The Secure Act 2.0 created an increased benefit and a new restriction for participants in defined contribution plans, such as 401(k), 457(b) and 403(b) plans.
Employees over age 50 have been permitted to make a catch-up contribution to their defined contribution plan accounts each year. However, starting in 2025 employees who are between the ages of 60 and 63 can now make a super catch-up contribution. The super catch-up contribution is calculated to be the greater of $10,000 or 150% of the catch-up limit for that year. The catch-up limit for 2025 is $7,500. Utilizing 150% of $7,500, this new rule will allow those who turn age 60 to 63 at any point during the year 2025 to make a super catch-up contribution of $11,250 to their defined contribution plan account for 2025.
| Age in 2025 | Employee Deferral | Catchup | 2025 Contribution Limit |
| 49 and under | $23,500 | $0 | $23,500 |
| 50 to 59 | $23,500 | $7,500 | $31,000 |
| 60 to 63 | $23,500 | $11,250 | $34,750 |
| 64 and over | $23,500 | $7,500 | $31,000 |
In 2025, an employee may elect their regular deferral contribution of $23,500 and their catch-up contribution be deposited into a traditional defined contribution plan. However, starting in 2026 catch up contributions must be deposited into a Roth account for employees whose Federal Insurance Contributions Act (FICA) wages exceed $145,000 in the prior calendar year.
Traditional contributions are pre-tax. The contribution is excluded from the employee’s taxable income, the contribution grows tax free and is then taxed as ordinary income when withdrawn in the future. This is advantageous at the time of making the contribution because it reduces the employee’s tax burden in the year the contribution is made.
Roth contributions are after tax. The contribution will be included in the employee’s taxable income even though the employee did not receive the cash in his/her paycheck. This is disadvantageous in the year of making the contribution because the employee will pay tax on money that went into the defined contribution plan instead of their bank account. The advantage is realized in the future as Roth contributions grow tax free and may be withdrawn tax free. The super catch up does not apply to contributions to traditional and Roth IRA accounts. The contribution limit for these accounts in 2025 will remain $7,000. Individuals aged 50 and older may make an additional catch-up contribution of $1,000 to their IRA or Roth IRA.
This content is for informational purposes only and does not constitute financial, tax, or legal advice. Please consult with your tax advisor, attorney, or financial professional for personalized advice regarding your specific situation.