Double limit catch-up contributions for (persons) 3 years before normal retirement age

Options
FreeChat
FreeChat Member Posts: 4 Newcomer

Earlier this year, I read the following on “Double limit catch-up contributions” but need specific IRS clarification:

*****************************

“Double limit catch-up contributions

(3 years before "normal retirement age")

Eligibility occurs during the three taxable years ending before the employee attains "normal retirement age" as defined by the plan.

Eligibility requires the availability of an "underutilized amount" based on plan contributions in preceding years. Depending on plan rules, double limit catch-up contributions to a governmental 457(b) plan may also be made on a pre-tax or Roth basis.”

*****************************

Please answer and provide all retirement accounts (401K, 403b, Roth, etc.) allowed. Also, indicate the maximum allowed contribution allowed by the IRS to qualify for this provision. For example, the 2024 general contribution caps (401k, 403b, etc.) are:

$23,000 for pretax and Roth employee contributions, and $69,000 for employer and employee contributions. Employees who are 50 and older can save an extra $7,500 in catch-up contributions, bringing their employee contribution limit to $30,500.

Double limit catch-up contributions for persons 3 years before “normal retirement age” are the $30,500 basic contribution limit for 2024, plus what “double limit catch-up contribution”?

Please break the information down according to tax-deferred plan (401k/403b,etc), Roth, traditional IRA investments, and also any other comments you feel are necessary to comply with IRS rules, eg., after tax Roth contribution relevancy, etc.

I welcome and value your feedback.

Thank you.

Best Answer

Answers

  • KristineS
    KristineS FreeTaxUSA Agent Posts: 109
    Options

    Hi FreeChat,

    Special 457(b) catch-up contributions, if permitted by the plan, allow a participant for 3 years prior to the normal retirement age (as specified in the plan) to contribute the lesser of:

    • the elective deferral limit ($22,500 in 2023; $20,500 in 2022; $19,500 in 2020 and in 2021).
    • the basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions)

    Here is IRS Publication 4484 that covers this topic. Search "Special 457 catch-up". Again, the allowable catch-up must be permitted by the plan. I believe the double limit being referred to is the the basic annual limit plus the unused basic annual limit in prior years specific to 457(b) plans. Other plans may or may not have a similar provision.

    This publication does not have current contribution amounts so I have included them here for 2023 by type:

    • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan is $22,500.
    • The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan is $7,500.
    • The limit on annual contributions to an IRA (Roth or Traditional) is $6,500. The IRA catch‑up contribution limit for individuals age 50 and over is not subject to an annual cost‑of‑living adjustment and remains $1,000.
    • The catch-up contribution limit for employees age 50 and over who participate in SIMPLE is $3,500.