SECURE 2.0 Section 109 Higher catch-up limit provision

Overview

Effective January 1, 2025, participants ages 60-63 will have the opportunity to take advantage of additional pre-tax contributions through their defined contribution retirement plan as part of the SECURE 2.0 Section 109 Higher Catch-Up Limit provision. Prior to this date, participants have been eligible for additional age 50 and over (50+) catch-up limits of $7,500 (in 2024). Starting in 2025, participants over age 50 can still take advantage of the age 50+ catch-up, but for those who will reach ages 60, 61, 62, or 63 by the end of the calendar year, they may use an alternate increased amount of $10,000 (or 150% of the age 50+ catch-up limit for that year, if that amount is greater).

While it is a benefit to participants to have the ability to save more as they prepare for retirement, plan sponsors must also be aware of this change. If your plan already offers age 50 catch-up, then it is mandatory that you comply with this new provision. Plan sponsors should consider the ability to monitor these parameters, whether they need to build a new limit code in their system or notify their payroll vendors, if applicable. It’s also important to note that the increased catch-up limit amount of $10,000 (or 150% of the age 50+ catch-up limit for that year, if that amount is greater) for participants ages 60-63 will need to be discontinued and resort only to the standard age 50+ catch-up for the calendar year the participant will reach age 64 and beyond. The parameters of this provision allow for ages 60-63 only.

Who may be impacted?
  • Participants, who can prepare to take advantage of this additional increase during the ages of 60-63.
  • Plan sponsors, who may need to monitor this new catch-up limit for their participants.
  • Payroll providers, who may need to build a new limit code and coordinate with plan sponsors.
  • Third Party Administrators (TPAs), if their systems or processes need updated to reflect the contribution changes.
What steps do I as a plan sponsor need to take?

Plan sponsors should review how they currently monitor age 50+ catch-up limits for their participants. Discuss whether your payroll system would require changes to allow for the additional allowable contributions for those participants ages 60-63 and consider how you would then return to the lower 50+ contribution limit for the calendar year those participants reach age 64 and beyond.

Show me an example1

Assume an age 50+ catch-up limit of $7,500 and standard DC contribution limit of $23,000 when this provision takes effect:

Participant age Total allowable annual contribution amount Standard DC contribution amount Allowable catch-up contribution amount
Age 50 up to 59 through all of 2025 $30,500 $23,000 $7,500
Ages 60, 61, 62, 63 at any point in 2025 $34,250 $23,000 $11,2502
(150% of $7,500)
Age 64 or older at any point in 2025 $30,500 $23,000 $7,500

[1] This example is for illustrative purposes only. The IRS releases contribution limits in the fall of each year.

[2] In this scenario, Section 109 allows for $11, 250 because it is the greater of $10,000 of 150% of the regular age 50 catch-up contribution limit, so the 150% takes effect.