The IRS is giving a two-year delay to higher-income participants in Sec. 401(k) and similar retirement plans before the new requirement that they must designate their catch-up contributions to those plans as after-tax contributions to Roth IRAs.
In Notice 2023-62, the IRS provided guidance under Section 603 of the SECURE 2.0 Act. The provision requires that, starting in 2024, the new Roth catch-up contribution rule applies to an employee who participates in a Sec. 401(k), 403(b), or governmental 457(b) plan and whose prior-year Social Security wages were over $145,000.
The IRS notice announced an “administrative transition period” delaying that requirement’s applicability until 2026. The agency stated the administrative transition period is designed to facilitate an orderly transition for compliance with the Roth catch-up contribution requirement.