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The 457(b) Special Catch-Up

If you’re a governmental employee, you may be aware that your employer offers a 457(b) retirement plan. Additionally, you likely know that like a 401(k), the 457(b) allows you to contribute $19,000 annually to the plan with an additional $6,000 catch-up for those aged 50 or older.

What you may not be aware of is the special catch-up provision the 457(b) offers. This special catch-up provision allows a governmental employee that is within 3 years of the normal retirement age (as dictated in the plan) to contribute up to twice the annual amount ($38,000 for 2019).

To take advantage of this special contribution the plan sponsor (employer) must allow it in the verbiage of the plan. Additionally, the employee must have unused contribution amounts from prior years. In other words, an employee can contribute twice the amount normally allowed if that employee has unused contributions from prior years; they didn’t contribute the maximum in previous years.

In addition, for an employee to take advantage of the special catch-up the employee must not also be making age-based (age 50 and over) catch-ups in the year the special catch-up contributions are being made.

Finally, the IRS states that the special contribution must be the lesser of twice the annual limit ($38,000 in 2019) or the normal annual limit ($19,000 in 2019) plus any unused basic limit from previous years. However, employees taking advantage of unused basic limit contributions from previous cannot make age-based catch-up contributions and unused basic deferrals from previous years.

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