September 14, 2023
The SECURE 2.0 Act had a little noticed provision that would, in 2024, not allow high earning employees to make deductible “catch-up” contributions to retirement plans. Such contributions could only go into a Roth portion of the plan.
Compliance with the new rule was required to begin on January 1, 2024, creating immediate challenges for plan sponsors to timely implement the new rule. However, in a welcome development, the IRS recently delayed by two years the deadline for plan sponsors to comply with this requirement. On August 25th, the IRS announced that there will be a two-year administrative transition period for the SECURE 2.0 Act provision, generally allowing plan sponsor relief to get plans in compliance until December 31, 2025.
This announcement, outlined in Notice 2023-62, also provided some insight into section 603 of the SECURE 2.0 Act, which was established in December 2022. Under this section, the new Roth catch-up contribution provision applies to an employee who participates in a specific retirement plan and whose prior-year Social Security wages were above $145,000. The IRS also clarified that participants who are over fifty years old can continue making catch-up provisions after this year, regardless of their income.
For more information, please visit the IRS link below or give our office a call.