Why consider contributing your lump sum separation pay?
Top benefits
How it works
Meet with your Personnel Specialist
Estimate your leave balance and calculate the value of your Lump Sum Separation Pay.
Review IRS contribution limits
Understand how much you can contribute to your 401(k) and 457(b) plans, including catch-up options.
Complete the worksheet
Use the Lump Sum Separation Pay Workbook to calculate your eligible contributions.
Choose your strategy
Decide how to allocate your contributions across standard IRS limits, catch-up contributions (age-based or traditional), or two tax years (if separating in November or December).
Complete and submit your form
Turn in your completed form to your personnel office at least 30 days before separation.
Let’s say you’re separating in December, and your estimated Lump Sum Separation Pay is $100,000. You’re age 59, so you qualify for Age-Based Catch-Up and Traditional Catch-Up. You want to maximize your contributions across two tax years.
Your strategy:
- 2025 Contributions
- $23,500 to 457(b) Standard
- $7,500 to 457(b) Age-Based Catch-Up
- $23,500 to 401(k) Standard
- $7,500 to 457(b) Age-Based Catch-Up
- 2026 Contributions
- $23,500 to 457(b) Standard (estimated)
- $14,500 to 457(b) Traditional Catch-Up (approval required)
This strategy allows you to defer the entire lump sum, reduce your taxable income, and maximize retirement savings.
Boost your retirement with Traditional Catch-Up (TCU)
Guides and tools
Step-by-step instructions and worksheets to calculate your contributions
View current limits
Learn more about Age-Based and Traditional Catch-Up options
Access your leave balances and contribution history
Forms and resources
Are you a payroll specialist or HR representative?
For the most accurate estimate, contact your personnel specialist. You can also calculate the cash value using:
Monthly gross base pay ÷ 173 = hourly wage
Hourly wage × eligible hours = lump sum value
Submit your form at least 30 days before your separation date. It must be received no later than five workdays prior to separation.
Yes. You can contribute up to the IRS maximum for each plan type within the same year.
No. Once submitted, your election is irrevocable.
Yes. You may be eligible for one of the following catch-up provisions (only one per plan year):
- Age 50+ Catch-Up: Up to $7,500 over the standard limit if you're 50 or older.
- Special Age-Based Catch-Up (60–63): Up to $11,250 over the standard limit.
- Traditional 457(b) Catch-Up: Available within three years of your Normal Retirement Age, as defined by your employer’s plan.
- For help, contact the Solutions Center at 1-855-616-4776.
You may be eligible to contribute across two tax years. Be sure to complete Sections 4 & 5 of the form.
Workdays are Monday through Friday, excluding weekends and legal holidays. Be mindful of observed holidays when calculating deadlines.
Any unallocated funds will be paid directly to you and are subject to applicable taxes.
Yes. Once posted to your account, your funds are accessible. If not posted within 75 days of separation, contact your Personnel Office.
Reach out to the Savings Plus Solutions Center or your personnel office.
Starting January 1, 2026, catch-up contributions must be made as Roth if your prior-year FICA wages exceed $145,000.
Employees with prior-year FICA wages over $145,000 from the same employer. Wages from multiple employers are not combined.
Only age-based catch-up contributions (50+ and 60–63) are affected. These must be Roth if you exceed the income threshold. Traditional catch-up remains pre-tax.
Lump sum pay can be contributed pre-tax up to IRS limits. If using catch-up and your prior-year FICA wages exceed $145,000, those contributions must be Roth. If deferring into a second tax year, both current wages and contributions must be considered.