Effective January 1, 2025, participants who reach ages 60-63 by the end of the calendar year may be allowed to make additional catch-up contributions. This provision is optional; plans must adopt it as part of SECURE 2.0 to permit these extra catch-up contribution limits.
A participant who reaches age 60 but not older than 63 by the end of the calendar year can benefit from the additional catch-up contribution if they have already met the maximum 402(g) deferral limit. Once the participant turns 63, the standard catch-up contribution limits for those aged 50 and over will apply starting from the calendar year in which they turn 64.
If allowed by a 401(k), 403(b), or 457(b) Plan, the increased catch-up limit is the greater of $10,000 or 150% of the standard catch-up limit, with adjustments for cost of living by the IRS in $500 increments. While the 2025 catch-up limit is not yet known, the limit for 2024 is $7,500.
For example, using 2024 limits in 2025 the catch-up limit could be $11,250 (150% x 7,500), plus the deferral limit of $23,000; bringing the total deferral to $34,250 but only for participants ages 60-63.
Plan Sponsors will also need to consider the following if allowing for the optional increased catch-up limits:
- Communicate to participants of the higher catch-up limits
- Enrollment/Deferral agreement forms will need to be updated to reflect this option
- Your payroll provider must have this functionality and be able to track eligible participants and allow for the increase in limits
