The SECURE 2.0 Act of 2022 contained several provisions aimed at helping Americans amp up their retirement savings. One area of focus centered on expanding “older” workers’ (those age 50+) ability to make catch-up contributions to their employer-sponsored retirement plans.
IRS Announces Two-Year Transition Period for Higher Wage Earners
SECURE 2.0 caused some concern and confusion for higher wage earners regarding catch-up contributions. Beginning in 2024, workers earning more than $145,000 per year who wish to make catch-up contributions must do so on an after-tax basis via a Roth IRA.
Industry groups expressed concern over the administrative requirements for establishing new Roth plans for these participants in a timely manner that would meet the 2024 deadline.
In response, the IRS announced an administrative transition period that extends implementation for the new Roth requirement to 2026 instead of 2024. The IRS expects the extension to help taxpayers transition smoothly to compliance with the new Roth IRA catch-up requirement.
If you have questions about the Roth IRA requirement or employee benefit plans for your company, please contact us for advice and guidance.