401(k) Contribution

401(k) Contribution paystub meaning: The share of your pay you send to an employer retirement plan before income tax — it lowers taxable wages, but not...

The share of your pay you send to an employer retirement plan before income tax — it lowers taxable wages, but not Social Security and Medicare.

A 401(k) deduction is your own money moved out of your check into a retirement account. The traditional version comes out before federal income tax is calculated, so the taxable wages on your stub are lower than your gross. A Roth 401(k) comes out after tax and lowers nothing today. The half that catches people: a traditional deferral does not reduce Social Security or Medicare tax. Elective deferrals stay in Social Security and Medicare wages, which is exactly why W-2 Box 1 ends up lower than Boxes 3 and 5 by the amount you deferred. The deferral is reported separately in Box 12 with code D, and Roth 401(k) with code AA. For 2026 the IRS limit on employee elective deferrals is $24,500. At 50 or older you can add a catch-up of $8,000, and if you turn 60, 61, 62 or 63 during 2026 the catch-up is $11,250 instead. Everything going into the account from every source — your deferral, the employer match, profit sharing — is capped at $72,000 for 2026, or $80,000 including catch-up, and $83,250 at ages 60 to 63. One change worth knowing at higher pay: beginning in 2026, participants must make catch-up contributions on a Roth basis if their prior-year wages with the plan sponsor exceeded $150,000. If your catch-up moved from a pre-tax line to a Roth line this year, that is the reason. Your employer's match is not a deduction. It is company money, shown as an informational line or not at all, and it does not reduce your net pay.

A deduction can be pre-tax, post-tax, voluntary, or required. Its label alone does not establish how it affects taxable wages, so check the plan document, employee election, payroll policy, and year-to-date amount.

When this term appears on a statement, read its label, current amount, year-to-date amount, pay-period context, and any adjacent rate or hours together. Resolve a mismatch with the original issuer or the cited authority rather than changing a record to force a preferred result.