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The IRS Issues a Reprieve: Roth Catch-up Contributions Deadline Delayed After 2025

In response to appeals from a broad swath of the retirement plan community, on August 25, 2023, the IRS issued Notice 2023-62, which delays the effective date of section 603 of SECURE Act 2.0 for two years. This means that elective deferral catch-up contributions for certain highly paid employees do not need to be treated as Roth contributions until taxable years after December 31, 2025.


As background, the Internal Revenue Code imposes an annual limit on a participant’s contribution of elective deferrals to a retirement plan ($22,500 in 2023). The IRC also allows participants who attain age 50 by the end of the taxable year to contribute “catch-up” elective deferral contributions ($7500 in 2023).


Section 603 amended the IRC to require that, in the case of a participant whose wages for the preceding year from the employer sponsoring the plan exceeded $145,000, catch-up contributions of elective deferrals could only be made to a Roth account. The provision applies to taxable years beginning after December 31, 2023. However, in response to concerns expressed by sponsors and service providers that this new requirement could not be implemented by the end of 2023, the IRS has now delayed the effective date of this new rule. The first two taxable years beginning after the provision’s effective date (2024 and 2025) will be regarded as an “administrative transition period”.


The Notice provides that until taxable years beginning after December 31, 2025:

  1. Catch-up contributions will be treated as in compliance with the catch-up rules of the IRC even if the contributions are not designated as Roth contributions, and

  2. a plan that does not provide for Roth contributions will also be treated as in compliance with the catch-up rules.


This gives plan sponsors, and their service providers, additional leeway during which to add a Roth account to their plans if necessary and to set up systems and procedures to comply with section 603.


The Notice also addresses an apparent drafting error in the statute which had the effect of eliminating catch-up contributions entirely. The Notice allows plans to continue to permit catch-up contributions pending the expected correction of the statute.


The IRS also announced in the Notice other guidance it intends to issue to clarify the application section 603, including:

  • Guidance clarifying that the Roth catch-up requirement will not apply in the case of an eligible participant who did not have wages for purposes of FICA, such as a self-employed individual.

  • Guidance providing that with respect to a plan participant subject to the new rule, the plan would be permitted to treat an election by the participant to contribute elective deferrals on a pre-tax basis as an election to make Roth catch-up elections.

  • Guidance addressing an applicable plan that is maintained by more than one employer.

There are other outstanding questions regarding the implementation of section 603, and we hope that some of these will be addressed in future guidance as well. But in the meantime, the IRS has given plan sponsors and their advisors and providers a welcome reprieve.


If you have any questions about RMDs or how this relief may apply to you or your plan, please contact a Boutwell Fay attorney or email us at attorneys@boutwellfay.com.

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