Can Retirement Catch-Up Contributions Be Matched?

The short answer is yes, but there are limitations

Depending on the terms of your employer's 401(k) plan, catch-up contributions made to 401(k)s or other qualified retirement savings plans can be matched by employer contributions. However, the matching of catch-up contributions is not required. Also, the Internal Revenue Service (IRS) limits the total amount of annual contributions to 401(k)s by both the employee and employer.

As a result, it's important to understand the rules and restrictions regarding contributing to 401(k)s and whether a catch-up contribution will be matched or not.

Key Takeaways

  • Many employers match 401(k) retirement plan contributions made by employees, up to a certain percentage of their salary.
  • The maximum amount that an employee under the age of 50 can contribute to a 401(k) is $19,500 for 2021 and $20,500 for 2022.
  • Catch-up contributions of an additional $6,500 are available to workers age 50 and older for 2021 and 2022.
  • Catch-up contributions can be matched but are often subject to maximum caps outlined in the plan.

What Is Retirement Plan Matching?

Your employer can match your contributions to your qualified retirement plan using various methods. The employer could contribute a set amount each year or decide not to match at all, depending on the terms in the plan.

Typically, employers match a percentage of employee contributions, up to a certain portion of the total salary. Occasionally, employers may elect to match employee contributions up to a certain dollar amount, regardless of employee compensation.

If an employer elects to match employee contributions—or deferrals—it is generally based on a calculation that limits the total amount that the employer is required to contribute. For example, an employer might match 50% of employee contributions up to 6% of their annual compensation. In other words, the employee would contribute 6% of their salary while the employer would provide a match in the amount of 3% of the employee's salary.

Matching contributions to a 401(k) from your employer are generally limited by a calculation derived from the employee’s salary and contribution amounts.

How Catch-Up Contribution Matching Is Handled

The IRS allows plan participants age 50 and older to make annual catch-up contributions to encourage those nearing retirement to bulk up their savings. For 2021 and 2022, the allowable catch-up contribution for 401(k) plans is $6,500 per year. However, catch-up contributions can only be made by employees who have maximized their traditional salary-deferral contributions.

Contribution Limits

The maximum amount that an individual plan participant can contribute to a 401(k) is $19,500 for 2021 and $20,500 for 2022. For an employee's catch-up contribution to be qualified for a match by their employer, the employee would need to contribute the maximum amount first.

The employer's 401(k) maximum contribution limit on any match is actually set quite a bit higher, at $38,500 for 2021 and $40,500 per year for 2022. As a result, the combined maximum amount that could be contributed to your 401(k) plan between both you and your employer is $58,000 ($19,500 + $38,500) in 2021 and $61,000 ($20,500 + $40,500) in 2022. This means that your employer can potentially contribute much more than an individual to a 401(k), although this is not at all usual.

Catch-up Contribution

Employees aged 50 and older can contribute an additional $6,500 for 2021 and 2022, for a total employee contribution of $26,000 for 2021 ($19,500 + $6,500) and $27,000 for 2022 ($20,500 + $6,500).

As a result, the maximum contribution amount for those aged 50 and over—including from the employer—can be $64,500 ($38,500 + $26,000) in 2021 and $67,500 ($40,500 + $27,000) in 2022.

However, if your plan allows for employer matching of catch-up contributions, the total amount of employer funds that can be contributed is still subject to the matching rules specified by your plan. In other words, the employer might set a dollar-amount limit or cap for the total amount that they'll match and contribute.

Whether 401(k) contributions come from the employee or employer, all contributions are subject to the annual contribution limit dictated by the IRS.

Example of Catch-Up Contribution Matching

Let's say, as an example, an employee who's over 50 years old earns $50,000 per year. The employer has offered a 50% match and established a maximum amount of $3,000 that the employer will contribute in one year.

The employee wants to make a catch-up contribution and, as a result, needs to contribute at least $19,500 to be eligible. If the employee contributes $19,500, the employer's match based on the percentage would be $9,750 or 50% of $19,500. However, the employer would have already hit the $3,000 limit and, therefore, would not be matching anything beyond the $3,000 already contributed.

On the other hand, let's say the employer had a generous matching program and didn't have a $3,000 maximum match but instead paid up to the $38,500 employer limit for 2021. The catch-up contributions would be matched since the employee's total contributions for 2021 would be $26,000 (or $19,500 + $6,500), and the total match would equal $13,000 for the year.

Article Sources
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  1. Internal Revenue Service. "IRS Announces 401(k) Limit Increases to $20,500." Accessed Feb. 2, 2022.

  2. Internal Revenue Service. "Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits." Accessed Feb. 2, 2022.

  3. Internal Revenue Service. "401(k) Plans - Deferrals and Matching When Compensation Exceeds the Annual Limit." Accessed Feb. 2, 2022.

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