IRS Delays Roth Catch-Up until 2026

IRS Delays Roth Catch-Up until 2026

August 30, 2023

The IRS released guidance on Aug. 25, 2023 that addressed Section 603 of the SECURE 2.0 Act concerning Roth catch-up contributions, giving employer retirement plans two additional years to comply.

This rule under Section 603 of the SECURE 2.0 Act was supposed to be effective beginning next year, but now the IRS says it will provide a two-year "administrative transition period" — until Jan. 1, 2026 — before plans must comply with the new law.

The law mandates that catch-up contributions must be on a Roth basis for those earning more than $145,000. More specifically, catch-up contributions can be made pre-tax through 2025, regardless of income. No employees will be required to make catch-up contributions on a Roth basis and plans that don’t already offer Roth contributions will not need to begin offering them.

Employees will have a choice on this from now until 2026 and can make catch-up contributions where they see fit.

It also addressed the technical error that would have eliminated all catch-up contributions beginning in 2024. Under the notice, catch-up contributions can continue to be made after 2023. The error would have eliminated all catch-up contributions (pre-tax or Roth) beginning in 2024.

To view the full guidance from the IRS click here.

We are happy to help provide additional insight, feel free to reach out to me at joe@diversifiedfa.com´╗┐ or 800.307.0376.

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