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Last November, the IRS announced that it increased 401(k) contribution limits, enabling Americans to increase their workplace retirement contributions, however, there’s a whole new “super” catch-up contribution category that was included in SECURE 2.0 that many employees may not be aware of.
“In 2025, the catch-up contribution for individuals age 50 and older in a 401(k) plan is $7,500,” said Stephen Callahan, Trading Behavior Specialist at Firstrade. However, SECURE 2.0 extended the catch-up limit for people between ages 60 and 63, but data from Guideline shows that 55% of eligible savers aren't even aware that they have this opportunity to begin with. These individuals “can contribute a ‘super’ catch-up amount of $11,250, a higher limit due to SECURE 2.0,” said Callahan.
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On Jan. 10, the Treasury Department and the Internal Revenue Service released two separate notifications with requirements related to these new regulations.
The proposed regulations, which have a comment period that ends March 14, related to the new SECURE 2.0 provision requires that catch-up contributions made by certain higher-income participants be designated as after-tax Roth contributions. The IRS extended the SECURE 2.0 provision until 2026, however, the agency also clarified that plan participants who are age 50 or older can continue to make catch-up contributions after 2023.
However, according to the new ruling, the IRS will not permit plan sponsors to require that all participants make catch-up contributions on a Roth basis to simplify plan administration. More specifically, plan participants earning $145,000 or less must still have the option of making traditional catch-up contributions.
Under the new IRS rules, a plan that provides for such a deemed Roth catch-up election would be required to: “(1) treat catch-up contributions subject to the deemed Roth catch-up election as not excludible from the participant's gross income, and (2) maintain the catch-up contributions in a designated Roth account,” according to IRS regulations.
Related: Catch-up contributions: Will they help older workers bridge the retirement gap?
“For employees whose employer offers matching contributions, higher catch-up limits can result in increased employer matching, further enhancing retirement savings,” said Callahan. “When contribution limits are increased for inflation, or they encourage those who may have started saving later in life, we should see an overall increase in retirement savings.
“Employers should stay informed on economic trends, as well as changing legislation. Employers who don’t offer retirement planning advice should encourage their employees to consult with accountants or tax preparers. While older workers may be in less of a position to take advantage of long-term accruals, strategic planning to adjust investment and retirement strategies can benefit from the ‘super’ catch-up.”
A public hearing on the proposed IRS catch-up regulations has been scheduled for April 7 at 10 a.m. ET.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
