SECURE 2.0: The Final ROTH Reg

Jeremy Springer
2 days ago
2 min read

The IRS has issued final regulations addressing several SECURE 2.0 Act provisions relating to catch-up contributions. (Catch-up contributions are additional contributions under a 401(k) or similar workplace retirement plan for employees age 50 or older.) In this Helpful Info article, we're going to explain the final regulation and how it impacts the average taxpayer.

The final regulations include final rules related to a SECURE 2.0 Act provision requiring that catch-up contributions made by certain higher-income participants be designated as after-tax Roth contributions.

Effective for tax years beginning after December 31, 2025, participants whose wages for the preceding calendar year exceed $145,000 can only make catch-up elective deferrals as designated Roth contributions. If the plan does not provide for a designated Roth option, then participants with wages exceeding $145,000 cannot make additional catch-up elective deferrals. This rule does not apply to SEPs or SIMPLE plans. The $145,000 threshold is indexed for inflation after 2024.

The final regulations provide guidance for plan administrators to implement and comply with the new Roth catch-up rule and reflect comments received in response to the proposed regulations issued in January.

The final regulations also provide guidance relating to increased catch-up contribution limits under the SECURE 2.0 Act for certain retirement plan participants, in particular employees between the ages of 60-63 and employees in newly established SIMPLE plans.

Effective for tax years beginning after December 31, 2024, the catch-up elective deferral limits are increased for eligible participants who attain ages 60, 61, 62, and 63 before the close of the tax year. For purposes of the 401(k)/403(b) increased catch-up limits, the adjusted dollar amount is the greater of $10,000, or 50% more than the regular catch-up amount (150% of the regular catch-up amount). For purposes of the SIMPLE increased catch-up limits, the adjusted dollar amount is the greater of $5,000, or 50% more than the regular catch-up amount (150% of the regular catch-up amount). The new law also adjusts the indexing calculations for the age 60 through 63 catch-up limits for tax years beginning after 2025.

Final regulations differ from the proposed regulations. While the final regulations generally follow the proposed regulations, changes were made in response to comments received on the proposed regulations. For example, the final regulations permit a plan administrator to aggregate wages received by a participant in the prior year from certain separate common law employers in determining whether the participant is subject to the Roth catch-up requirement.

Legal Disclaimer: This post contains general information for taxpayers and should not be relied upon as the only source of authority. Taxpayers should seek professional tax advice for more information. This information was current at time of posting; we are not responsible for updating this or any blog post/article for subsequent changes in the law or its interpretation.