The Internal Revenue Service (IRS) just released a notice that the Roth Catch-up Contribution Provision, created as a part of SECURE 2.0, will be postponed for two years for an administrative transition period. The rule, initially slated for Jan. 1, 2024, will now be enforced starting in 2026. This law requires employees 50 years or older with income over $145,000 in the prior calendar year to make all catch-up contributions to their retirement accounts in the form of Roth contributions.
The IRS also clarified that plan participants who are age 50 and over can continue to make catch‑up contributions after 2023, regardless of income. This was included to fix an error Congress made when it passed the SECURE 2.0 Act that could have resulted in the elimination of catch-up contributions after 2023.
Therefore, all catch-up contributions before Dec. 31, 2025, will continue to satisfy the requirements of SECURE 2.0, regardless of the contribution type. Also, retirement plans will only be required to offer Roth contributions as an option within their plan at the start of 2026. The IRS stated that “the extra time is designed to facilitate an orderly transition from compliance with that requirement.” This extra time will allow stakeholders (plan sponsors, payroll providers, and recordkeepers) to transition to the new Roth catch-up requirement and prepare for the updated procedures.
At OneDigital, we are here to assist you and your plan with complying with the updated requirements of SECURE 2.0. We will continue to keep you informed and provide clarity on all updated guidance. To learn more about this new change, contact your adviser or check out our recent blog post for more details.