3-Year Catch-Up (457 Plans)

The 3-Year Catch–up provision allows employees who are close to retirement to make contributions up to twice the regular contribution limit.

You are eligible to use the 3-Year Catch-up provision if you:

  • Participate in the Retirement Investors' Club 457 plan;
  • Are three years from your declared "normal retirement age"; AND
  • Did not defer the maximum amount allowed for one or more years that you were eligible to participate in this plan.

If eligible for the 3-Year Catch-up provision, you may qualify to contribute up to twice the regular annual contribution limit during the three years prior to, but not including, the year you will reach normal retirement age.

Eligible Contributions

You may only catch-up on amounts you were eligible to contribute in the past but did not. You may go back to the later of the following dates:

  • January 1, 1979; or
  • The date you became eligible for your employer's plan

Example

In 2015, the IRS maximum contribution limit was $18,000 for the year. If you were eligible to contribute to your employer's 457 deferred compensation plan and only contributed $3,000 that year, you would have $15,000 to "catch up" on. Or if you didn't participate in your employer's deferred compensation plan at all that year, you would have the full $18,000 to "catch up" on.

Participation rules

  • You may designate only one period of 3 consecutive years as your 3-year catch-up period.

  • The 3-year period must precede your declared normal retirement age.
  • You cannot use the 3-year catch-up provision during or following the year of your normal retirement age.
  • You are not required to contribute the maximum amount nor are you required to use it for all three years. Your contributions should be based on your budget and how much you can afford.
  • If you elect to apply the 3-year catch-up provision to your account and do not take advantage of the higher catch-up limits in the first or second year, you have "lost" the higher limit benefit of those years. In this example, your 3rd year is your last chance to use the higher 3-year catch-up limit designated for that year.
  • If you work beyond your declared normal retirement age, you may NOT extend the use of the 3-year catch-up provision. You simply return to the 50+ contribution limit once the catch-up period is complete.

Contribution limit

The catch-up provision allows you (if qualified) to contribute up to twice the regular IRS limit as follows:

  • 100% of your compensation or the Regular Limit, whichever is less, PLUS
  • The amount of the contributions which have been underutilized in all prior taxable years since the 457 plan has been available to you (no earlier than January 1, 1979 for State employees)
  • Up to a total of maximum 3-year catch-up limit.

The maximum amount you may contribute in a 3-year catch-up year is determined by how much you have missed contributing in the past.

Example

If you qualify to participate in 2022, you could utilize the 3-year catch-up limit in 2022, 2023, and 2024. You are not required to contribute the maximum during this time. If after this 3-year period, you decide to continue working and contributing, you would drop back down to the Age 50+ Limit in 2025 and beyond.

Normal retirement age

Normal retirement age is age 65 unless you declare a different normal retirement age (no later than age 70 ½). The normal retirement age you choose may not be earlier than a year in which you are eligible to receive pension benefits WITHOUT an age reduction penalty from your regular pension plan (IPERS, POR, Judicial). Please consult with your retirement plan’s representative for more information. For example, IPERS will NOT reduce your benefits due to age, if you:

  • Meet the Rule of 88 (minimum age 55) plus your years of service equal or exceed the number 88); or
  • Meet the 62 and 20 provision (age 62 with at least 20 years of service);or
  • Are age 65 or older.

Your normal retirement age determines the time period of your 3-year catch-up provision. 3-year catch-up contributions may not be made in the year you declare as your normal retirement age. You can retire sooner than your declared normal retirement age.

Your declared normal retirement age is irrevocable once you begin to use the 3-year catch-up provision to any extent.

How to qualify and apply:

To qualify for the 3-year catch-up benefit, you must first request a 3-Year Catch-up Worksheet. This worksheet is then completed by your payroll office with your income and deduction information history to determine eligibility. The completed worksheet automatically calculates the maximum amount of missed contributions available for catch-up.

To request a 3-Year Catch-up Worksheet:

  • Non-state employees: Contact your payroll office.

  • State of Iowa employees: Send your full name and last four digits of your social security number to RIC. The worksheet will be forwarded to you for consideration and signature. If you choose to apply the 3-year catch-up limit to your account, forward your worksheet and a copy of your most recent IPERS benefit estimate (IPERS benefit calculation) to RIC (fax 515-281-5102). If you wish to increase your payroll deduction amount, log into Workday and select the Benefits worklet, then select the Retirement Savings tab.