The IRA catch‑up contribution limit for individuals 50 and over was amended under the Secure 2.0 Act of 2022 to include an annual cost‑of‑living adjustment, but it remains $1,000 for 2025.
13. Catch-Up Contributions
The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and the federal government's Thrift Savings Plan remains $7,500 for 2025.
Under a change made in Secure 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 instead of $7,500.
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The Internal Revenue Service has released final Roth catch-up regulations confirming that beginning next year highly paid employees who wish to make catch-up contributions can only make them to a Roth 401(k) account.
The rules, originally set to take effect in 2024, apply to "those who had more than $145,000 (indexed) of prior-year W-2 wages from the employer," IRA and tax expert Ed Slott of Ed Slott & Co. told ThinkAdvisor Tuesday. "If the plan does not allow Roth contributions (although most do), then these highly paid employees cannot make any catch-up contributions — pre-tax or Roth."
However, "the plan could start offering the Roth 401(k) option if it doesn’t currently have it available," Slott pointed out.
About 93% of 401(k) plans offered a Roth option in 2023, according to the Plan Sponsor Council of America.
The policy change is "designed to create upfront tax revenue by taking away 401(k) deductions for contributions," Slott continued. "Congress likes these forced Roth contributions because they bring in current revenue. Requiring catch-up contributions for highly paid employees to go into the Roth 401(k) account may not necessarily be a terrible result for some employees. They might like building tax-free Roth accounts, even if it means giving up the current deduction. However, no one likes to be forced into it. Most employees would like this to be their choice, not mandated."
The final rules address several Secure 2.0 Act provisions relating to catch-up contributions, which apply to employees age 50 or older.
The final regs also state that 401(k) plans "cannot force all employees to make their catch-up contributions to a Roth account, although this would make administration easier," Slott relayed.
Provisions in the final regs relating to the Roth catch-up requirement generally apply to contributions in taxable years beginning after Dec. 31, 2026, the IRS explained.
However, the final regs provide a later applicability date for certain governmental plans and plans maintained under a collective bargaining agreement, the IRS added, and also permit plans to implement the Roth catch-up requirement "for taxable years beginning before 2027 using a reasonable, good faith interpretation of statutory provisions."
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