Preparing employers for the new age 60–63 catch-up contribution provision

Written by Mary Graf

If permitted under an employer’s 401(k), 403(b) or governmental 457(b) plan, this new catch-up increases a participant’s catch-up contribution amount to the greater of $10,000 or 150% of the regular Age 50+ Catch-Up contribution limit ($7,500 in 2024, subject to IRS annual cost of living adjustments in $500 increments), effective January 1, 2025. Note: There is a technical correction discussion draft bill pending in Congress to revise this to be 150% of the Age 50+ Catch-Up contribution in 2025. In the absence of Congressional activity on this technical correction bill, it is possible that the IRS may provide clarification in its 2025 Cost of Living Adjustment guidance.

If a 401(k) or 403(b) plan permits this new SECURE 2.0 catch-up contribution limit:

• A participant can take advantage of this additional catch-up contribution if they attain age 60, but are not older than age 63, by the end of the calendar year and provided they have contributed the maximum amount under the Internal Revenue Code Section 402(g) general annual deferral limit (including any available amounts under the Special 15-Year Catch-Up permitted under a 403(b) plan).
• After the calendar year in which a participant has reached age 63, the standard Age 50+ Catch-Up limit will apply, meaning that those participants who are age 64 and older in a calendar year can only contribute up to the Age 50+ Catch-Up contribution amount.
• Like the Age 50+ Catch-Up contribution, the increased catch-up contribution limit for participants between 60-63 is coordinated among 403(b) plans, 401(k) plans, SARSEPs, and SIMPLE retirement plans.
• Like the Age 50+ Catch-Up contribution, the increased catch-up for participants between 60-63 is not subject to the Internal Revenue Code Sections 415(c) annual additions limit.

If a governmental employer’s 457(b) plan permits this new SECURE 2.0 catch-up:

• A participant can take advantage of this additional catch-up contribution if they attain age 60, but are not older than age 63, by the end of the calendar year and provided they have contributed the maximum amount of the Code Section 457 general contribution limit.
• Like the Age 50+ plus Catch-Up contribution, a participant is not eligible to use both the increased catch-up for participants between the ages of 60-63 and the Special 457 Catch-Up provision in the same tax year; however, they are permitted to use whichever catch-up is greater.
• After the calendar year in which a participant has reached age 63, the standard age 50+ Catch-Up limit will apply, meaning that those participants who are age 64 and older in a calendar year not contributing under the Special 457 Catch-up can only contribute up to the Age 50+ Catch-Up contribution amount.

How does the Increased Catch-Up coordinate with the Mandatory Roth Contribution?

SECURE 2.0 added a further stipulation on the Age 50+ Catch-Up provision:

• If a participant’s IRC Section 3121(a) wages (often referred to as “FICA wages”) in the previous year, paid by the employer sponsoring the plan, were more than $145,000 (subject to IRS annual cost of living adjustments in $5,000 increments), the participant may only contribute the increased age-based catch-up as a Roth contribution.
• However, for 2025, the Internal Revenue Service has provided an administrative transition period for implementing this requirement, meaning that impacted participants using the increased catch-up contribution will not be subject to the mandatory Roth contribution in that year.

Plan Sponsor Considerations

Under SECURE 2.0, permitting the Age 60-63 Catch-Up Contributions provision in your plan is optional. The following are some factors and actions that should be taken into consideration by plan sponsors:

• The plan document may need to be amended to align with plan operation for this optional increased catch-up feature and related details (including whether employer matching contributions will also apply to these increased catch-up contributions).
• Applicable Salary Reduction Agreements will need to be updated.
• The Plan’s payroll systems must recognize eligible participants and permit increased limits.
• The change must be communicated to plan participants.

Visit the SECURE 2.0 Employer Resource Center