In a recent development, the Internal Revenue Service (IRS) has made a decision to put off the Roth Catch-up Requirement till 2026. A provision of the SECURE Act 2.0, a piece of legislation enacted on December 29, 2022, which is having considerable implications on retirement plans.
As per this provision, it is mandatory for plan sponsors, payroll providers, and recordkeepers to make catch-up contributions as Roth contributions and this applies to participants who earned more than $145,000 in the prior year. Participants who earned less than this threshold in the prior year are allowed to make catch-up contributions on a pre-tax basis. However, this provision has now been postponed to take effect from 2026.
This delay will provide some relief to those who are in the process of managing their retirement plans, providing them with additional time to organize and strategize around the new rules.
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