The Treasury Department and the IRS issued final regulations on Sept. 15 that address several SECURE 2.0 Act provisions relating to catch-up contributions.
Signed into law on Dec. 29, 2022, SECURE Act 2.0 includes numerous significant provisions affecting individual retirement savers. It builds on the original SECURE Act, which was signed into law in December 2019.
Catch-up contributions are additional contributions under a 401(k) or similar workplace retirement plan for employees who are age 50 or older.
The regulations include final rules related to a SECURE 2.0 Act provision requiring that catch-up contributions made by certain higher-income participants be designated as after-tax Roth contributions, the IRS said.
The final regulations provide guidance for plan administrators to implement and comply with the new Roth catch-up rule and reflect comments received in response to the proposed regulations issued in January. In addition, they provide guidance relating to increased catch-up contribution limits under the SECURE 2.0 Act for certain retirement plan participants, in particular employees between the ages of 60 to 63 and employees in newly established SIMPLE plans.
While the final regulations generally follow the rules that were proposed earlier this year, changes were made in response to comments received on the proposed regulations, according to the IRS.
- Related article: IRS and Treasury Department Propose Regs on New Roth Catch-Up Rule, 401(k) Auto Enrollment
“For example, the final regulations permit a plan administrator to aggregate wages received by a participant in the prior year from certain separate common law employers in determining whether the participant is subject to the Roth catch-up requirement,” the agency said on Monday.
In addition, the final regulations include changes to certain provisions in the proposed regulations, including those relating to:
- Correction of a failure to comply with the Roth catch-up requirement;
- Implementation of a deemed Roth election; and
- Plans that cover participants in Puerto Rico.
The provisions in the final regulations relating to the Roth catch-up requirement generally apply to contributions in taxable years beginning after Dec. 31, 2026. However, the final regulations provide a later applicability date for certain governmental plans and plans maintained under a collective bargaining agreement. The final regulations also permit plans to implement the Roth catch-up requirement for taxable years beginning before 2027 using a reasonable, good faith interpretation of statutory provisions, the IRS said.
The final regulations don’t extend or modify the administrative transition period provided under Notice 2023-62, which generally ends on Dec. 31, 2025.
Photo credit: Natalia Bratslavsky/iStock
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