There is good news for employees who are maxing out their Employer Retirement Plan Accounts.
First, a little background and history on ERPs. And, for the purpose of this email article, I am going to reference 401(k), 403(b), and Employer SIMPLE IRA plans.
The Background:
Employees who participate in a 401(k) or 403(b) Plan and who are at least 50 (or will be turning age 50) during the calendar year 2025, can make an additional “catch-up” contribution to their retirement account.
In 2025, for employees under the age of 50, the regular contribution limit is $23,500. However, anyone who is turning 50 or older in 2025 will be eligible to make an additional catch-up contribution of up to $7,500 for a total annual employee contribution limit of $31,000.
In other words, the allowance of a normal catch-up amount is not something new.
What's Changing for 401(k) and 403(b) Plan Participants:
Now here comes the good news!
Beginning in 2025, due to an allowable provision from SECURE Act 2.0, those who are turning age 60 (sometime during the year) and who will not be older than 63 by 12/31/2025, can also do what is being termed as a “super catch up” employee deferral of $3,750 (on top of the allowable $7,500). This equates to a total catch-up of $11,750. This will allow this group to defer an overall employee contribution amount of $34,750!
Those of you who participate in an Employer SIMPLE IRA Plan are not left out!
Similar to 401(k) and 403(b) plans, employees who are at least 50 or will be turning age 50 during the calendar year 2025, can make an additional “catch-up” contribution to their retirement account as well.
In 2025, for employees under the age of 50, the regular contribution limit is $16,500. However, anyone who is turning 50 or older will be eligible to make an additional catch-up contribution of up to $3,500 for a total annual employee contribution limit of $20,000.
Beginning in 2025, also due to an allowable provision from SECURE Act 2.0, employees who are turning age 60 sometime during the year and who will not be older than 63 by 12/31/2025, can defer a “super catch up” employee deferral of $1,750 (on top of the allowable $3,500) for a total catch-up of $5,250. This will allow this group to defer an overall employee contribution amount of $21,750.
And just full disclosure, there is also an extra deferral amount limit allowed for Employer SIMPLE IRA Plans that have less than 25 employees. Check with your employer to see if you qualify for this as well!
Every little bit helps when it comes to saving for your retirement! Overall, whichever type of employer plan that you participate in, if you are able to max out your employee deferrals, take advantage of this opportunity!
If you have additional questions, please do not hesitate to reach out to your advisor!
Joe J. Pelle, AIF®, QKA
Partner, SVP of Employer Retirement Plans
Financial Advisor