4050 / Can participants in a tax sheltered annuity plan who are age 50 and over contribute a “catch-up” contribution each year?
The otherwise applicable dollar limit on elective deferrals under a Section 403(b) annuity can be increased for individuals who attain age 50 by the end of the taxable year.1 In 2023-2024, the applicable dollar amount is $7,500. In 2021 and 2022, the applicable dollar amount was $6,500.2 The limit is indexed for inflation in $500 increments.3
Catch-up contributions by participants age 50 or over made under the provisions of IRS Section 414(v) are not subject to the elective deferral limit.4 The elective deferral limit of $XX,000 in 2025 (projected) is increased by the special catch-up limit under IRC Section 402(g)(7) and by the catch-up limit under Treasury Regulation Section 1.414(v)-1(c)(2).5
According to final 403(b) regulations, any catch-up amount contributed by an employee who is eligible for both an age 50 catch-up and the special 403(b) catch-up for certain organizations is treated first as an amount contributed as a special 403(b) catch-up, to the extent that type of catch-up is permitted and second as an amount contributed as an age 50 catch-up to the extent the catch-up amount ( Q 3761) exceeds the maximum special 403(b) catch-up after taking into account IRC Sections 402(g) and 415(c), the special 403(b) catch-up, and any limits on the special 403(b) catch-up that are imposed by the terms of the plan.6