The Internal Revenue Service (IRS) has announced a two-year administrative transition period, effectively delaying the Roth Catchup deadline provision of the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act to 2026. This update was enacted through Notice 2023-62.
The initial SECURE 2.0 rule stipulated that catch-up contributions—extra contributions to retirement savings that an individual aged 50 or older is allowed to make—must be designated as Roth contributions. This condition applied except for the employees with compensation of $145,000 or lower (indexed).
Under the current regulation, catch-up contributions can be made on either a pre-tax basis or a Roth basis. However, Section 603 of Secure 2.0 seemingly sought to overhaul this by implementing a Roth requirement for higher earning individuals. The recent IRS notice has put a temporary hold on this rule change, offering a reprieve for such individuals planning their retirement strategies.
The delay provides an opportunity for retirement savers to reassess their options and potentially optimize their financial planning strategies, all while waiting for any additional clarifications on the implementation of the SECURE 2.0 Act’s provisions. It is crucial for legal professionals, particularly those in the corporate world, to continue keeping abreast with these developments as they can significantly impact the retirement strategies of their high earning clients.