As of 2025, there are several important 401(k) plan updates that you should be aware of:
- Contribution Limits:
- The basic employee contribution limit increased to $23,500 (up from $23,000 in 2024)
- The catch-up contribution limit for those 50-59 or 64+ remains at $7,500. Important note: Beginning in 2025, those between ages 60 and 63 will be eligible to contribute up to $11,250 as a catch-up contribution.
- Total contribution limit (employer + employee) increased to $70,000 (up from $69,000 in 2024)
- SECURE 2.0 Act Provisions:
- Employers must automatically enroll eligible employees in new 401(k) plans at a rate of at least 3% of salary
- Automatic annual contribution increases of 1% up to at least 10% (but no more than 15%) of pay
- The age for required minimum distributions (RMDs) is 73 for people who turn 72 after 2022 and 75 for for people who turn 74 after 2032
- Student Loan Matching:
- Employers can now match student loan payments with 401(k) contributions
- This helps employees save for retirement while paying off student debt
- Emergency Withdrawals:
- You can withdraw up to $1,000 per year for emergency expenses without the usual 10% early withdrawal penalty. (Note: not all employers may offer this option)
- You must repay the withdrawal within 3 years
- Part-time Worker Eligibility:
- Long-term part-time workers who have worked at least 500 hours per year for two consecutive years must be allowed to participate
Important Note:
- 401(k) plans can have complex rules and regulations.
- This information is for general guidance only and does not constitute financial or tax advice.
- Always consult with a qualified financial advisor or tax professional for personalized guidance on your specific situation.