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On August 25, the Internal Revenue Service issued Notice 2023-62 (the Notice) delaying implementation of a provision of the SECURE 2.0 Act of 2022 that, commencing in 2024, would have required catch-up contributions by participants in a 401(k), 403(b) or governmental 457(b) plan whose prior year Social Security wages exceed $145,000 to be treated as after-tax Roth contributions rather than as pre-tax catch-up contributions.
The Notice, which provides welcome relief to plan administrators and participants, delays this new requirement until 2026. During this transition period, participants at or over age 50 can continue to make pre-tax catch-up contributions regardless of income, and plans need not offer the opportunity to make catch-up contributions as Roth contributions.
The guidance and administrative transition period in the Notice came as a reprieve to plan sponsors and recordkeepers who were gearing up to ensure compliance. This transition period should afford employers and plan administrators needed time to prepare for the change and facilitate compliance.
Our Employee Benefits & Executive Compensation Practice Group attorneys are ready to assist with any questions you may have and to advise on implementing the above into your retirement plan and communicating any changes to your plan participants.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
