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A recent call with a financial advisor in OH is representative of a common question on SIMPLE IRA Catch-up Contribution limits.
Welcome to the Retirement Learning Center’s (RLC’s) Case of the Week. Our ERISA consultants regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans, and other types of retirement savings and income plans, including nonqualified plans, stock options, Social Security, and Medicare. This is where we highlight the most relevant topics affecting your business.
“If a SIMPLE IRA plan has the special small employer increased deferral/catch-up limit of 110% of the standard amounts, and someone is also age 60-63 catch-up eligible, does the participant get both the 110% and age 60-63 increases in catch-up contributions?”
The short answer is no – the regulations do not allow double dipping, so to speak. For a SIMPLE IRA plan that is subject to the 110% increased deferral/catch-up limit, the catch-up limit is $3,850 for individuals aged 50-59. For individuals attaining age 60-63, the catch-up limit is $5,250.
Section 117 of SECURE 2.0 increases the standard deferral limit and the age 50 catch-up limit by 10% for employers with 25 or fewer employees. This provision is effective for 2024 and later years.
Section 117 of SECURE 2.0 allows an employer with employees from 26-100 employees to elect to apply the 10% increase in the deferral limit and age 50 catch-up limit if the employer provides a larger employer contribution. If an employer with 26-100 employees elects to apply the 10% employee contribution increase, the employer must provide a 4% matching contribution or a 3% non-elective contribution rather than the 3% matching contribution or 2% non-elective contribution required when not electing the 10% increase in employee contributions.
Section 109 of SECURE 2.0 added an increased catch-up contribution limit for individuals attaining the ages of 60-63, which is the greater of 150% of the age 50 catch-up or $5,000 for SIMPLE IRA plans. For 2025, 150% of the age 50 catch-up is $5,250 and is the limit for 2025. The increased amounts will be indexed for inflation after 2025.
In Notice 2024-80, the IRS released the new 2025 cost-of-living adjustment (COLA) limits and clearly states that for an individual in a SIMPLE IRA plan that is subject to the 110% increased deferral/catch-up limit, the catch-up limit is $3,850 for individuals age 50-59. For individuals attaining age 60-63, the catch-up limit is $5,250.