The new ages 60–63 catch-up, and why it is not the cash balance limit

The most misunderstood line in IR-2024-285 is the new catch-up. For 2025, a participant who attains age 60, 61, 62, or 63 may make a catch-up deferral of $11,250 instead of the ordinary $7,500. The rule begins with the 2025 limitation year. It is public now, because the IRS announced it on November 1, 2024, in IR-2024-285 and Notice 2024-80. It is not in force on a 2024 paycheck. And it is not, in any year, a cash balance contribution limit.

That distinction is the whole briefing. Sterling Pension Group LLC in West Hartford is a third-party administrator. We coordinate independent Enrolled Actuaries when a defined benefit plan needs a certification we are not permitted to sign, because we are not an actuarial firm. This note is education for an owner, a physician, a dentist, an attorney, or a consultant who is in, or approaching, that age band. It is not tax, legal, or actuarial advice.

The announcement itself is the IRS newsroom piece, 401(k) limit increases to $23,500 for 2025. How to read the rest of the table, including what did not change, is /insights/reading-2025-limits. The permanent COLA list is here: dollar limitations.

Who is actually in the window

The higher catch-up is for the year in which the participant attains age 60, 61, 62, or 63. It is not a reward that begins on the sixtieth birthday and then lasts forever. A participant who turns 64 in 2025 is outside the window for 2025 and uses the ordinary age-50 catch-up, which remains $7,500. A participant who turns 59 in 2025 is also outside the window. Turning 60 in 2026 is a 2026 question, and 2026 dollar limits have not been released. Do not invent them. Do not assume the $11,250 figure is a permanent unindexed amount. It is the IRS figure for 2025, built from the statutory design of a higher limit, and later years will be whatever later notices say.

Age is attained for this purpose on the terms the statute uses, which is a question your document provider and counsel apply to the plan's definition. Do not guess from a birthday party. If you will be 62 for most of 2025 but turn 63 in December, you are still in the ages that the 2025 rule is about. If you turn 64 in January 2025, you need the plan's reading of "attains," not a brochure that says "early sixties." Write the birth date down and have the administrator check it against the document before payroll withholds the higher amount.

The higher amount is per eligible participant. It is not a household figure. Spouses who are both on payroll and both in the age window can each be eligible. A spouse who is 54 cannot use the 62-year-old's tier. An owner cannot "give" unused catch-up room to a younger partner. Catch-up eligibility is personal.

What the dollars are, and what they are stacked on

For 2025, once the year begins, the ordinary deferral limit will be $23,500. The age-50 catch-up will be $7,500. The ages 60–63 catch-up will be $11,250 instead of that $7,500, not stacked on top of it. An owner who adds $23,500 plus $7,500 plus $11,250 has double-counted the catch-up. The eligible 2025 total of employee deferrals for someone in the special window is the $23,500 deferral plus the $11,250 catch-up, not a third figure and not a larger invention.

Those deferrals are 401(k) deferrals. Catch-up amounts generally do not count toward the defined contribution annual additions limit, which will be $70,000 in 2025. They are still not cash balance credits. The compensation cap will be $350,000. The defined benefit annual benefit limit will be $280,000. The IRA limit stays $7,000. None of those last three numbers moves because you personally qualify for the higher catch-up. A 62-year-old and a 42-year-old face the same benefit limit. They do not face the same catch-up, and the difference between them on the catch-up line is $11,250 versus zero, not a different pension.

Until January 1, 2025, none of the 2025 column is operational. A 2024 deferral is still capped at $23,000, and a 2024 catch-up is still $7,500 for anyone age 50 or older, including someone who is already 62. There is no ages 60–63 tier in 2024. Withholding $11,250 of catch-up from a December 2024 bonus is an excess, not a head start.

Why owners keep trying to add it to the pension

The cash balance conversation and the catch-up conversation happen in the same season of life. The owner is old enough that the actuary's illustrative pay credit is often larger than it would have been at 45, and old enough to see a new catch-up in the news. The two facts get stapled together. They should not be.

A cash balance credit is a defined benefit promise. The actuary tests it against the annual benefit limit, $275,000 for a 2024 accrual and $280,000 for a 2025 accrual, and against the assets, the interest crediting rate, the compensation cap, and the census. The result is not published. Any dollar credit in a proposal is illustrative. Adding $11,250 to that credit, or substituting $11,250 for a credit the actuary has not computed, is a category error. The IRS page that describes the benefit limit, and that does not describe catch-up deferrals as a pension cap, is defined benefit plan benefit limits.

The higher catch-up also does not loosen nondiscrimination testing by itself. It is an employee deferral. Staff who are in the same age window and who are participants get the same statutory opportunity if the plan offers it. Staff who are younger do not. An owner cannot take $11,250 and decline to offer the feature to an eligible office manager. If the plan is amended to permit the higher catch-up, it is permitted on the document's terms for eligible participants, not for the owner as a class.

This is also why the feature lives naturally in the 401(k) half of a paired design. The ordinary reason for a pair is set out in /insights/combo-plan and on the combo page. The catch-up, ordinary or higher, is one of the jobs the 401(k) does. The cash balance plan's job is the actuarial credit. Keeping those jobs in separate columns is how you avoid wiring the catch-up into the pension trust as if it were employer funding.

