Overview: A 401(k) Catch-Up contribution is an additional amount that individuals aged 50 and older can contribute beyond the standard annual limit. Buddy Punch automatically tracks eligibility based on the birthdate entered during onboarding.
Instructions:
Additional Resources:
401(k) Contribution/Catch-Up Table
The table below outlines the standard 401(k) contribution limit and the additional Catch-Up contribution limit for the specified years:
Type | 2023 | 2024 | 2025 |
401(k) Annual Limit | $22,500 | $23,000 | $23,500 |
Catch-Up Annual Limit | $7,500 | $7,500 | $7,500 |
Total Annual Limit | $30,000 | $30,500 | $31,000 |
Example:
A 49-year-old employee contributing the maximum allowable percentage of their salary in 2024 will stop at $23,000. A 50-year-old employee contributing the same percentage will stop at $30,500.
Enrollment Process
During implementation, prior payroll providers may have separated 401(k) and Catch-Up contributions into different deductions. While this setup is common, Buddy Punch consolidates these amounts under the standard 401(k) benefit code. Additionally, contribution percentages should be combined. Since Buddy Punch does not track Catch-Up contributions separately, they are instead included under the standard 401(k) code and activated based on age.
Examples:
If an employee has $5,000 in year-to-date (YTD) 401(k) contributions and $1,000 in Catch-Up contributions, their total YTD contribution should reflect $6,000.
If an employee is contributing 5% to their 401(k) and 1% to their Catch-Up, they should be set up with a total 6% Employee Contribution Percentage under their 401(k) plan.
Ongoing Payroll Management
Employees turning 50 during the calendar year will automatically be eligible to contribute up to the Total Annual Limit. The only required action is adjusting their Employee Contribution Percentage to reflect their desired total contribution, including both the standard 401(k) and Catch-Up amounts. Employees reaching age 50 can elect to contribute at the higher limit from the beginning of that calendar year.
Example:
In 2024, an employee earning $100,000 annually and contributing 23% of their salary would reach the $23,000 limit if they are under 50. If they turn 50 in 2024 and wish to maximize contributions, they would need to adjust their percentage to 30% to reach the $30,500 limit.
Employee Communication
Employees may not realize that their Catch-Up contribution is included within their standard 401(k) deduction. This should be clearly communicated, as their pay statement will reflect one total amount. Additionally, the total 401(k) deduction, including Catch-Up contributions, will be reported in Box 12 (Code D) on their W-2.