Are Catch-Up Contributions Included in the 415 Limit?

Unlike regular employee deferrals, catch-up contributions are not included in the 415 limit. While there is an annual limit imposed on catch-up contributions, it is designated by a different section of the Internal Revenue Service (IRS) code governing contributions to qualified retirement savings plans.

Key Takeaways

  • Many employers offer 401(k) retirement plans to their employees in which limits allow up to $20,500 for 2022 and $22,500 for 2023.
  • Workers over age 50 are permitted catch-up contributions of an additional $6,500 for 2022, increasing to $7,500 for 2023.
  • If employers match contributions, the 415 limits—inclusive of matches on catch-ups—is $67,500 for 2022 and $73,500 for 2023.

What Is the 415 Limit?

Named for section 415 of the Internal Revenue Code (IRC), the 415 limit reflects the maximum allowable contributions to a qualified retirement savings plan in a given year. The maximum employee contributions are dictated by section 402(g), but the overall contributions from all sources are limited by section 415. This includes employee deferrals, employer matching, and profit-sharing contributions.

These types of contributions are considered to be annual additions. This means that your employer can potentially contribute much more than an individual to a 401(k), although this is not at all usual. In fact, most employer's match only up to 3%-5% of employee contributions.

For example, the 415 limit for 401(k) plans is $61,000 for 2022 and $66,000 for 2023. Of this, employees may contribute up to $20,500 in 2022 and $22,500 in 2023. The balance can be composed of employee contributions and matching or profit-sharing contributions. Anything above the 415 limit is considered overfunding of the retirement account and those monies do not enjoy the same tax-deferred benefits of qualified retirement money. If those excess funds are used incorrectly, the IRS may further impose fines and back taxes.

Catch-Up Contributions

To encourage employees nearing retirement to increase their savings, the IRS allows people aged 50 and over to make annual catch-up contributions in excess of the 402(g) and 415 limits. Because these contributions are defined separately in IRC code 414(v), they are not included as annual additions under section 415. In the case of a plan audit, therefore, any contributions made to a plan as allowable catch-up contributions are not included in the 415 limit test.

The Internal Revenue Service (IRS) allows plan participants 50 and over to make annual catch-up contributions to encourage those nearing retirement to bulk up their savings. For 2022, the allowable catch-up contribution for 401(k) plans is $6,500. For 2023, it increases to $7,500

However, catch-up contributions can only be made by employees who have maximized their traditional salary-deferral contributions. This increases the maximum employee contribution to $27,000 in 2022 (or $30,000 in 2023), and the maximum total annual contribution to $67,500 in 2021 (or $73,500 in 2023) for plan participants 50 and over.

Article Sources
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  1. Internal Revenue Service. “401(k) limit increases to $22,500 for 2023, IRA limit rises to $6,500.”

  2. Office of the Law Revision Counsel. "26 USC 402: Taxability of Beneficiary of Employees' Trust."

  3. Internal Revenue Service. "COLA Increases for Dollar Limitations on Benefits and Contributions."

  4. Office of the Law Revision Counsel. "26 USC 415: Limitations on Benefits and Contribution Under Qualified Plans."

  5. Vanguard. "How America Saves 2021," Page 21.

  6. Internal Revenue Service. "2022 Limitations Adjusted as Provided in Section 415(d), etc.," Page 1.

  7. Internal Revenue Service. "Issue Snapshot - Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan."

  8. Office of the Law Revision Counsel. "26 USC 414: Definitions and Special Rules."

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