Breaking News: IRS Grants Two-Year Delay in Roth Catch-Up Requirements

Section 603 of the SECURE 2.0 Act added a new requirement that high-income individuals must make their catch-up contributions on a Roth basis for high-income individuals, citing “high-income” as  employees with wages exceeding $145,000 paid in the prior calendar year by the employer sponsoring the plan.

Mandatory Roth treatment of catch-up contributions for high income individuals was set to start in tax years starting January 1, 2024. With these new, abbreviated parameters, employers, plan record-keepers, payroll companies and various industry and professional groups have expressed concerns. These concerns stem from the additional challenges in making the necessary changes to plan documents, employee communications, and administrative procedures required for proper implementation.

In response to those concerns, the IRS granted a two-year delay for the required implementation date, which is now for plan years beginning after December 31, 2025. That means until the 2026 plan year, plan sponsors may continue to administer catch-up contributions without regard to the new Roth requirement.

There are many more items from SECURE 2.0 that need more guidance from the IRS. SMA Services will be keeping you up to date and providing helpful insight on how the new guidance affects your plan, as new information becomes available.

If you have any questions, please reach out to me, Rick Spence, at rspence@sma.org or contact your dedicated administration specialist today for further information.