Secure Act 2.0 Update
Employers now have two more years to adjust their benefits plans to meet the catch-up contributions changes outlined in the Secure Act 2.0.
Updated guidance from the IRS (Notice 2023-62) extends the transition period for pre-tax Roth catch-up contributions until 2026. Before this announcement, many plans were racing to meet the January 1, 2024, deadline.
Most affected by the changes are higher-income participants (employees whose prior year wages exceeded $145,000) who, after 2026, will only be able to make catch-up contributions on a Roth (after-tax) basis. However, because plans have been granted an additional two years, these participants will be able to continue to contribute catch-up contributions on a pre-tax basis for that duration. The IRS guidance also clarified that plan participants who are fifty or older may continue to make catch-up contributions regardless of their income level.
According to an IRS press release, the changes were announced to “help taxpayers transition smoothly to the new Roth catch-up requirement and is designed to facilitate an orderly transition for compliance with that requirement. “
Currently, individuals age fifty and older may contribute an extra $7,500 into 401(k) plans and other retirement plans beyond the $22,500 employee deferral limit for 2023.
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