Roth catch-up is still delayed

SECURE 2.0's Roth catch-up mandate was delayed by Notice 2023-62 through 2025. It is not in force. The new $11,250 catch-up, when 2025 payrolls begin, is not automatically a Roth contribution. The mandate is scheduled to become operational beginning January 1, 2026, for participants whose prior-year FICA wages exceeded $150,000. Even then, it changes the paired 401(k), not the cash balance formula. A participant can be in the ages 60–63 window and also be over the FICA wage threshold. Those are separate tests. In 2025, apply the age test for the amount. Do not apply the Roth mandate. Anyone who tells you the higher catch-up "has to be Roth now" is running next year's operational rule a year early, and is still talking about the 401(k), not about the pension.

Plans that already offer Roth deferrals can often permit a participant to choose Roth for a catch-up. Choice is not the mandate. If you want Roth treatment for tax reasons your CPA supports, that is a personal election inside a plan that allows it. It is not required by the November 2024 COLA release.

What the document and the payroll file have to do

A statutory catch-up is available only if the plan's operation and, where required, the plan's terms allow it. Do not assume a document written several years ago silently contains a tier that did not exist when it was drafted. Ask, in writing, whether an amendment is required before the first 2025 payroll, and who will prepare it. Sterling can coordinate that question with the document provider. The enrolled actuary does not need to "approve" a catch-up tier as if it were a cash balance pay credit. If someone quotes an actuarial fee to bless $11,250, you are in the wrong meeting.

Payroll has a narrower task. The provider needs the participant's date of birth, the correct year's limit table, and a rule for when the higher tier applies. The first 2025 payroll is the earliest this should run. A bonus paid in 2024 is not a trial run. Owners who are paid irregularly, or who take a single large W-2 late in the year, should look at whether 2025 pay will actually be large enough to withhold $23,500 plus $11,250. A limit is not a deposit. If you do not have the wages, you do not have the deferral. Earned income of a sole proprietor is a different computation entirely, and a sole proprietor does not withhold a 401(k) deferral from a paycheck that does not exist. Your CPA has to say how an owner deferral is executed for your entity. The higher catch-up does not simplify that.

Publication 560 remains the IRS booklet for small-business plans. It is a map of plan types, not a payroll coding sheet. When the booklet's printed catch-up figure lags the newsroom, follow the newsroom for the dollar amount and follow the document for whether your plan can use it.

What it does not change about funding the pension

Minimum funding for a calendar-year cash balance or traditional defined benefit plan is generally due September 15 of the following year, 8.5 months after year-end. The higher catch-up does not pay that minimum. It does not reduce it. It does not extend it. Missing the minimum can mean a 10% excise tax on Form 5330. Deductible timing under IRC 404(a)(6) still generally runs to the return due date including extensions, which is not the same date as September 15. Your CPA confirms the deduction date. A larger deferral in 2025 can change the owner's personal tax picture and can change how much of the defined contribution annual additions limit remains for employer profit sharing. It is not a substitute for the actuarial deposit.

PBGC coverage is untouched. It remains plan-specific. Many small professional-service employers are exempt. Not every small plan is exempt, and a catch-up tier does not create or destroy coverage. See the agency's coverage guidance. Form 5500 filing is untouched as well. A calendar-year return is generally due July 31 on EFAST2, extendable to October 15 with Form 5558. The Department of Labor's overview is Form 5500 reporting and filing. The catch-up will show up, eventually, as a deferral on the records that feed that filing. It will not show up as the cash balance contribution.

If you are comparing an illustrative cash balance credit at age 62 with the new catch-up, keep the labels brutal. The catch-up is at most $11,250 of employee deferral in 2025, and only if wages, the document, and the age test all cooperate. The pension credit is whatever the actuary computes under the $280,000 benefit limit once 2025 is the year being valued, and under $275,000 if the year being valued is still 2024. One of those numbers is a statute you can read tonight. The other is not a statute. The age effect on the pension side is real and is easy to overstate; /insights/age-shape is where that belongs once the 2025 benefit limit is the one in force. For this month, do not let the catch-up headline stand in for it.

The limits page separates these figures on purpose. The calculator and the illustrations will mislead you if you type the catch-up into a pension field. The fees for an amendment and a payroll update are minor next to the cost of a wrong deposit. The plan lifecycle does not treat a COLA tier as a new plan.

What to do in the next two weeks

Treat the new catch-up as a January payroll project, not as a November funding idea.

• Write down every participant, including you and a spouse on payroll, who will attain age 60, 61, 62, or 63 in 2025. Write down who will instead be 50 through 59, or 64 or older. The first group is the $11,250 group once 2025 starts. The second is the $7,500 group, if they are at least 50.
• Ask the document provider whether the plan can administer that tier on January 1 and whether an amendment is required. Do not withhold the higher amount in 2024.
• Tell payroll, in the same note, that 2024 remains $23,000 plus $7,500 where the ordinary catch-up applies. Put the 2025 ordinary deferral of $23,500 on the January checklist, not on the December checklist.
• If a proposal adds $11,250 to a cash balance credit, send it back. Ask for the credit to be restated as illustrative and silent on the catch-up.
• Confirm with your CPA that Roth catch-up is still delayed. Do not convert the 2025 catch-up to Roth because a headline said SECURE 2.0.

When the age list and the document answer are in writing, contact Sterling Pension Group if you want the 401(k) operation coordinated with the cash balance valuation. Bring dates of birth. Do not bring a blended "age-62 maximum."