IRS Increases Limits for 2015

The IRS just announced that next year's 401k and 403b contribution limit is $18,000 with a $6,000 catchup!  Read the full story and get all the retirement plan related limits HERE.

A client sent in a great question regarding catch-up contributions for those age 50 and older, and I thought I'd share it. The question was:

If I were to contribute the catch-up amount, would that be considered in the top heavy test?

The great thing is that catch-up contributions are not considered for testing purposes, including the ADP/ACP and top heavy tests.

What this means is that if you turn age 50 or older in the plan year (in this case I'm referencing 2015 plan year) you can contribute up to $6,000 on top of the $18,000 for a total of $24,000 to your 401k or 403b plan.

Now, if for some reason you're a highly compensated employee turning age 50 or older and you are limited in how much you can contribute due to testing issues, you should at least be able to put away $6,000 in your 401k in the form of the catch-up.

Questions on how to get the message out to your employees or how this works within your plan? Reach out.