The SECURE 2.0 Act is raising the catch-up contribution limit for older workers to help make a comfortable retirement more attainable. Beginning in 2025, retirement plan participants ages 60-63 will have the opportunity to save more.
There are many strategies to help encourage employees to take advantage of your company’s retirement benefits — from financial wellness education to auto-enrollment.
Another is making them aware of new rules governing how much they can contribute, especially older employees with less time to save and take advantage of compound interest. Catch-up contributions have been around for a while, and the SECURE 2.0 Act just raised the allowable amount.
Fast-tracking retirement savings
Under current law, defined contribution retirement plans may allow employees ages 50 and over to make catch-up contributions in excess of the otherwise applicable annual contribution limits. For 2024, the catch-up contribution limit is $7,500 for defined contribution plans and $3,500 for SIMPLE plans.
In 2025, SECURE 2.0 increases these catch-up limits for participants ages 60-63 in 401(k), 403(b) and 457(b) plans to the greater of $10,000 or 150% of the regular catch-up amount. Participants ages 60-63 in SIMPLE plans may contribute the greater of $5,000 or 150% of the regular catch-up limit.
Defined contribution plans (excluding SIMPLE plans)
| Age | 2025 annual participant deferral limit (assuming no change from 2024) |
| 49 and under | $23,000 |
| 50 to 59 | $30,500 ($23,000, plus $7,500 catch-up) |
| 60 to 63 | $34,250 ($23,000, plus $11,250 catch-up) |
| 64 and older | $30,500 ($23,000, plus $7,500 catch-up) |
SIMPLE plans
| Age | 2025 annual participant deferral limit (assuming no change from 2024) |
| 49 and under | $16,000 |
| 50 to 59 | $19,500 ($16,000, plus $3,500 catch-up) |
| 60 to 63 | $21,250 ($16,000, plus $5,250 catch-up) |
| 64 and older | $19,500 ($16,000, plus $3,500 catch-up) |
Next steps for retirement plan sponsors
Many plans that permit catch-up contributions include general language that allows participants to make maximum annual catch-up contributions under the current tax code. Plan sponsors should review their plan documents to determine if the increased catch-up limit is automatic for impacted participants. If your plan uses an ADP pre-approved plan document, this change will automatically take effect for the 2025 plan year.
Help your employees achieve retirement readiness
Adding a retirement plan to your benefits offerings gives your business a competitive edge in the talent search — and shows employees that you care about their future.
ADP retirement specialists are available to answer your questions and discuss plan options to help ensure that your employees are best prepared for the next phase of life. Connect with an ADP retirement specialist or call (800) 432-401K today.
ADP, Inc., and its affiliates do not offer investment, tax, or legal advice to individuals. Nothing contained in this article is intended to be, nor should be construed as, particularized advice or a recommendation or suggestion that you take or not take a particular action. Questions about how laws, regulations, guidance, your plan’s provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor. M-557782-2024-06-10
This article originally appeared on SPARK powered by ADP.
