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Setting up a Secure Act 2.0 401(k) Deduction Code

Managing retirement deductions in Greenshades requires proper configuration to ensure compliance and accuracy. Beginning in 2026, high earning employees that make 401(K) contributions and are catch up eligible must make those catch-up contributions as ROTH.

We walk you through creating a 401(k) deduction code, a Roth catch-up code, and linking them in a shared code group.

Overview

Greenshades allows payroll administrators to configure multiple deduction codes and group them under a single benefit plan. This is essential for employees who are classified as high earners and must contribute to both traditional 401(k) and Roth catch-up plans.

Step 1: Create Deduction Codes

  • Navigate to Settings > Payroll > Codes > Deduction Codes.
  • Select Create Deduction Code.
  • For the 401(k) Code
    • Enter a Code Name and Description.
    • Set Deduction Category to Retirement.
    • Configure
      • Rate: percentage or fixed amount.
      • Tax Type: Pre-tax for traditional 401(k).
      • Frequency Select your desired deduction frequency.
      • Maximum: Set this to the base annual maximum for 401(k)
  • Save the code.
  • Repeat the process for the Roth Catch-Up Code
    • Select Catch-Up Code option.
    • Set Tax Type Post-tax for Roth contributions.
    • Maximum: Set this to the maximum amount of just the catch-up.

Step 2: Create a Shared Code Group

  • Shared code groups allow multiple deduction codes to work together under one benefit plan.
  • Go to Settings > Payroll > Codes > Shared Code Groups.
  • Choose Create Shared Code Group.
  • Name the group (e.g., “401(k) + Roth Catch-Up”).
  • Add both codes (401(k) and Roth Catch-Up) to the group.
  • Set the Shared Maximum to the normal 401(k) maximum, not including the Catch-up portion.

Step 3: Assign to Employees

  • Open Employee Profiles.
  • Under Benefits/Deductions, assign the new retirement plan to your catch-up eligible high earner employees that elect into 401(K) only.
  • Verify eligibility for catch-up contributions before assigning the Roth code.

Step 4: Test and Validate

Run a sample payroll to confirm

  • Both codes calculate correctly.
  • Tax treatment aligns with IRS rules.
  • Update limits annually.

Need Help? For additional assistance, visit Greenshades support or contact your payroll administrator.

Keywords: Secure Act 2.0, high earner, retirement