Can retirement catch-up contributions be matched?

Depending on the terms of your plan, catch-up contributions you make to 401(k)s or other qualified retirement savings plans may be matched by employer contributions. However, catch-up contribution matching is not required, and it is subject to the same maximum contribution limitations as all other contributions.

Your employer may match your contributions to your qualified retirement plan if it elects that option. Or, it may simply contribute a set amount each year instead.

If an employer elects to match employee deferrals, it is generally based on a simple algorithm that limits the total amount the employer can be required to contribute. A common structure is for the employer to match 50% of employee contributions up to 6% of annual compensation.

The Internal Revenue Service (IRS) allows plan participants over the age of 50 to make annual catch-up contributions to encourage those nearing retirement to bulk up their savings. As of 2018, the allowable catch-up contribution for 401(k) plans is $6,000. However, catch-up contributions can only be made by employees who have maximized their traditional salary-deferral contributions.

The maximum amount that can be contributed to a 401(k) as of 2018 is $55,000. Of this, the employee can contribute only $18,500, leaving a maximum employer contribution limit of $36,500. However, employees over 50 can contribute an additional $6,000 each year, for a total employee contribution of $24,500 and a maximum contribution from all sources of $61,000.

If your plan allows for employer matching of catch-up contributions, the total amount of employer funds that can be contributed is still subject to the matching algorithm specified by your plan.

For example, assume an employee over the age of 50 makes $50,000 a year. Using the 50% / 6% algorithm referenced above, the maximum amount the employer will contribute is $1,500. However, the employee needs to contribute at least $18,500 to be eligible to make catch-up contributions. As a result, the employer would not be matching catch-up funds, simply because the employer contribution limit imposed by the plan is already surpassed after the first $3,000 of employee deferrals.

In the event that your employer has a particularly generous matching algorithm or matches contributions up to the $36,500 limit, your catch-up contributions may be matched.