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In a highly welcome development, the IRS recently delayed by two
years the deadline for plan sponsors to comply with its requirement
under the SECURE 2.0 Act of 2022, that catch-up contributions made
on behalf of certain eligible participants be designated as Roth
Although the announcement in IRS Notice 2023-62 is not intended
to provide comprehensive guidance on the SECURE 2.0 Act, it
nonetheless provides much-needed breathing room for plan sponsors
and related parties to implement the new rule, while previewing
some additional guidance the IRS is considering on this topic.
Roth Contributions Under SECURE 2.0 Act
The SECURE 2.0 Act makes a variety of changes to certain
tax-qualified retirement plans. One such requirement is a new
mandate that catch-up contributions by individuals who earned over
$145,000 during the preceding tax year be designated as Roth
contributions beginning in January 2024. Previously, employees
generally were allowed to choose whether their catch-up
contributions were made on a pre-tax or Roth basis if their
employer’s plan gave them the choice.
Two-Year Administrative Transition Period
As drafted, compliance with the new rule was required to begin
on Jan. 1, 2024, creating immediate challenges for plan sponsors
— particularly governmental employers sponsoring 457(b) plans
— and related parties to timely implement the new rule. In
response, Notice 2023-62 confirms the new rule will apply on Jan.
1, 2024, but the first two years will be regarded as an
administrative transition period. Specifically, until Dec. 31,
- Catch-up contributions will be treated as satisfying the new
SECURE 2.0 Act requirement, even if contributions are not
designated as Roth contributions.
- A plan that does not provide for designated Roth contributions
will be treated as satisfying the new SECURE 2.0 Act
Notice 2023-62 also addressed a drafting issue in the statute
that arguably would have eliminated catch-up contributions from the
Internal Revenue Code.
Guidance Under Consideration
Notice 2023-62 indicates the IRS is considering whether to issue
further guidance that would:
- Clarify that this requirement would not apply in the case of an
eligible participant who does not have wages for purposes of FICA
for the preceding calendar year from the employer sponsoring the
plan (e.g., a partner or other self-employed individual).
- Permit plan administrators and employers to treat pre-tax
catch-up contribution elections by affected participants (i.e.,
those subject to the new rule) as deemed Roth elections.
- Clarify how the rule works for plans with more than one
Overall, Notice 2023-62 provides helpful breathing room to plan
sponsors and related parties with respect to implementation of a
key aspect of the SECURE 2.0 Act. As future guidance under the
SECURE 2.0 Act is released, plan sponsors should work with their
advisers to understand what changes, required and optional, are
needed as a result.
Future McGuireWoods WorkCite updates will continue to cover
significant developments on the SECURE 2.0 Act.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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