Depending on the terms of your employer's 401(k) plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans may be matched by employer contributions. However, catch-up contribution matching is not required, and it is subject to the same maximum contribution limitations as all other contributions. As of 2019, for retirement savers over age 50, a maximum of $7,000 may be contributed to their 401(k) each year ($6,000 for younger than 50).

Key Takeaways

  • Many employers match 401(k) retirement plan contributions made by employees, where each worker under age 50 can contribute up to $19,000 a year.
  • Catch-up contributions of an additional $6,000 are available to workers over age 50.
  • These catch-up contributions may also be matched subject to maximum caps.

What Is Retirement Plan Matching?

Your employer may match your contributions to your qualified retirement plan if it elects that option. Or, it may simply contribute a set amount each year instead. Depending on the terms of your employer's 401(k) plan, your contributions to your retirement savings may be matched by employer contributions in a number of ways. Typically, employers match a percentage of employee contributions, up to a certain portion of 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 deferrals, it is generally based on a simple algorithm that limits the total amount the employer can be required to contribute. A common structure is for the employer to match 50% of employee contributions up to 6% of annual compensation.

Regardless of whether contributions to your 401(k) come from you or from employer matching, all deferrals are subject to an annual contribution limitdictated by the Internal Revenue Service (IRS)

How Catch-Up Contribution Matching Is Handled

The Internal Revenue Service (IRS) allows plan participants over the age of 50 to make annual catch-up contributions to encourage those nearing retirement to bulk up their savings. As of 2018, the allowable catch-up contribution for 401(k) plans is $6,000. However, catch-up contributions can only be made by employees who have maximized their traditional salary-deferral contributions.

The maximum amount that an individual plan participant can contribute to a 401(k) as of 2019 is $19,000. The employer’s 401(k) maximum contribution limit on any match is actually set quite a bit higher at $37,000 per year. Combined, the maximum that can be contributed to your 401(k) plan between both you and your employer is $56,000, up from $55,000 in 2018. This means that your employer can potentially contribute much more than an individual to a 401(k), although this is not at all usual. However, employees over 50 can contribute an additional $6,000 each year, for a total employee contribution of $25,000 and a maximum contribution from all sources of $62,000.

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 algorithm specified by your plan.

For example, assume an employee over the age of 50 makes $50,000 a year. Using the 50% / 6% algorithm referenced above, the maximum amount the employer will contribute is $1,500. However, the employee needs to contribute at least $19,000 to be eligible to make catch-up contributions. As a result, the employer would not be matching catch-up funds, simply because the employer contribution limit imposed by the plan is already surpassed after the first $3,000 of employee deferrals.

In the event that your employer has a particularly generous matching algorithm or matches contributions up to the $37,000 limit, your catch-up contributions may be matched.