“David, it’s Beth. I just brought a few of our consultants on as full-time hires. They’re in their 50s—a bit older than our typical new employees—and since they’ll only have so many years to contribute into our retirement plan, I was wondering if…”

“What you’re asking about is called a ‘catch-up,’” I explained. Catch-ups are additional contributions above the annual limit that can be made by employees over the age of 50. The limit of the catch-up is set each year, and the current limit is $6,500.

“The good news is that for employees age 60–63, effective for plan years beginning in 2025, you can now contribute 150% of the current catch-up limit—a catch-up to the catch-up.”

“So what’s the bad news?” asked Beth.

“Effective January 1, 2024, catch-up contributions with compensation in excess of $145,000 (indexed each year for inflation) must be Roth contributions with wages based on the previous year’s compensation. For folks who do not have Roth in their plan, you will need to include it if you want high earners to be able to put in Roth catch-up contributions. If not, they will be shut out of the catch-up.”

“I’m not sure I follow you,” said Beth.

“With Roth,” I explained, “you don’t get a tax break when the money goes in; you get a deduction when you cash out … but that’s really a technicality. If you want a hand setting up catch-up contributions for your new people, it’s something we can take off your hands so you don’t have to become an expert on tax law.”

“You mean you’ll do the work and I won’t get frustrated trying to understand the rules? I’m in!” said Beth. “Tell me what you need and I’ll send it over!”

Struggling to keep up with the rules while you keep up with your work? Ask the retirement plan professionals at Concierge to help you stay on top of both!