The perplexing question of “to Roth or not to Roth” for catch-up eligible individuals recently became significantly less complicated following new IRS guidance issued last week. The guidance outlines a delay in the implementation of mandatory Roth catch-up contributions, a topic we explored in depth in a previous blog post.
The recalibration concerns SECURE 2.0, a part of the U.S tax law that amended the catch-up contribution provisions of the Code. The Code, primarily, is a set of statutes that underpin taxation in America. Its amendment via SECURE 2.0 has been a point of intense deliberation for many law professionals, and this latest development adds a fascinating new angle to the discussion.
Catch-up contributions, as many of you are aware, are elective deferrals that exceed the annual limit, made by employees aged 50 and older to 401(k), 403(b), SARSEP, and government 457(b) plans, as well as Roth IRAs. Originally, the SECURE Act 2.0 mandated that these contributions be made to Roth accounts, however, the recent delay to this mandate presents an opportunity for law practitioners and advisors to re-evaluate their advice concerning catch-up contributions.
While further analysis of these changes is required, it is an undoubtable truth that the shifting landscape of taxation in the United States presents an exciting challenge for all legal professionals. The delay in the implementation of mandatory Roth catch-up contributions, in particular, emphasizes the dynamic nature of this field, and serves as a reminder of the need for continued vigilance and adaptability. It remains to be seen how this will impact tax law and employee retirement planning in the long run, but for now, Roth catch-up contributions remain an optional, rather than a compulsory choice for eligible individuals.
By: Bricker Graydon LLP