Catch up contributions

How do Catch up contributions work

Catch up contributions eligibility

 Aged 50 or older

You are eligible to contribute catchups to your plan on turning 50.

IRS deems the contributor to be 50 years any time in the calendar year that he turns 50.

You can make catch-ups despite not turning 50(until the next plan year) in a non-calendar year plan. This is as long as you turn 50 by the end of the calendar year that you make the catch-up contribution

Don’t ignore catchups, they can potentially reduce your annual tax bill by over $1,000.

Already maxed your annual contributions

This benefit is triggered once the saver meets the annual IRS 402(g)/457 limit for the year, or as a result of your plan’s savings limit (including catch-up).

Must be for a Specific Calendar Year

The catch-up limits are counted on the basis of a specific calendar year. You cannot make catch-up contributions for 2022 with 2021 income.

The plan allows catch-up contributions

Plans are generally not required to provide for this. However, IRS has provided model amendment language that is usually used in plan documents.

The employee makes the election

The employee makes an election which usually effected the first pay period after instruction.

In most plans, the current election nullifies all previous elections.

Over 50 Catch up contributions

This is available under;

• 401(k) Plans
• 403(b) Plans
• 457(b) Plans
• SIMPLE IRA
• Thrift Saving Plan (TSP)
• HSA (individual/family)

Catch up contributions 401k

Eligibility for Catch up contributions on 401k

Plan participants are eligible if;

• They are turning 50 years of age during the calendar year they become eligible for catch-ups.
• Participants’ regular plan savings must at least meet the annual 402(g)/457 limit or the plan-imposed limit, or
• The annual ADP limit for Highly Compensated Employees.

Catch up contributions 401k 2022

The basic employee savings limits are as below table;

Source: IRS 2022 Limits

This limit includes all elective pre-tax income including any after-tax savings to a designated Roth account within your 401(k) or a special Roth 401(k) plan.

The total limit for employer and employee contribution is;

• $61,000, or
• 100% employee compensation.
• For employees 50 years old, the base limit is $67,500. This includes a $6,500 catch-up contribution.

 401k Catch up 2021

The basic employee savings limits are as below table;

 Source: IRS 2021 Limits

This includes all elective pre-tax income including any after-tax savings to a designated Roth account within your 401(k) or a special Roth 401(k) plan.

The total limit for employer and employee contribution is;

• $58,000, or
• 100% employee compensation.
• For employees 50 years old, the base limit is $64,500. This includes a $6,500 catch-up contribution.

Catch up contributions 401k 2020

The basic employee savings limits are as below table;

Source: IRS 2020 Limits

This includes all elective pre-tax income including any after-tax savings to a designated Roth account within your 401(k) or a special Roth 401(k) plan.

The total limit for employer and employee contribution is;

• $57,000, or
• 100% employee compensation.
• For employees 50 years old, the base limit is $63,500. This includes a $6,500 catch-up contribution.

403 b Catch up contributions

Annual 403b contribution limit 2022

The basic employee savings limits are as below table;

Source: IRS 2022 Limits

This includes all elective pre-tax income including contributions to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $61,000, or
• 100% employee compensation.
• For employees 50 years old, the base limit is $67,500.This includes a $6,500 catch-up contribution.

403b contribution limit for 2021

The basic employee savings limits are as below table;

Source: IRS 2021 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

• $58,000, or
• 100% employee compensation.
• For employees 50 years old, the base limit is $64,500. This includes a $6,500 catch-up contribution.

403 b contribution limits 2020 over 50

The basic employee contribution limits are as below table;

 Source: IRS 2020 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $57,000, or
• 100% employee compensation.
• For employees 50 years old, the base limit is $63,500. This includes a $6,500 catch-up contribution.

 457 b Catch up

457b Catchup 2022

The basic employee savings limits are as below table;

Source: IRS 2022 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $20,500, or
• 100% employee’s compensation or the deferral limits. Employers are allowed to match your contribution, but it’s counted towards your annual limit.
• For employees 50 years old, the base limit is $27,000. This includes a $6,500 catch-up contribution.

