The Secure 2.0 Act of 2022 included a provision that starting in 2024, any catch-up contributions by an employee who participates in a 401(k), 403(b) or governmental 457(b) plan and whose prior-year Social Security wages exceeded $145,000 would be required to be made with after tax dollars and deposited into a Roth account.
The IRS has announced an administrative transition period that extends until 2026 the new requirement that any catch-up contributions made by higher‑income participants in 401(k) and similar retirement plans must be designated as after-tax Roth contributions.
The administrative transition period will help taxpayers transition smoothly to the new Roth catch-up requirement and is designed to facilitate an orderly transition for compliance with that requirement, according to the IRS.
The IRS notice also clarifies that the SECURE 2.0 Act does not prohibit plans from permitting catch-up contributions, so plan participants who are age 50 and over can still make catch-up contributions after 2023, regardless of income.
The Treasury Department and the IRS say they will be issuing future guidance to help taxpayers, and the notice describes several positions that are expected to be included. As with most IRS announcements, the rules can be complex. Be sure to seek the advice of your experienced CironeFriedberg tax CPA to make sure you understand how this change may affect you.
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