401k Overview & Setup
Overview
A 401(k) is one of the most common retirement benefits offered to workers. This article covers how contribution types and limits work, how Salsa handles 401(k) tracking through payroll, and how to get a plan set up for workers.
What Is a 401(k)?
A 401(k) is a tax-deferred retirement savings plan offered through an employer. Contributions are deducted from an worker’s paycheck before federal income taxes are applied, reducing taxable income for the year. Employers may also contribute through matching or supplemental contributions. Salsa tracks both employer and worker contributions through payroll and displays them on earnings statements each pay period.
Contribution Types
There are three 401(k) contribution types available: Standard, Standard Catch-up, and Super Catch-up. The IRS sets contribution limits each calendar year and eligibility is determined by the worker’s age within the calendar year.
Standard
Available to all workers. The standard contribution limit for 2026 is $24,500.
Catch-Up (Ages 50-59)
Workers who are 50 or older are eligible for catch-up contributions. The catch-up amount is added on top of the standard limit, bringing the 2026 total to $32,500 ($24,500 + $8,000).
Super Catch-Up (Ages 60–63)
The IRS introduced a higher catch-up limit for workers ages 60-63. This contribution adds $11,250 on top of the standard limit, bringing the 2026 total to $35,750 ($24,500 + $11,250).
📄 See also: 401(k) Contribution Limits
Catch-Up Contribution Tax Treatment
Catch-up contributions can be designated as either pre-tax or after-tax (Roth), depending on the worker’s income and plan setup.
Pre-Tax
Contributions are deducted from the worker’s paycheck before taxes are applied. Taxes are paid upon withdrawal in retirement.
Roth (After-Tax)
Contributions are made with income that has already been taxed. Qualified withdrawals in retirement are tax-free.
⚠️ Important: High Earner Roth Requirement
Workers who earned more than $145,000 in the prior calendar year are required by the IRS to designate catch-up contributions as Roth (after-tax). Pre-tax catch-up contributions are not permitted for these workers.
Setting Up 401(k) Benefits in Aaniie Payroll
Step 1: Create an Employer Benefit Policy
In the employer Profile, locate the Benefits card and select Edit
Select Add benefit
In the Benefit category dropdown, select Retirement benefit
Select 401(k) and rename accordingly, if needed
Set an Effective Date for the plan
Select the contribution limit:
Standard
Catch-up (age 50+)
Super catch-up (age 60-63)
📌 Note: If either catch-up option is selected, a question about how the catch-up should be taxed will be required. It defaults to pre-tax; however, the employer should refer to the policy documents for proper taxation.
Select how often the benefit amounts are contributed
Per pay period
Fixed amount per month
Select if this policy is a worker and/or employer contribution
Depending on the above selection, enter the Worker deduction and/or Employer contribution details
Select Save
Step 2: Assign the Benefit to Workers
Navigate to the Worker list and select the worker
Under Profile, locate the Benefits card and select Edit
Select Add benefit
In the Benefit category dropdown, select Retirement benefit
For Benefit type, select the applicable policy
Add an Effective Date
Under Benefit policy, select “Default policy”
The worker policy inherits settings from the employer policy. Override individual fields as needed.
Select Save
Editing Contribution Amounts in a Payroll Run
Employers have the option to manually adjust the worker deduction or employer contribution amount on a payroll run.
In the payroll run, locate the worker and navigate to the 3 dots on the right
Select Edit benefits
Adjust the Worker deduction and/or Employer contribution amounts
Select Save
Roth Catch-Up on Earnings Statements
All worker deductions will be listed under the Deductions Withheld section of the earnings statement.
For workers who have a Roth Catch-up or Roth Super Catch-up benefit, the system automatically splits the deduction into two lines. The 401(k) Roth Catch-up line is clearly labeled, so workers can see which portion of the deduction is being treated as a Roth.
FAQ
Does the Roth catch-up split apply to Roth 401(k) plans?
No. The split only applies to traditional pre-tax 401(k) plans with Roth catch-up treatment. Roth 401(k) deductions are already Roth, so no split is needed.
Can a worker have both a standard 401(k) and a catch-up policy?
The catch-up configuration is part of the benefit policy, not a separate policy. A worker is assigned to a single 401(k) policy that includes the catch-up settings.
Can employers choose a custom name for the Roth Catch-up line on earnings statements?
The name is derived from the 401(k) policy name with Roth Catch-up appended automatically. Policy names cannot end with Roth Catch-up since this suffix is reserved for the system-generated line on an earnings statement.
When does the split start to appear as two line items on an earnings statement?
The split begins on the first payroll run where a worker's year-to-date pre-tax 401(k) deductions exceed the base annual limit ($24,500 for 2026). Before that point, deductions appear on a single line.
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