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403(b) 15 years-of-service catch-up contribution election

“How does the special 15-year catch-up contribution rule works for 403(b) plans?”

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business. A recent call with a financial advisor from Massachusetts is representative of a common inquiry related to 403(b) salary deferrals.

Highlights of the Discussion

The IRS allows certain long-term employees to catch-up on the funding of their 403(b) plans by electing to increase their elective deferrals over the standard dollar limit. The election is available only to employees who have completed at least 15 years of service with one of the following types of employers:

With the exception of church-related organizations or organizations controlled by a church-related organization, years with different employers cannot be added together for purposes of satisfying the 15-year requirement.

Example 1

Anna is a teacher with the West County School System. She has been employed by West County for six years, but worked for the East County School System for 10 years prior to coming to West County. There is a State Teachers Retirement System that covers all of Anna’s years with both West and East Counties. However, only the years that Anna worked while a teacher for West County may be counted for purposes of eligibility for the 15-year catch-up contribution election [see Treas. Regs. 1.403(b)-4(c)(3)(ii)(B) and 1.403(b)-4(e)(3)].

Under the special 15-year catch-up election, the standard annual deferral limit (i.e., $18,500 for 2018) is increased by the lesser of the following three numbers:

  1. $3,000 or
  2. $15,000 minus any elective deferrals previously excluded under this catch-up election, plus any amount of designated Roth contributions in prior years under this catch-up, or
  3. $5,000 multiplied by the employee’s years of service minus the elective deferrals made to plans of the organization in prior taxable years.

There is a lifetime limit of $15,000 for this catch-up election. And, to complicate matters further, an individual age 50 or older may make an additional standard catch-up of $6,000. For an employee eligible to use both the 15-year catch-up and the age 50 catch-up, he or she must apply the 15-year catch-up first. Then an amount may be contributed as an age 50 catch-up to the extent the age 50 catch-up limit exceeds the 15-year catch-up limit.

Example 2

Let’s apply all this in an example.

For 2018, Dion, age 50, has taxable compensation of $70,000. He has worked for the local hospital for 15 years. Dion has made no other elective deferrals during the year, and this will be the first year he contributes to the hospital’s 403(b) plan.

The general 402(g) limit is $18,500. Dion can use up to $3,000 of the 15-year catch-up, and he qualifies for the age 50 catch up of $6,000. Therefore, the maximum amount Dion can elect to defer is $27,500 ($18,500 + $3,000 + $6,000). If Dion defers only $24,500, then $3,000 will count as his 15-year catch-up contribution (reducing future 15-year catch-up contributions because of the $15,000 lifetime limit) and $3,000 will count as his age 50 catch-up.

Example 3

Similarly, Fiona, age 50, has taxable compensation of $70,000 for 2018. She has worked for the local hospital for 20 years. Fiona has made no other elective deferrals during the year, but she has made elective deferrals in prior years to the 403(b) plan of $175,000.

The general 402(g) limit is $18,500. The 15-year catch-up is only available if prior deferrals do not exceed $5,000 x her years of service (i.e., $5,000 x 20 = $100,000). Fiona had prior deferrals of $175,000. Therefore, she has used up her 15-year catch-up. However, because she has attained age 50, she is eligible for the age 50 catch-up limit of $6,000. Consequently, the maximum Fiona can elect to defer is $24,500 ($18,500 plus $6,000 under the age 50 catch-up).

Be sure to check the terms of the 403(b) document for any additional limitations that may apply on salary deferrals.


Certain long-tenured 403(b) plan participants who work for eligible employers such as a public school system, hospital or church have special considerations when it comes to the maximum amount they can defer into their 403(b) plans. Plan language can also affect how much participants are eligible to contribute. The rules are complicated; therefore, 403(b) plan participants should be encouraged to discuss their contributions with a tax advisor.

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