Legal professionals and corporate entities should be aware of recent guidance issued by the Internal Revenue Service (IRS) regarding a delay to the SECURE Act 2.0. The implementation of the provision mandating that any age 50 catch-up contributions by an employee with prior-year compensation over $145,000 be made on a Roth basis — instead of a pre-tax basis — has been postponed to January 1, 2026. This requirement was initially scheduled to start from January 1, 2024.
According to a report by Venable LLP, the IRS issued this guidance on August 25, 2023. The implications of this delay could influence both employers’ and employees’ approach to retirement savings strategies, especially for high-income earners who would be directly affected by the catch-up contribution changes.
Introduced as part of the SECURE Act 2.0, the catch-up contribution changes were intended to encourage individuals nearing retirement to save more and take advantage of the tax benefits available through Roth accounts, which are funded with post-tax earnings. Although delayed, it is essential for professionals handling employee benefit programs to keep abreast of this development to effectively manage their clients’ retirement benefit planning.
The revised execution date provides additional time for corporations and law firms to make necessary adjustments and plan accordingly. With careful attention and adaptation, legal entities can be prepared for the future implementation of this provision.