Increased Catch-Up Contributions

In 2022, the SECURE 2.0 Act introduced new regulations regarding catch-up contributions made to retirement plans. Some of these changes went into effect immediately in 2022, while others had delayed effects—either not going into force until later years, or from allowed contribution amounts changing each year.

A quick note on contribution limits, and what catch-up contributions are:

Each year, the IRS determines a maximum amount that can be contributed by employees to retirement plans. For 2025, the standard limit is $23,500. However, employees over the age of 50 can make catch-up contributions to help build up their accounts as they get closer to retirement. The standard limit for such contributions (over and above the $23,500 noted above) is $7,500 for 2025. However, there are a few special circumstances to note below. The updated information for 2025 is summarized as follows:

• Mandatory Roth catch-up contributions for high wage earners are not yet in effect: this requirement will trigger after December 31, 2025.
• Historically, catch-up contributions to IRAs were limited to $1,000 for employees over the age of 50 but became indexed for potential cost of living adjustments starting in 2024. For 2025, the IRA catch-up amount is still $1,000, but will increase in future years based on inflation.
• New for 2025, employees aged 60-63 can make a higher catch-up contribution, over and above the normal catch-up contributions for employees over age 50. The standard catch-up contribution amount for employees over 50 is $7,500 for 2025, as noted above. For 2025, employees aged 60-63 can make catch-up contributions of $11,250 instead These amounts will be indexed against inflation after 2025, so they can be expected to change in future years.
• Similarly, a new catch-up amount is permitted for employees with SIMPLE plans. The standard catch-up amount for employees over 50 is $3,850 for 2025. For 2025, employees aged 60-63 can make catch-up contribution of $5,250 instead if offered by the plan. This will also be indexed against inflation after 2025.

In summary, the biggest impact for 2025 related to catch-up contributions is for those employees between the ages of 60-63.

If you have any questions or concerns about catch-up contributions, please contact your local Hawkins Ash representative.

Raphael Imgrund

Raphael, an associate who joined in 2022, is a key member of our team, demonstrating proficiency in auditing various not-for-profit entities, with a particular focus on voucher schools.