The SECURE 2.0 Act implemented changes to catch-up contributions and is applicable to 401(k), 403(b), or 457(b) plans for participants age 50 and older, and whose income from the prior year exceeded $145,000. It mandated that catch-up contributions must be made as Roth contributions (after tax basis) for those earning more than $145,000. Originally, this was set to become effective starting in 2024. However, on August 25, 2023, in response to many employers urging for an extension, the IRS granted a 2 year delay in the effective date.

This means employers don’t need to add Roth as an option to retirement plans for those earning $145,000 before 2026 to comply with the Section 603 rule. During the transition period, catch-up contributions can continue on a pre-tax or Roth basis until 2026 regardless of a plan participant’s income.

Additionally, the IRS notice addressed the technical error that would have effectively eliminated all catch-up contributions – Roth and pre-tax – beginning in 2024. The notice makes clear that going forward, Roth and pre-tax catch-up contributions can continue to be made by plan participants who are age 50 and older! Employees over age 50 may contribute an additional (“catch-up”) amount of up to $7,500 for 2023.

Feel free to contact me, Cory Lyon, directly at 561-209-1120, with any questions regarding customized financial strategies for your personal estate as well as your business. Our goal is to assist you in making informed decisions. We believe in personalized asset management and estate planning, and I act as a fiduciary for all my clients.

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