457b Catchup 2021

The basic employee savings limits are as below table;

Source: IRS 2021 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

• $19,500, or
• 100% employee’s compensation or the deferral limits. Employers are allowed to match your contribution, but it’s counted towards your annual limit.
• For employees 50 years old, the base limit is $26,000. This includes a $6,500 catch-up contribution.

 457b Catchup 2020

The basic employee savings limits are as below table;

Source: IRS 2020 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $19,500, or
• 100% employee’s compensation or the deferral limits. Employers are allowed to match your contribution, but it’s counted towards your annual limit.
• For employees 50 years old, the base limit is $26,000. This includes a $6,500 catch-up contribution.

 SIMPLE IRA Catch up

2022 SIMPLE IRA Catch up contribution limits

 The basic employee contribution limits are as below table;

Source: IRS 2022 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $23,100
• Employers can do either a dollar-for-dollar match (up to 3% of employees’ pay) or
• A flat 2% of compensation regardless of whether the employee contributes or not. So, if your employer matches your contribution, make sure you do contribute enough to qualify for the full match.

IRS limits employees’ salary to $305,000 ($290,000), effectively capping the employer’s contribution to $6,100 ($5,600) with this option.

• For employees 50 years old, the base limit is $23,100. This includes a $3,000 catch-up contribution.

 2021 SIMPLE IRA Catch up contribution limits

The basic employee savings limits are as below table;

Source: IRS 2021 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $19,100
• Employers can do either a dollar-for-dollar match (up to 3% of employees’ pay) or
• A flat 2% of compensation regardless of whether the employee contributes or not. So, if your employer matches your contribution, make sure you do contribute enough to qualify for the full match.

IRS limits employees’ salaries to $305,000 ($290,000), effectively capping the employer’s contribution to $6,100 ($5,600) with this option.

• For employees 50 years old, the base limit is $19,100. This includes a $3,000 catch-up contribution.

 2020 SIMPLE IRA Catch up contribution limits

The basic employee savings limits are as below table;

Source: IRS 2020 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $19,100
• Employers can do either a dollar-for-dollar match (up to 3% of employees’ pay) or
• A flat 2% of pay regardless of whether the employee contributes or not. So, if your employer matches your contribution, make sure you do contribute enough to qualify for the full match.

IRS limits employees’ salary to $305,000 ($290,000), effectively capping the employer’s contribution to $6,100 ($5,600) with this option.

• For employees 50 years old, the base limit is $19,100. This includes a $3,000 catch-up contribution.

 TSP Catchup

TSP Catch up limit 2022

The basic employee savings limits are as below table;

Source: IRS 2022 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $61,000, or
• 100% employee compensation.
• For employees 50 years old, the base limit is $67,500. This includes a $6,500 catch-up or spillover savings.

 Military members on assignments can exceed the $20,500 annual elective deferral limit made through payroll deductions.

 TSP Catch up limit 2021

The basic employee savings limits are as below table;

Source: IRS 2021 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $58,000, or
• 100% employee compensation.
• For employees 50 years old, the base limit is $64,500. This includes a $6,500 catch-up or spillover savings.

Military members on assignments can exceed the $20,500 annual elective deferral limit made through payroll deductions.

 TSP Catch up for 2020

 The basic employee savings limits are as below table;

Source: IRS 2020 Limits

This includes all elective pre-tax income including savings to 401ks and other qualified plans and SIMPLE IRAs.

The total limit for employer and employee contribution is;

• $58,000, or
• 100% employee’s compensation.
• For employees 50 years old, the base limit is $64,500. This includes a $6,500 catch-up or spillover savings.

Military members on assignments can exceed the $20,500 annual elective deferral limit made through payroll deductions.

HSA Catchup

HSA Catch up 2022

IRS allows members to save an extra $1,000 to their HSA (either as individual or family coverage) upon attaining the age of 55.

Source: IRS 2022 Limits

Please note;

• Employer HSA contribution is not treated as a taxable benefit but still counts towards employees’ annual contribution limit. Employers are allowed to make higher contributions under set conditions for “non-highly compensated employees” without a cafeteria plan
• IRS caps the maximum amount that employers can contribute to excepted benefit health reimbursement arrangements (excepted benefit HRAs) for plans at $1,800
• HDHP’s Minimum deductible amount is set at $1,400 for individual plans. On the other hand, Families are allowed $2,800.
• HDHP Individual’s maximum out-of-pocket is capped at $7,050 while the HDHP Family maximum out-of-pocket is capped at $14,100.

