The Internal Revenue Service (IRS) recently announced a welcomed delay of two years for plan sponsors to comply with a requirement under the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act of 2022, relating to Roth Catch-Up contributions. The requirement stipulates that catch-up contributions made on behalf of certain eligible participants must be designated as Roth contributions. This development offers an extended window for plan sponsors to suitably prepare for the policy change.
The SECURE Act 2.0, signed into law last year, offers a series of updates aimed at broadening retirement plan coverage and simplifying plan administration. Among several changes, the most notable include increased automatic enrollment, longer catch-up contribution limits for older workers, and the aforementioned measure requiring certain catch-up contributions to be designated as Roth contributions.
The recent IRS decision gives plan sponsors an additional two years to comply with the latter requirement; a measure that many have viewed as favorable, given the substantial logistical adjustments required to meet the law’s directives. Although the delay represents a temporary relief, plan sponsors and other affected parties must use this period wisely to align their systems and processes with the incoming regulation.
While this delay certainly eases the immediate pressure, corporations, law firms, and other players in the retirement space must keep their focus on the coming challenges. The Roth catch-up contributions represent a major shift in how retirement plans are handled, and preparation now will be key to smooth implementations later.
For the complete details on the IRS’ recent delay and the wider implications of the SECURE Act 2.0, you can read the full article by McGuireWoods LLP.