How Does the 403(b) Special 15-Year Catch-Up Contribution Work?
Where have you worked, for how long, and how much have you contributed to the 403(b) plan? These are all questions that make up the puzzle pieces necessary to compute each participant’s available 403(b) catch-up.
Participants in a 403(b) plan can make an additional contribution once they have 15 years of service with the same 403(b) employer, including a:
- public school system,
- hospital,
- home health service agency,
- health and welfare service agency,
- church, or
- convention or association of churches
The amount available under the 15-year catch-up provision is based on the number of years of service and the total contributions previously made. Each year, a participant may be entitled to a special catch-up contribution amounting to the lesser of:
- $3,000, or
- $15,000 minus the prior 15-year catch-up contributions or
- $5,000 times years of service minus the total amount of 403(b) deferrals contributed
In a nutshell, the additional contribution is permitted if it brings the cumulative participant contributions closer to an average of $5,000 per year. Determining how many years of service with a single employer could be complicated when a participant does not work full-time, works only a partial-year, or works at different schools within a public school district or different hospitals within a system, but that’s beyond the scope of this article. To focus only on the computation of the available 15-year catch-up, let’s assume the following four participants are all full-time employees of the same plan sponsor.
| Employee 1 | Employee 2 | Employee 3 | Employee 4 | ||
| 403(b) Contributions | 403(b) Contributions | 403(b) Contributions | 403(b) Contributions | ||
| 15-Year Anniversary | 2024 | $5,000 | $4,000 | $4,500 | $ — |
| 2023 | $5,000 | $4,000 | $4,500 | $ — | |
| 2022 | $5,000 | $4,000 | $4,500 | $ — | |
| 2021 | $5,000 | $4,000 | $4,500 | $ — | |
| 2020 | $5,000 | $4,000 | $4,500 | $ — | |
| 2019 | $5,000 | $4,000 | $4,500 | $ — | |
| 2018 | $5,000 | $4,000 | $4,500 | $ — | |
| 2017 | $5,000 | $4,000 | $4,500 | $ — | |
| 2016 | $5,000 | $4,000 | $4,500 | $ — | |
| 2015 | $5,000 | $4,000 | $4,500 | $ — | |
| 2014 | $5,000 | $4,000 | $4,500 | $ — | |
| 2013 | $5,000 | $4,000 | $4,500 | $ — | |
| 2012 | $5,000 | $4,000 | $4,500 | $ — | |
| 2011 | $5,000 | $4,000 | $4,500 | $ — | |
| Date of Hire – 1/1/2010 | 2010 | $5,000 | $4,000 | $4,500 | $ — |
| Total 403(b) Contributions Made | $75,000 | $60,000 | $67,500 | $ — |
| Compare with:
($5,000 times 15 years of eligibility) |
$75,000 | $75,000 | $75,000 | $75,000 |
| Difference | $ — | $15,000 | $7,500 | $75,000 |
| Available Special Catch-Up Contributions – The lower of $15,000 or the difference above | $ — | $15,000 | $7,500 | $15,000 |
| Available Special Catch-up 2025
*(lesser of $3,000 or the above two criteria) |
$ — | $3,000 | $3,000 | $3,000 |
On the last day of the plan year ended December 31, 2024, all four of the employees in the above example have completed 15 years of service and are eligible for the 403(b) Special Catch-up Contribution for the first time in 2025.
According to the ordering rules, Employees #1, 2, 3, and 4 must contribute the maximum deferral under Internal Revenue Code section 402(g) before any contribution is attributable to the special catch-up, and then to the 50-year catch-up contribution or the enhanced 60-63 catch-up. Starting in 2025, catch-up contribution limits to retirement plans such as 401(k)s for those age 60 to 63 will increase from $7,500 per year to $10,000.
| Employee 1 | Employee 2 | Employee 3 | Employee 4 | |
| Forecasted 2025 402(g) Limit | $24,000 | $24,000 | $24,000 | $24,000 |
| Special 403(b) Catch-up | $ — | $3,000 | $3,000 | $3,000 |
| Age 50 Catch-up | $7,500 | $7,500 | $7,500 | $7,500 |
| Age 60-63 Catch-up | $10,000 | $10,000 | $10,000 | $10,000 |
| Age 50: Maximum 2025 Deferral | $31,500 | $34,500 | $34,500 | $30,000 |
| Age 60-63: Maximum 2025 Deferral | $34,000 | $37,000 | $37,000 | $37,000 |
The 403(b) Special 15-Year Catch-up Contribution Computation Must be Performed Annually
In Year 2, the maximum available 15-Year Catch-up available to Employees 1 through 4 is as follows:
| Employee 1 | Employee 2 | Employee 3 | Employee 4 | |
| Total 403(b) Deferrals Made from 2010 through 2024 | $75,000 | $60,000 | $67,500 | $ — |
| Forecasted 2025 Deferrals | $24,000 | $24,000 | $24,000 | $24,000 |
| Total Regular Deferrals for 16 Years | $99,000 | $84,000 | $91,500 | $24,000 |
| $5,000 times 16 years eligibility | $80,000 | $80,000 | $80,000 | $80,000 |
| Total Available Special Catch-up | $ — | $ — | $ — | $15,000 |
| 15 year catch-up contributed in previous years | $ — | $3,000 | $3,000 | $3,000 |
| 2026 Catch-up: the lesser of the above two criteria up to $3,000 | $ — | $ — | $ — | $3,000 |
Conclusion
Plan sponsors must make sure that they have the historical information necessary to compute the maximum available 403(b) catchup for each employee. If historical information is not available due to permissibly excluded contracts, then the plan sponsors should reconsider offering a plan provision that they cannot administer accurately, due to lack of information. If you don’t have all the puzzle pieces, it may be better to throw away the puzzle instead of trying to work with what you have to no avail. The above template is a good tool to document the computation of the maximum available 15-year catchup for every eligible employee taking advantage of this special catch-up opportunity that is exclusively available to 403(b) plans.
