isolved Release Notes
2/6/2025
isolved releases HPI (Highly Paid Individual) Functionality in response to Secure 2.0 Regulations
isolved rolled out an automated way to manage the HPI mandate for Secure 2.0 with release 12.2 on February 6. This post outlines the planned feature update designed to accommodate highly-compensated individuals who may participate in deferred compensation catch up contributions. It is still recommended that you review your payroll reports and manage this with your employee and financial advisors.
Need a refresher on entering employee retirement deductions? Download the guide here.
What Secure 2.0 mandate is this in response to?
This is in response to Section 603 of the Secure 2.0 Act which mandates that highly paid individuals who are 50 or older (eligible for catch-up contributions) and have FICA wages over $150,000 (indexed for inflation) the prior calendar year will be required to make catch-up contributions on a Roth (after-tax) basis. Check out our last post about Secure 2.0 for the details.
The HPI functionality includes:
There is now a HPI Catch-Up Deduction Code for catch up contributions made by employees who qualify as Highly Paid Individuals (HPI). This setting has been added on the deferred comp plan and is automatically added to your setup at the CLIENT LEVEL.
You will not see 401k-HPI on the Deferred Comp Screen (EMPLOYEE MANAGEMENT > EMPLOYEE BENEFITS > BENEFITS > DEFERRED COMP). The normal buckets for Roth and Traditional 401k will apply and you can still use and manage the deductions that way.
When you will see the code
If you are not manually adjusting the employee deferrals to be compliant, then isolved will adjust to the 401k-HPI code for excess contributions once the regular deferral limit (e.g., for 2026 the regular deferral limit is $24,500) is reached. These excess contributions, based on catch up rules (e.g., $7,500 for ages 50+ or $11,250 for ages 60-63), will be allocated to the deduction code specified in the ‘HPI Catch Up Deduction Code’ field on the Deferred Compensation UI instead of the original deduction code.
Client Action Needed: You must ALWAYS check payroll preview reports before processing payroll to ensure accuracy.
The Employee Benefit Plans screen now displays an employee’s highly-paid status.
No action is needed by you – An employee is considered highly paid if their prior year’s W-2 (Box 3) for the same legal company exceeds the benefit threshold and they turn the first catch up age set up for the benefit type (e.g. 50 years old by year-end.).
Override Field
You can now check off an override field which allows you to manually designate an employee as highly paid if the system does not have full W-2 (Box 3) data for the previous year. This would occur if we were not your payroll provider the previous year, or for a new hire to your company in the current year.
A new “As of Date” report called Deferred Comp Highly Paid Individuals Report is available to identify Highly Paid Individuals (HPI) based on prior year earnings or override settings in the Employee Benefit Plan screen.
Access the report by going to REPORTING> CLIENT REPORTS.
