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Payroll contributions come out of a named earned income before spending, and each one is capped at the owner’s remaining legal limit for the year. A request above the limit isn’t lost: the excess stays in pay and flows to your surplus rules. Employer money is either a fixed percentage of that income or a matching formula on what the employee actually defers, and either way it’s trimmed by the combined employee-and-employer limit.
Limits are the 2026 figures. Later years scale them with your plan’s inflation assumption.
Payroll rules fund a workplace plan, a 401(k), 403(b), 457(b) or 401(a), or an HSA from one earned income that belongs to the account’s owner. A 401(a) takes only the employer contribution. There are three kinds:
- Payroll percent of income: Employee contribution (%) applied to that year’s pay from the source income, and an Employer contribution that is either a Fixed percent of pay or a Matching formula (see below). For a 401(k), 403(b) or 401(a), pay above the IRS compensation limit ($360,000 in 2026) doesn’t count. In a partial first year, that’s the pay for the months modeled, and pay earned earlier in the year uses up the compensation limit first.
- Payroll annual amount / remaining room: a dollar amount in Annual maximum, prorated in a partial first year, or, if blank, whatever legal room is left for the year.
- Mega backdoor Roth: after-tax contributions from W-2 wages, converted to a Roth 401(k) at once, up to the employee-plus-employer room left. See Backdoor Roth contributions.
Rules run in list order, and one paycheck can’t fund two rules: each rule draws on pay the earlier rules left.
Contribution limit on a payroll or surplus rule can be set to Lower plan limit for a plan that caps contributions below the IRS limit. The Plan annual limit is in today’s dollars and rises with the IRS limits; it caps the year’s contributions to that account, counted the same way as its IRS limit. The IRS limit still applies when it’s lower.
Max 401(k) (or Max 403(b), Max 457(b)) adds a remaining-room rule for that plan, funded by its owner’s largest earned income.
A fixed percent of pay is paid whether or not the employee contributes. A matching formula pays only on deferrals. Each tier matches a percentage of what the employee defers on the next slice of pay, in order, so “100% of the first 3%, then 50% of the next 2%” is two tiers. The match uses the deferral actually deposited, after every limit, as a share of the year’s plan pay.
| Employee deferral | Employer match |
|---|---|
| None | $0 |
| 2% | $2,000 |
| 4% | $3,500 |
| 6% or more | $4,000 |
- Nonelective contribution (% of pay): added to the match whether or not the employee defers. With the formula above and 3% nonelective, an employee who defers nothing still receives $3,000.
- Annual employer cap: limits the year’s match plus nonelective money. It’s in today’s dollars, rises with your inflation assumption and is prorated in a partial first year.
- True up the match at year end: on by default, the match uses the whole year’s deferrals. Turned off, each pay period is matched on its own deferral, so when deferrals reach the annual limit early, the rest of the year’s paychecks get no match.
| Deferral requested15% × $225,000 | $33,750 | |
|---|---|---|
| → | Deposited, limited to the employee limitReached in September | $24,500 |
| Match with a year-end true-up6% × $225,000: the year’s deferral is 10.9% of pay | $13,500 | |
| Match each pay period9 months × 6% of $18,750; none for October–December | $10,125 |
Roth employer contributions puts the employer money in the owner’s Roth 401(k), 403(b) or 457(b) of the same plan type instead of the rule’s account. Saving the rule needs that Roth account to exist for the same person; a 401(a) has none. The money is taxed as described below.
- Traditional 401(k), employee: excluded from taxable wages; payroll taxes still apply.
- Roth 401(k), employee: comes out of taxed pay.
- Employer, to a Traditional 401(k): never taxed or counted as cash pay.
- Employer, to a Roth 401(k): taxed as income in the year it’s made, though it isn’t cash pay and isn’t subject to payroll taxes. The projection warns when this happens. This applies both to a rule that funds a Roth 401(k) directly and to a matching formula with Roth employer contributions checked: on $100,000 of pay in the 22% bracket, a $6,000 Roth match adds $1,320 of federal income tax and no payroll tax.
HSA payroll contributions follow the rules in Health savings accounts. When the source income is self-employment income, the “employer” contribution is paid out of your own business profit and, for a 401(k), is limited to 20% of that profit after the deductible half of self-employment tax; see Self-employment income.
