IRS offers extra time for Roth catch-up contributions

The Internal Revenue Service is giving people until 2026 to comply with a new requirement for Roth catch-up contributions.

The IRS said Friday that it’s providing an administrative transition period that extends until 2026 a new provision under last December’s SECURE 2.0 Act requiring that any catch-up contributions made by higher‑income participants in 401(k) and similar retirement plans have to be designated as after-tax Roth contributions. In addition, the IRS also said that plan participants who are 50 years and older can continue to make catch‑up contributions after 2023, no matter what their income level is.

The IRS spelled out the details in Notice 2023-62, which provides initial guidance for Section 603 of the SECURE 2.0 Act, which was included as part of the Consolidated Appropriations Act of 2023. Under that part of the law, starting in 2024, the new Roth catch-up contribution rule applies to an employee who participates in a 401(k), 403(b) or governmental 457(b) plan and whose prior-year Social Security wages surpassed $145,000.

The IRS believes the administrative transition period will enable taxpayers to make a smoother and more orderly transition to the new Roth catch-up requirement. The notice also clarifies that the new law doesn’t prohibit plans from permitting catch-up contributions, so plan participants who are 50 and over can still make catch-up contributions after this year.

The IRS and the Treasury Department intend to release future guidance on the matter to help taxpayers, and the notice describes several positions they anticipate will be included. The notice also asks for public comments and suggestions, along with how to send the comments to the IRS and the Treasury.