Employees who turn 50 or older this calendar year can contribute more to their retirement plans.
In 2016, the maximum annual contribution for these employees is $18,000 in elective deferrals, plus an additional $6000 in catch-up contributions (for most retirement funds).
If you have a catch-up 401(k) plan or other qualified catch-up retirement plan, contributions made by your employees are not subject to federal income tax, although they are subject to Social Security, Medicare, and federal unemployment taxes.
Retirement plan contributions are also not subject to state income tax. State laws vary as to whether they’re subject to state unemployment tax or other types of state taxes. We'll comply with the your state's laws when calculating retirement plan deductions.
For detailed info on retirement plan catch-up limits, see IRS Retirement Topics - Catch-Up Contributions.
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