As summer draws to a close and 2024 looms, certain provisions from the SECURE 2.0 legislation for retirement plans are gradually coming into view, poised to soon become law. One such provision, scheduled for implementation in 2024, is a rule that insists on all catch-up contributions made by participants with Social Security wages under Code Section 3121 that exceed $145,000 in the preceding year – referred to as “high wage earners” – being treated as designated Roth contributions.
The recent announcement by the Internal Revenue Service (IRS) suggests a two-year delay for the implementation of this new Roth catch-up contribution rule. While the broader implications of this postponement are yet to be fully understood, they will surely impact both employers offering retirement plans and the employees contributing to them..
In particular, the delay raises key questions about how the regulation will impact “high wage earners” and the potential changes they may need to make to their retirement planning strategies. For such earners, their ability to make traditional catch-up contributions could be significantly affected by the new timeline for enforcing this rule.
This delay also gives employers offering retirement benefits more time to adjust their current protocol and ensure compliance with the new rule. It is crucial that all employers stay updated with these changes to avoid penalties and guarantee their employees are informed well in advance.
Even as the profession keeps a close eye on the IRS’s shifting timeline, it’s imperative to understand that changes to retirement plans through the SECURE Act 2.0 are steadily coming to life. As such, those affected – from legal professionals to corporations and employees – should monitor developments closely.