- 401(k) employee limit
- $24,500
- Traditional and Roth combined
- Catch-up, age 50 or older
- $8,000
- Catch-up, ages 60–63
- $11,250
- Replaces the age-50 catch-up
- Employee plus employer
- $72,000
- Includes after-tax contributions; catch-up not counted; never more than pay
- IRA limit
- $7,500
- Traditional and Roth combined
- IRA catch-up, age 50 or older
- $1,100
- Roth catch-up wage threshold
- $150,000
- Prior-year wages
- Employee limit
- Catch-up
Age is the age reached during the calendar year.
Show data
| Age | Employee limit | Catch-up | Total |
|---|---|---|---|
| Under 50 | $24,500 | $0 | $24,500 |
| 50–59 | $24,500 | $8,000 | $32,500 |
| 60–63 | $24,500 | $11,250 | $35,750 |
| 64 and older | $24,500 | $8,000 | $32,500 |
| Filing status | Phase-out starts | No contribution at |
|---|---|---|
| Single, head of household | $153,000 | $168,000 |
| Married filing jointly, qualifying surviving spouse | $242,000 | $252,000 |
| Married filing separately | $0 | $10,000 |
Inside the range the Roth IRA limit falls proportionally, rounded up to the next $10, with a $200 minimum.
A traditional IRA contribution is deductible in full unless the owner or their spouse is covered by a workplace plan. CoastMath counts someone as covered in any year their 401(k), 403(b) or 401(a) receives an employee or employer contribution; a 457(b) doesn’t count. A covered household’s deduction then phases out over the ranges below, measured on modified AGI figured before the IRA deduction, so Roth conversions count. The full contribution is still deposited, and only the deductible part lowers taxable income.
| Who is covered | Phase-out starts | No deduction at |
|---|---|---|
| Single or head of household, covered | $81,000 | $91,000 |
| Married filing jointly, contributor covered | $129,000 | $149,000 |
| Married filing jointly, only the spouse covered | $242,000 | $252,000 |
| Married filing separately, either spouse covered | $0 | $10,000 |
Inside the range the deductible amount falls proportionally, rounded up to the next $10, with a $200 minimum. Spouses filing separately who lived apart all year use the single range. The nondeductible part isn’t tracked as basis, so it’s taxed again when withdrawn or converted.
IRA contributions also can’t exceed the owner’s earned income for the year; on a joint return the couple’s combined earnings count. HSA limits are in Health savings accounts, and Roth IRAs funded through a converted nondeductible contribution are in Backdoor Roth contributions.
- Shared per owner. All of one person’s 401(k)s and 403(b)s share one employee limit, and all their IRAs share one IRA limit, across every rule that funds them. A 457(b) has its own employee limit and catch-ups, and employer money paid into it counts toward that limit, though not toward its catch-up.
- Earlier this year counts. Contributions you enter as already made this tax year use up room without adding to the opening balance.
- Employee money first. Employer money is cut only to keep employee (without catch-up) plus employer within the combined limit, and within pay. A 25% employer rate on $200,000 of pay requests $50,000; with $24,500 of employee deferrals, $47,500 is deposited.
- Where the excess goes. The part of an employee request above the limit stays in pay and joins the year’s surplus. Employer money above the limit isn’t deposited anywhere.
From 2026, someone whose prior-year wages exceeded $150,000 can make catch-up contributions only to a Roth 401(k). CoastMath checks the owner’s projected wages from the previous plan year against the threshold, indexed by plan inflation. In the plan’s first year it has no prior-year wages, so it uses that year’s projected wages. A plan that starts mid-year annualizes its first year’s projected wages. For the second year’s test, year-to-date wages you enter replace the annualized months before the start.
| Rule 1: Traditional 401(k), 15% of salary | $30,000 | |
|---|---|---|
| → | Deposited, limited to the regular employee limitCatch-up can go only to a Roth 401(k) this year | $24,500 |
| Rule 2: Roth 401(k), remaining room$35,750 limit at 61, less $24,500 already deferred | $11,250 | |
| Employer contribution, 5% of salaryDeposited in the Traditional 401(k) | $10,000 | |
| = | Employee contributions for the year | $35,750 |
Without the Roth rule, the $5,500 left of the first request stays in pay. For someone earning $120,000 with a 30% request, the first year likewise stops at $24,500; from the second year, prior-year wages are under the threshold and the full $35,750 goes to the traditional account.
After 2026, every dollar limit above, the phase-out starting points and the Roth catch-up wage threshold grow with your plan’s inflation assumption each year. The phase-out ranges keep their 2026 widths, and the married-filing-separately range isn’t indexed.