IRS Guidance on Secure 2.0 Act Catch-Up Contributions

At A Glance

• The IRS announced that there will be a two-year extended administrative transition period from January 1, 2024, through December 31, 2025, for the new catch-up contribution provision.
• The IRS also clarified that plan participants who are age 50 and over can continue to make catch-up contributions after 2023, regardless of income.

IRS Guidance on Secure 2.0 Act

The IRS released guidance included in Notice 2023-62, posted to IRS.gov, on Section 603 of the Secure 2.0 Act with respect to catch-up contributions for taxable years beginning after December 31, 2023.

Extended Administrative Transition Period

There will be an extended administrative transition period for the new requirement that catch-up contributions made by higher-income participants in 401(k) and similar retirement plans must be designated as after-tax Roth contributions. This means from January 1, 2024, through December 31, 2025, a transition period will be in place and catch-up contributions will be treated as satisfying the requirements of the new provision, even if the contributions are not designated as Roth contributions and a plan that does not provide for designated Roth contributions will be treated as satisfying the requirements of the new provision.

The new Roth catch-up contribution provision, passed under the Secure 2.0 Act in December 2022, applies to an employee who participates in a 401(k), 403(b), or governmental 457(b) plan and whose prior-year Social Security wages exceeded $145,000 beginning in 2024.

Catch-Up Contributions for Participants Age 50+

In addition to the announcement, the IRS also clarified that plan participants who are age 50 and over can continue to make catch-up contributions after 2023, regardless of income.

The IRS would like to remind taxpayers that Notice 2023-62 is not intended to be comprehensive guidance, but rather to aid in the implementation of certain issues within Section 603 of the Secure 2.0 Act.

Paylocity originally published an article on the Secure 2.0 Act of 2022, you can also find guidance on the Paylocity Education and Knowledge portal, PCTY-120959, Congress passes Omnibus Spending Bill with Secure 2.0.

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This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney, or Advisor.