IRS Issues Guidance on Roth Catch-Up Contributions

**mATTHEW aREY, jd* – rETIREMENT aDVISOR, pARTNER**

September 2023

In December of 2022, Congress passed the SECURE Act of 2022 (SECURE 2.0 Act), implementing a number of provisions directly related to qualified retirement plans.¹ Section 603 is one of the many provisions of SECURE 2.0. Section 603 requires individual plan participants with compensation in excess of $145,000 and eligible for catch-up (50 years of age and older) to contribute their catch-up deferral as a Roth deferral beginning in tax years following December 31^st, 2023.² Recently the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have issued an administrative transition period for Section 603 effectively delaying implementation until taxable years following December 31^st, 2025.

While this is welcome news—many recordkeepers / custodians still have concerns about accurately implementing Section 603. In response, the IRS has indicated new guidance will be forthcoming (after a comment period) on the following:

Guidance clarifying whether an eligible participant who does not have 3121(a) (that is wages for FICA purposes) for the preceding calendar year would be subject to the requirements of Section 603. This guidance is likely to include self-employed individuals and State and Local Government employees.
Guidance on whether the plan administrator / employer may be permitted to treat an election to make catch-up contributions as a Roth election (assuming the eligible participant is subjection to SECTION 603’s mandate).
Guidance on whether multiple plans (and multiple employer plans), calculation of the eligible participant’s wages for the preceding calendar year are plan specific or whether aggregation of compensation is necessary to subject the participant to the Roth catch-up requirement.

Comments have been requested and should be submitted to the IRS on or before October 24^th, 2023. L&H is dedicated to providing you with the most updated information to assist in managing your qualified retirement plan. If you have any questions, please reach out to us!*

Sources

[1] SECURE Act 2.0 See also Congressional Summary SECURE Act 2022 Summary.

[2] SECURE Act 2.0 Section 603; See also Congressional Summary SECURE Act 2022 Section 603 Summary.

Disclosures

*L&H does not practice law or tax. Please consult with your appropriate tax adviser to review your specific facts and circumstances. Although licensed to practice law, the author of this article does not provide legal services to clients. Attorney client privilege does not apply to communications.

The information presented here is for educational purpose only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation or needs of individual investors. The information provided has been derived from sources believed to be reliable, but the accuracy is not guaranteed and does not purport to be a complete analysis of the material discussed.