The IRS has announced an extended administrative transition period for the new Roth catch‑up requirement through 2026. Under this administrative relief, any catch-up contributions made by high-income participants in 401(K) and other similar retirement savings plans will be treated as in compliance with the Secure 2.0 requirement even if the contributions are still treated as regular pre-tax contributions. Additionally, catch-up contributions are still permitted after 2023 for plan participants ages 50 and over.
You can find the full details of the IRS announcement in Notice 2023-62. It provides initial guidance for the SECURE 2.0 Act, section 603. Under this provision, new Roth catch-up contribution rules apply to employees participating in related retirement plans [401(K), 403(b), and 457(b)] and whose Social Security wages exceeded $145,000 in the prior year.
The administrative transition period aims to ensure that taxpayers can experience a smooth transition to the Roth catch-up requirement and maintain compliance in an orderly way. Additionally, the SECURE 2.0 Act doesn’t prohibit plans from allowing catch-up contributions, extending the period beyond 2023.
This article is informational and does not constitute legal or financial advice. Consult with an employment lawyer or accountant for additional clarification on how these changes impact your company.