IRS Delays Roth Catch Up Provisions of the SECURE Act 2.0

What retirement plan sponsors and employees need to know about IRS Notice 2023-62

Background

Section 603 of the Secures Act 2.0 provides that all catch-up contributions for eligible participants in employer sponsored retirement plans must be subject to Roth contribution treatment. This provision means that 401(k), 403(b) or 457(b) plan participants subject to this rule would not receive an income tax deduction for their catch-up contributions made after 2023.

This provision is effective for taxable years beginning after December 31,2023. An exception to this rule is provided for employees with compensation of $145,000 or less, indexed for inflation.

Roth Catch-up Provisions Delay

On August 25, 2023, the IRS issued notice 2023-62. This notice delays the effective date of the Roth catch-up provisions of Section 603 of the SECURE Act 2.0 until taxable years beginning after December 31, 2025; a two-year delay of this provision.

Thus, for tax years 2024 and 2025, high wage earners do not have to make catch-up contributions to their plan as Roth contributions (i.e. after-tax). Rather, they can make their catch-up contributions as regular tax-deductible contributions.

Questions on tax planning for your unique situation?

These tax savings opportunities should be carefully considered as part of your broader financial picture. This information is intended as a starting point for discussion on tax planning and savings opportunities for individuals and employers. If any of the tax changes discussed here are of interest to you, or if they trigger questions about your specific tax and retirement situations, please reach out to your Keiter Opportunity Advisor or Email | Call: 804.747.0000 for advice on tax planning opportunities.