Under section 603(c) of the SECURE 2.0 Act, catch-up contributions from participants in 401(k), 403(b), or governmental 457(b) plans earning $145,000 or more must be made as Roth contributions. Initially, the provisions of section 603 applied to taxable years beginning after December 31, 2023.
The Internal Revenue Service (IRS) has since announced an administrative transition period for the first two taxable years of the SECURE 2.0 requirement that all participants whose FICA earnings exceed $145,000 in the prior year must make age 50 catch-up contributions as Roth. Plans will now have through December 31, 2025 to comply with the regulation.
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. The 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.