Are Age 60-63 Catch-up Contributions ‘Freebies’?’

Q: I read in an old Ask the Experts column that the age-50 catch-up election is a “freebie,” meaning that such amounts are not included as contributions for Section 415 or Section 402(g) limit purposes, nor are they included in any other contribution or nondiscrimination testing limits. Is this the same for the new age 60-63 catch-up election under the SECURE 2.0 Act of 2022 as well?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Yes, the same rules apply. Under the new provision raising the catch-up limit for active participants aged 60 through 63, such individuals, beginning in the 2025 tax year, can contribute the greater of $10,000 or 150% of the catch-up contribution limit (indexed).

This SECURE 2.0 Act provision is merely an amendment to Code Section 414(v), which permits the age-50 catch-up election and now the age 60-63 catch-up election by amendment. Thus, since contributions under the current age-50 catch-up election are “freebies,” as you state (e.g., not subject to Section 415 or Section 402(g) contribution limits or nondiscrimination testing limits), contributions under the age 60-63 catch-up election are “freebies” as well.

However, special rules apply if there is more than one plan in the control group, and it is important to note that catch-up contributions made are limited to the lesser of the catch-up contribution dollar limit or the excess of the participant’s compensation over the elective deferral contributions made by the participant that are not catch-up contributions.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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