If baby boomers haven’t saved enough for retirement, catch-up contribution limits for 401(k) plans may help them to increase their contributions as they move closer to retirement. In your role as NADART Plan Coordinator, participants may look to you for guidance on this subject.

The rules are simple. If a participant is age 50 or older in a given year, he or she may make an additional $5,000 pre-tax contribution to the NADART 401(k) plan. This contribution must be made through payroll deduction. Personal checks cannot be accepted. The catch-up contribution is over and above:

• The pre-tax deferral limit for the year ($15,500 for 2008)
• Any limits imposed on highly compensated employees by the Contribution Nondiscrimination Test (CNT)
• The limits on how much can be allocated to a participant's account annually

Any increases to this catch-up contribution will be determined by the rate of inflation and stated in IRS retirement plan limits annually. Refer to the table below for both the pre-tax deferral limit, the catch-up contribution limit and the combined pre-tax deferral and catch-up contribution limit for previous, current and future years (if already provided by the IRS).

Highly compensated employees over age 50 should be aware that the IRS allows the first $5,000 (in 2008) of any excess 401(k) contributions to be classified as catch-up contributions. They can contribute the allowable catch-up contribution maximum ($5,000 in 2008) over the highly compensated employee limit without worrying about a refund.

NADART has created payroll stuffers to help you spread the word about catch-up contributions to your participants who are age 50 and older. If you have questions about catch-up contributions, please contact our Plan Information Center at nadart@nada.org or call (800) 462-3278.