 HSA over 55 Catch up 2021

IRS allows members to save an extra $1,000 to their HSA (either as individual or family coverage) on attaining the age of 55.

Source:IRS 2021 Limits

Please note;

• Employer HSA contribution is not treated as a taxable benefit but still counts towards employees’ annual contribution limit. Employers are allowed to make higher contributions under set conditions for “non-highly compensated employees” without a cafeteria plan
• IRS caps the maximum amount that employers can contribute to excepted benefit health reimbursement arrangements (excepted benefit HRAs) for plans at $1,800
• HDHP Minimum deductible amount is set at $1,400 for individual plans. On the other hand, Families are allowed $2,800.
• HDHP Individual’s maximum out-of-pocket is capped at $7,000 while the HDHP Family’s maximum out-of-pocket is capped at $14,000.

 HSA limits 2020 Catch up

IRS allows members to save an extra $1,000 to their HSA (either as individual or family coverage) on attaining the age of 55.

Source: IRS 2020 Limits

Please note;

• Employer HSA contribution is not treated as a taxable benefit but still counts towards employees’ annual contribution limit. Still, Employers are allowed to make higher contributions under set conditions for “non-highly compensated employees” without a cafeteria plan.
• IRS caps the maximum amount that an employer can contribute to excepted benefit health reimbursement arrangements (excepted benefit HRAs) for plans at $1,800
• HDHP Minimum deductible amount is set at $1,400 for individual plans. On the other hand, Families are allowed $2,800.
• HDHP’s Maximum out-of-pocket for individuals are capped at $6,900 and $13,800 for families.

15-YEAR SPECIAL CATCH-UP

It’s only available under certain 403(b) plans. Qualified institutions offering 403b plans which include;

• Public schools(IRC Section 170(b)(1)(A)(ii))
• Hospitals
• Home health service agencies,
• Churches and Church-related organizations
• Health and welfare service agencies

As of 2022, Most 403b plans do allow contributors to save up to $3,000 each year of pre-tax income in catchups up to a lifetime limit of $15,000.

This is as long as they achieve certain service-related requirements.

The requirements are;

• Served full-time for 15 years with the same employer
• Have unused amounts from previous years that are available for catch-up
• Not exceeding the $ 15,000 lifetime limit.

Please note, that two types of catchups are available for 403b pension savers.

If the contributor opts for the age-50 catch-up but is still eligible for the 15-year catch-up. IRS will prioritize the 15-year catch-up lifetime to the maximum.

Also Designated Roth savings in a 403b plan are included within the different limits.

Below, please find a summary of elective deferrals and matching contributions for the years 2020 to 2022;

Source: IRS 2020 Limits, IRS 2021 Limits, IRS 2022 Limits

3-YEAR CATCH-UP

This is available for 457b and 457b Top Hat plans

It allows employees who are within three years of attaining the normal retirement age (65).

The special catch-up limit allows you to contribute up to twice the “annual deferral limit which is the lesser of the:

• 100% of total compensation or the Regular Limit, whichever is less, plus
• All underutilized contributions from previous years.

The special catch-up limit and the “age 50” catch-up limit cannot be applied in the same year.

Participation rules

• If your 457b allows for both the age-50 catch-up and the 3-year catch-up. IRS allows the option with the largest deferral but not both.
• You can only designate one period of three consecutive years as your three-year catch-up period.
• The three-year period must be before your normal retirement age.
• Three-year catch-up provision cannot be used during or after your normal retirement age.
• You lose the higher limit benefit not used in that particular year
• You are not allowed to extend the three-year catch-up provision if you work beyond the normal retirement age.

Bottom line

Catch-up is advisable when;

• You are in need of making up for lost investment opportunities in previous working years.
• Current income is high, and  IRA deductions can achieve this effortlessly
• Catch-up contributions fit in the current budget and it’s the best way to attain retirement savings goals.

Catch-up is not advisable when;

• You are already taking withdrawals from a retirement account or just about to start
• A future personal budget is short of $1,000 in the next 1 year.
• You have been consistent in your retirement savings goal.