Will There Be a Delay on Roth Catch-Up Contributions for Age 50+ High Income Earners?

Delay on Roth Catch-Up Contributions for Age 50+ High-Income EarnersAs you might recall from our executive summary report, the SECURE 2.0 Act included several important changes to retirement plan rules. One of those changes, scheduled to take effect in plan years beginning on or after 01/01/2024, involves high-income earners making age 50+ catch-up contributions. Currently, anyone age 50+ can elect to make catch-up contributions as pre-tax or Roth. The Act requires catch-up contributions for anyone who earns $145,000+ in 2023 (indexed in future years) to be made as Roth contributions. There was also a technical error in The Act language that could inadvertently eliminate the ability of anyone to make catch-up contributions altogether.


We’ve been hard at work educating and preparing our clients for this change, but there are still outstanding questions. How will payroll providers assist with this new requirement? Are our recordkeeping and third-party administrator (TPA) partners ready to accommodate this? Will impacted employees need to make new deferral elections to continue to max out their contributions? And all of this has to be ready for the 01/01/2024 Plan year?!?!?


Update: On July 18, 2023, fifty organizations related to retirement, including the American Retirement Association (ARA), sent a letter to the Treasury Department and the IRS requesting "transition relief" for Section 603 under the SECURE 2.0 Act. The coalition is asking for two-year transition relief. Here is an excerpt from the letter: 


“Plan sponsors, along with their payroll vendors and in-house payroll, and their service providers are working to implement this provision; however, because of the many outstanding issues that require Treasury guidance, it is proving difficult to implement this on a timely basis…Even with the guidance, this change is an enormous undertaking requiring significant coordination among multiple parties and the development, testing, integration, and implementation of entirely new systems which will take substantial time to comply.”

See the full letter content here. 


Our team is an active member of the American Retirement Association and is glad to see so many organizations working together to address this issue. We are in full support of the letter as it would provide much-needed help for plan sponsors who are facing significant challenges in complying with the requirement. The need for guidance from the Treasury and the IRS is clear, and these agencies must provide the requested relief to plan sponsors as soon as possible. 


Please reach out to AFS with any questions.