COLLECTED WISDOM™ on 401k Plan Catch-Up Contributions
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On January 10, 2025, the Internal Revenue Service proposed regulations aimed at clarifying ambiguities surrounding Super Catch-Up and Mandatory Roth Catch-Up contributions. This summary outlines key questions addressed by the Proposed Regulations. The regulations for Mandatory Roth Catch-Up contributions will take effect for taxable years beginning six months after the final rule is published, though plans may implement the rules for contributions made after December 31, 2023. Similarly, the regulations for Super Catch-Up contributions will become effective six months after the final rule, with plans able to apply them starting after December 31, 2024.
On January 10, 2025, the IRS released proposed regulations regarding several provisions of the SECURE 2.0 Act. One key provision focuses on catch-up contributions for employees aged 50 and older in 401k, 403b, and governmental 457b plans. The IRS is open to public commentary on these regulations until March 14, 2025. Starting January 2026, employees who earned over $145,000 in FICA wages in the prior year will be required to direct their catch-up contributions to Roth accounts (after-tax contributions) for the following year. This changes the previous timeline established in Notice 2023-62, extending the implementation to taxable years beginning January 1, 2026.
Effective January 1, 2025, plan sponsors may choose to implement a "super catch-up" provision for participants aged 60 to 63 at the end of 2025 and in subsequent years. This allows eligible participants in 401k and 403b plans to contribute an additional amount that is 150% of the regular annual catch-up limit. For the year 2025, this means the super catch-up contribution would be $11,250 (150% of the $7,500 catch-up limit). While the addition of this provision is optional, it must be made universally available to all participants across related plans.
On January 10, 2025, the IRS released proposed regulations concerning several provisions of the SECURE 2.0 Act, particularly regarding catch-up contributions for employees aged 50 and older in 401k, 403b, and governmental 457b plans. The IRS is open to comments on these regulations until March 14, 2025. Starting January 2026, employees who earned over $145,000 in FICA wages the previous year must make their catch-up contributions to Roth accounts (after-tax contributions) for the following calendar year. For instance, employees meeting this income threshold in 2025 will be required to use Roth accounts for their catch-up contributions in 2026.
The Department of the Treasury has proposed a rule related to the SECURE 2.0 Act of 2022, focusing on catch-up contributions to defined contribution plans. The rule addresses two key provisions: Higher-income employees must make catch-up contributions only as Roth contributions and a new catch-up contribution option for individuals aged 60-63. This proposed rule builds on guidance from 2023, and the public can submit comments on it until March 14, 2025.
On January 10, 2025, the IRS issued proposed regulations outlining guidance on age-based catch-up contributions under Internal Revenue Code Section 414(v). These regulations allow participants aged 50 or older in 401k, 403b, and governmental 457b plans to make additional "catch-up" contributions beyond regular deferrals. This provision is not subject to the usual limits on elective deferrals. The proposed regulations implement statutory changes from the SECURE 2.0 Act of 2022 and provide important guidance for retirement plan participants, beneficiaries, employers, and administrators regarding compliance with the new catch-up contribution rules.
Under SECURE 2.0 Section 603, catch-up contributions for individuals earning more than $145,000 (adjusted for inflation starting in 2025) in FICA wages must be designated as Roth contributions. These individuals are referred to as "higher-paid individuals." The IRS has delayed the implementation of this requirement until January 1, 2026, during which time they will develop the necessary regulations. As a result, not all plans with catch-up contributions are required to offer Roth contributions immediately; however, they will need to comply with this requirement by the effective date.
On January 13, 2025, the IRS proposed regulations (REG-101268-24) to help plan administrators and participants better understand and implement new rules related to retirement plans. These updates build on the SECURE 2.0 Act of 2022 and address the administrative challenges faced by employers, plan administrators, payroll providers, and financial professionals. This document outlines key provisions of the regulations, their evolution, and their current implications.
The IRS has proposed regulations regarding catch-up contributions under the SECURE 2.0 Act. Key changes include: Increased catch-up contribution limits for participants aged 60 to 63, starting in 2025. Mandatory Roth tax treatment for catch-up contributions by 401k participants earning over $145,000 from the previous calendar year, effective from 2024. Transition relief allows plans to let all participants, including those above the income threshold, make pre-tax catch-up contributions until 2026. These plans will still meet the new requirements even if they do not offer designated Roth contributions. These highlights summarize the main aspects of the proposed regulations.
Recently proposed IRS regulations clarify the increased catch-up contribution limit for defined contribution plan participants aged 60-63 under the SECURE 2.0 Act of 2022. Employers will be relieved to learn that they are not mandated to offer the higher "super catch-up" limit; they can continue to provide the regular limit to all eligible participants. Since the law's enactment, there has been uncertainty among employers and administrators regarding how the "universal availability requirement" impacts the new higher catch-up contributions.
On January 10, 2025, the IRS proposed regulations regarding the SECURE 2.0 Act's catch-up contributions, providing much-anticipated guidance but highlighting the complexities involved in implementation. The regulations indicate that the mandatory Roth catch-up provision will create significant administrative challenges for employers and plan administrators, regardless of whether a qualified Roth contribution program is offered. Although the increased catch-up contribution is optional, plan sponsors must consider various implementation factors, requiring coordination with payroll, third-party administrators, and legal counsel to ensure compliance with legal requirements specific to their situations.
The IRS recently released proposed regulations concerning mandatory Roth catch-up contributions, following amendments made by SECURE 2.0. Starting in 2024, individuals earning over $145,000 from the previous year will need to designate their catch-up contributions as Roth contributions, eliminating the option for pre-tax contributions. The IRS had previously postponed the implementation of this requirement from 2024 to 2026. The new proposed regulations address several key questions from the benefits community regarding this mandatory Roth provision.
The IRS has released proposed regulations concerning the SECURE 2.0 Act, specifically focusing on catch-up contributions available to employees aged 50 and older in 401k plans. The regulations detail a requirement that catch-up contributions from certain higher-income participants be designated as after-tax Roth contributions. They also offer guidance for plan administrators on implementing this new Roth catch-up rule, incorporating feedback from comments on a previous notice issued in August 2023. Additionally, the proposed regulations address an increased catch-up contribution limit for specific participants, including those aged 60-63 and employees enrolled in newly established SIMPLE plans.
The Super Catch-Up 401k rule is a new legislative provision designed to help individuals aged 60 to 63 significantly boost their retirement savings by allowing them to contribute more to their 401k plans beyond the standard limits. This rule expands on the existing catch-up contributions available for those 50 and over. This is an overview of the new rule.
Source: 401khelpcenter.com, November 2024
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