There has recently been significant development on the front of “catch-up” contributions. In a measure that gives a sigh of relief to many plan sponsors and high-paid participants, the Internal Revenue Service (IRS) released Notice 23-62 on Friday, August 25, 2023. The notice carries two crucial clarifications related to “age 50” catch-up contributions and the Roth-ification of such contributions.
According to the details released the IRS has clarified that plan sponsors will continue to be allowed to accept participant’s age 50 catch-up retirement contributions post December 31, 2023. This clarity is certain to bring peace of mind to various participants who were unsure about the future acceptability of such contributions.
The second part of the notice addresses another significant area of concern – the Roth-ification of catch-up contributions for certain highly remunerated participants. Here, the IRS has offered another shot of relief. The enforcement of the mandatory Roth-ification of catch-up contributions has been delayed until the first taxable year after December 31, 2025.
This delay in implementing the mandatory transition to Roth contributions for some participants is bound to assist them in better planning their retirement saving strategies. This strategic ease comes at a time when many are grappling with the economic uncertainties presented by a complex and evolving global environment.
For additional information, it is advisable for plan sponsors and participants to refer directly to this specific IRS notice, or seek professional advice to fully understand the implications of these developments on individual retirement plan strategies.