Catch Up Contributions 457b: A Comprehensive Guide

If you're eligible for a 457b plan, you can make catch up contributions starting at age 50, which can significantly boost your retirement savings.

Catch up contributions are a great way to accelerate your retirement savings, and the 457b plan is a popular option for government and tax-exempt employees.

You can contribute up to $6,500 in catch up contributions to a 457b plan, in addition to the regular annual limit, which is $19,500 in 2022.

A 457 Plan is a type of tax-advantaged retirement savings account offered by certain state and local governments and tax-exempt organizations to their employees.

These plans are typically available to law enforcement officers, civil servants, and university workers, among others.

You can set aside pre-tax dollars in a 457 Plan, reducing your income, and the money in the account can be invested and potentially grow.

There are two types of 457 Plans, each with different rules, and it's essential to understand these rules before investing.

You can contribute to a 457 Plan through payroll deductions, and the contributions are made with pre-tax dollars, which means you won't pay taxes on them until you withdraw the money.

A key feature of 457 Plans is that they allow you to set aside money for retirement on a tax-deferred basis, which can help you save more for your future.

To be eligible for catch-up contributions in your 457(b) plan, you can go back to the later of January 1, 1979, or the date you became eligible for your employer's plan.

You can only designate one period of 3 consecutive years as your 3-year catch-up period, which must precede your declared normal retirement age. This means you can't extend the use of the 3-year catch-up provision if you work beyond your declared normal retirement age.

The 3-year catch-up period allows you to make higher contributions, but you can't make both the Age 50 and the Pre-Retirement contributions in the same calendar year.

Here are the key rules to keep in mind:

To determine if you're eligible for catch-up contributions, let's look at the past. You may only catch-up on amounts you were eligible to contribute in the past but didn't. This means you can go back to the later of two dates: January 1, 1979, or the date you became eligible for your employer's plan.

You can use this catch-up provision to make up for missed contributions from the past, but you can't just start from any date. You have to look back to the later of these two dates to figure out when you can start catching up.

There are two key dates to keep in mind: January 1, 1979, and the date you became eligible for your employer's plan. These dates determine when you can start making catch-up contributions.

You have to stay within the limits set by the catch-up contribution provisions. If you're eligible for both Age 50 and Pre-Retirement contributions, you can't make both in the same calendar year.

To maximize your contributions, consider which option allows you to make the most contributions in a given year.

Starting in 2026, catch-up contributions to 401(k), 403(b) and governmental 457(b) plans must be made as Roth for employees who earned over $145,000 in the prior calendar year.

Only compensation from the employer sponsoring the plan is counted for this purpose. Employees with $145,000 or less in compensation for the prior year will have the option to make their catch-up contributions as pre-tax or Roth.

The IRS provided an administrative transition period, allowing plan sponsors to wait until 2026 to implement the new Roth catch-up rules.

Roth contributions differ from pre-tax contributions in that they are taxed at the time of contribution. Amounts are then distributed tax-free, assuming the account has been in place at least 5 years and the owner is at least age 59 ½.

This provision is intended to reduce the extent to which high wage earners can defer taxation on their income, thereby raising current tax revenue for the government.

The catch-up provision in 457(b) plans allows you to contribute up to twice the regular IRS limit, but it's not that simple. You can contribute up to 100% of your compensation or the Regular Limit, whichever is less, plus the amount of contributions that have been underutilized in all prior taxable years.

To make a 457(b) catch-up deferral, you'll need to contact your plan sponsor and complete a form either on paper or online. They'll ask you to specify how much you want to contribute and how you want to make the catch-up deferral, as a pre-tax or Roth contribution.

There are some unique features to 457(b) catch-up deferrals, including the ability to contribute up to double the annual limit if you're within 3 years of your plan's normal retirement age. However, if your plan allows for both age-50 catch-up contributions and 3-year catch-up contributions, you can only take advantage of one of them.

Here are the maximum catch-up contribution limits for 457(b) plans:

Note that some plans may also offer a higher catch-up contribution limit for employees aged 60, 61, 62, and 63, which is $11,250 for 2025.

If you're eligible, the catch-up provision allows you to contribute up to twice the regular IRS limit.

You can contribute up to 100% of your compensation or the Regular Limit, whichever is less. Additionally, you can utilize the amount of contributions that have been underutilized in all prior taxable years since the 457 plan has been available to you.

The maximum amount you may contribute in a 3-year catch-up year is determined by how much you have missed contributing in the past. This can be a great opportunity to make up for lost time.

You can utilize the 3-year catch-up limit in a 3-year period, which can include the current year and the next two years. For example, if you qualify to participate in 2022, you could utilize the 3-year catch-up limit in 2022, 2023, and 2024.

If you're within 3 years of your plan's normal retirement age, your 457(b) plan might allow you to contribute up to double the annual limit or the annual 457(b) limit, plus any amount of unused contribution limit from prior years.

However, you can't take advantage of both the age-50 catch-up contributions and the 3-year catch-up contributions. This means you need to carefully review your plan's rules and options.

To make 457(b) catch-up deferrals, you'll need to contact your plan sponsor and complete a form either on paper or online. This will help you take advantage of the catch-up contribution limits.

Starting in 2025, a higher catch-up contribution limit applies for employees aged 60, 61, 62, and 63, with a limit of $11,250. This option is effective as of January 1, 2025, for plans that elect to adopt it.

The IRS has delayed the requirement for certain catch-up contributions in 401(k), 403(b), or governmental 457(b) plans to be made as Roth contributions until 2025. This requirement was added to the Internal Revenue Code by the SECURE 2.0 Act.

The delay was prompted by concerns from advocates, including the U.S. Chamber of Commerce, ERIC, and the American Benefits Council, as well as private ERISA practitioners and retirement plan vendors. They raised issues with the implementation of the provision, such as payroll programming and election processes for participants.

The SECURE 2.0 Act requires that participants who earn more than $145,000 in FICA wages make catch-up contributions in the following plan year as Roth contributions. This means that participants who earn above this threshold will be limited in their ability to make pre-tax catch-up contributions.

The IRS has also clarified that catch-up contributions may be made in 2024, and has established a two-year transition period for implementing the limitations on pre-tax catch-up contributions. This will give plan sponsors time to adjust to the new rules.

Here are some key points to consider: