approved limit from the plan administrator rather than estimating eligibility from hire date alone.
How Does The 2026 Roth Catch-Up Rule Affect Payroll Setup?
For plans subject to the rule, an age-based catch-up participant with more than $150,000 of prior-year FICA wages from the plan sponsor must make the catch-up as Roth in 2026. That can affect 403(b) and governmental 457(b) payroll sources. The plan also needs to permit the required Roth treatment for affected participants.
Do 457(b) Employer Contributions Reduce What The Employee Can Defer?
Yes. Employer contributions generally count toward the same 457(b) annual limit that applies to employee deferrals. If the employer contributes part of the annual amount, the participant’s remaining employee deferral capacity is reduced unless an allowed catch-up increases the limit.
Are 403(b) Salary Deferrals Exempt From Social Security And Medicare Taxes?
Generally, no. Pre-tax 403(b) salary reductions are generally excluded from federal income tax wages at the time of deferral, but they remain subject to Social Security and Medicare taxes. Payroll should test both federal taxable wages and FICA wages when the deduction is created.
What W-2 Codes Apply To 403(b) And 457(b) Contributions?
Common Box 12 codes include E for 403(b) elective deferrals, BB for designated Roth 403(b) contributions, G for 457(b) deferrals and employer contributions, and EE for designated Roth governmental 457(b) contributions. The exact reporting depends on the contribution source and plan type.
What Should Be Tested Before A 403(b) Or 457(b) Goes Live In ADP?
Test eligibility, effective dates, deduction calculations, tax treatment, employer contributions, year-to-date limits, and recordkeeper output. Include employees with Roth elections and catch-up eligibility when those features exist. The payroll register and recordkeeper file should agree before production use.
How Often Should Retirement Deductions Be Reconciled?
Reconcile after every payroll file. Compare employee contributions and employer contributions by source, participant counts, rejects, and year-to-date balances. Resolve differences before the next payroll so one error doesn’t carry into later periods.
What Should Payroll Do When A Retirement Contribution File Is Rejected?
Identify the cause before changing payroll. Check whether the deduction amount, source mapping, employee identifier, effective date, or recordkeeper setup caused the rejection. Reverse or correct payroll only when the payroll result itself needs correction, and document the action taken.
