It seems to make sense to follow up last week’s Roth Catch-Up article with a discussion of the other major change to the catch-up rules under SECURE 2.0. This time, we are talking about the enhanced catch-up contribution opportunity for participants aged 60 through 63.
As employees get older and realize that retirement is not as far down the road as it once was, they may want to put a little more away, as a cushion, or to make up for missed savings opportunities from earlier years. For many employees in their early 60s, these are often peak earning years, which means the opportunity to save a bit more may be both appealing and realistic. This enhanced catch-up contribution is exactly the kind of option those employees may be looking for.
Beginning in calendar year 2025, employees who are aged 60 through 63 at the end of the calendar year may be allowed to make larger catch-up contributions than the maximum amount permitted for employees who are age 50 or older.
For example, David turns 61 during 2026 and participates in his employer’s 401(k) plan. The plan has elected to permit the enhanced catch-up contribution option. As a result, David is permitted to make a catch-up contribution of up to $11,250 instead of being limited to the standard $8,000 amount.
This sounds pretty straightforward, but there are a few important details employers should keep in mind.
The Enhanced Catch-Up Option Is Optional
The first and foremost, this is an optional plan provision. In other words, just because SECURE 2.0 allows the enhanced catch-up opportunity, it does not mean that your plan is required to offer it. This feature requires the plan to allow regular catch-up contributions and permit this higher catch-up amount for participants aged 60 through 63. That distinction matters because employees may hear about the new limit and assume it is available in their company’s plan. As this is not a great area for “I think so”, the employer should confirm that the plan document permits this provision and that payroll can properly manage it before communicating anything to participants.
Another important point is that the enhanced catch-up opportunity is a “limited time offer”, applying to only four age-specific years. Participants may be eligible for the enhanced amount only if they are age 60, 61, 62, or 63 at the end of the calendar year. Once they move beyond that age bracket, they would return to the standard age-50 catch-up limit.
For employers, this means communication matters. Eligible employees should understand that this is a short window of opportunity, not a permanent catch-up limit increase. Also, eligible employees who want to take advantage of the provision should review their contribution elections early. Waiting until there are only few payrolls left may not leave enough time to contribute the amount they intended.
Don’t Forget About the Roth Catch-Up Rule
The enhanced catch-up option is also subject to the Roth catch-up requirement under SECURE 2.0. As I discussed in last week’s article, some higher-paid employees who make catch-up contributions are now required to make those catch-up contributions on a Roth basis. If one of those employees is also aged 60 through 63, the employer would need to follow both rules at the same time.
The practical takeaway for employers is not to review the enhanced catch-up option in a silo. It needs to be considered together with Roth availability, payroll capability, and plan document language.
Things Employers Will Want to Consider
Before adding the enhanced catch-up option to the plan, here are a few things employers may want to consider when making the decision:
- Confirm whether the plan permits catch-up contributions
- Confirm that payroll can timely identify the affected participants
- Confirm that payroll can manage different catch-up limits for different populations
- Coordinate any necessary plan amendments with your TPA
- Communicate this change to the affected participants
This list is not meant to make the provision sound intimidating. It is simply intended to illustrate the necessity of a documented procedure in helping employers implement the provision properly.
The bottom line is that the enhanced catch-up option can be a valuable SECURE 2.0 provision for late-career savers. It can provide owners and employees with the opportunity to put more away during a crucial retirement planning window.
At TNJ, we help employers and advisors turn retirement plan options into workable action steps. SECURE 2.0 created new opportunities, but those opportunities work best when they are implemented carefully, communicated clearly, and administered correctly. If you have any questions or we can assist you with this change, please let us know.
