In a recent development regarding the Secure 2.0 Act and its impact on employer-sponsored retirement plans, the Internal Revenue Service (IRS) has delayed the implementation of a new provision affecting catch-up contributions for high-income earners.
The Secure 2.0 Act, passed in 2022, aims to improve access and incentives for retirement savings. One provision of the Act allows employers to offer catch-up contributions to employees aged 50 and older. These contributions are designed to help individuals save more for retirement during their peak earning years.
What was the original Roth Catch-Up Rule?
The Secure 2.0 Act originally stipulated that, beginning in 2024, catch-up contributions for employees earning more than $145,000 annually would be required to be made on a Roth basis (meaning contributions are taxed after dollars grow tax-free).
The IRS, in response to concerns from taxpayers and plan sponsors, has delayed the implementation of the Roth catch-up rule until January 1, 2026. This provides employers with two additional years to adjust their plans and administrative procedures to accommodate the change.
What does this mean for Employers?
Employers with retirement plans offering catch-up contributions have an additional two years to decide how to implement the Roth catch-up rule for high earners.
This delay allows them to:
- Review their plan options and determine the most efficient way to integrate the Roth catch-up provision.
- Communicate the changes clearly to affected employees regarding Roth contributions and their tax implications.
- Update plan administration systems to handle the distinction between pre-tax and Roth catch-up contributions for high earners.
The Floyd Law Firm PC remains committed to providing our clients with up-to-date information and guidance on retirement planning matters. If you have questions about the Secure 2.0 Act or its impact on your company’s retirement plan, please contact our office to schedule a consultation. We can help you understand the implications of the Roth catch-up rule delay and ensure your plan is compliant with the latest regulations.
Recent shifts in retirement laws underscore the importance of a solid estate plan. The Floyd Law Firm PC offers tailored solutions and legal knowledge to ensure your plan reflects current regulations. Our Estate Planning, Wills & Trusts practice means that we can help you with customizable plans for all situations, from simple to complex. Our collaborative approach and personalized service is aimed towards addressing your unique needs and goals.
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