Final Catch-Up Contribution Regulations Issued by IRS

Washington, DC, July 11, 2003 - The IRS has finalized regulations that clarify how individuals age 50 and over can make contributions to their employer-sponsored retirement savings plan accounts that exceed the annual contribution limits.

Background
The final regulations implement the catch-up provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, and include several statutory changes enacted as part of the Job Creation and Worker Assistance Act of 2002.

The final regulations provide that catch-up contributions may be made to employer-sponsored plans including section 401(k) plans, SIMPLE IRAs, simplified employee pensions (SEPs), 403(b) plans or contracts, and governmental section 457 plans. A participant is eligible to make catch-up contributions if the participant would attain age 50 or older before the end of the taxable year.

The final regulations address a number of issues, including:

contribution limits,
universal availability,
matching contributions,
participants in multiple plans,
exclusion of catch-up contributions from income taxes.

The final regulations apply to contributions in taxable years beginning on or after January 1, 2004.

ICI Position
The Institute has long-supported the introduction of catch-up contributions, a step which will enhance the retirement security of many Americans by enabling them to save additional amounts for retirement. The Institute made several recommendations to the IRS on the proposed regulations, many of which are addressed in the final regulations.