Make-Up Contributions

[#toomanyrules]

Non-governmental 457(b) plan - participant becomes eligible in 2021 and is age 62. NRA is age 65. Since participant is within 3 years of NRA, the participant can make a catch-up contribution. 

Since there is no under-utilized amounts from prior years (given that the first year of participation is 2021), is the participant able to make catch-up contributions? Since the catch-up is the lesser of 2X the annual limit or the under-utilized amounts from prior years, what do we use as the  under-utilized amount from prior years to determine the available catch-up? 

[John Feldt ERPA CPC QPA]

The underutilized amount is equal to zero since they were not eligible for the plan before, so the catch-up is limited to that, which is zero.

Now 2021 is over. If they entered in 2021 and no allocation was done for 2021, then they have an underutilized amount now equal to $19,500 which can be used now.

Also, read the 3-year language carefully, my understanding is that the year they reach normal retirement age is not a year that can provide a catch-up, it’s the 3 years prior to the year they reach normal retirement, but check the document. 

[#toomanyrules]

Thanks, John. Yes, I agree - at age 65 the participant can no longer make catch-up. I was leaning toward $0 catch-up available, but needed some reassurance!