Catch-up contributions are additional employee deferrals that can be made to 401(k), 403(b) and governmental 457 plans for those participants who are age 50 or older. These contributions can be made on a pre-tax or Roth (after-tax) basis.
As originally laid out in the SECURE 2.0 Act of 2022, catch-up contributions for those earning over $145,000 in the prior year would need to be Roth deferrals starting in 2024. However, the Internal Revenue Service (IRS) recently announced a transition period that will delay this requirement until 2026. While there was previously some confusion as to whether the new law eliminated all other catch-up contributions, the IRS has since confirmed that catch-up contributions can continue to be made by all age-eligible participants if allowed by the plan document. The deferrals can continue to be either pre-tax or Roth.
For 2024, the maximum deferral contribution is $23,000 and the maximum catch-up contribution is $7,500.
This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.
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