IRS finalizes regulations for Roth catch-up contributions under SECURE 2.0

The IRS on Monday issued final regulations (T.D. 10033) that address catch-up contributions under a 401(k) or similar retirement plans that are allowed for workers who are at least 50 years old.

The final regulations, which address catch-up contributions under several provisions of the SECURE 2.0 Act of 2022 (Division T of the Consolidated Appropriations Act, 2023, P.L. 117-328), provide guidance for plan administrators to implement and comply with the new Roth catch-up rule.

In response to comments, the IRS said it made some changes to the final regulations from the proposed regulations issued in January (REG-101268-24). For example, the Service cited a change that allows 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.

The final regulations also make changes to the proposed regulations relating to:

• Correction of a failure to comply with the Roth catch-up requirement;
• Implementation of a deemed Roth election; and
• Plans that cover participants in Puerto Rico.

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, as well as providing guidance relating to increased catch-up contribution limits under SECURE 2.0 for certain retirement plan participants, including employees between the ages of 60 and 63 and employees in newly established SIMPLE plans.

The provisions in the final regulations relating to the Roth catch-up requirement generally apply to contributions in tax years beginning after Dec. 31, 2026, while providing for a later applicable date for certain governmental plans and plans maintained under a collective bargaining agreement.

The final regulations also permit plans to implement the Roth catch-up requirement for tax years beginning before 2027 using a reasonable, good-faith interpretation of statutory provisions. The final regulations do not extend or modify the administrative transition period provided under Notice 2023-62, which generally ends on Dec. 31, 2025.

AICPA advocacy

In a letter to Treasury and the IRS in July, the AICPA made comments in response to the proposed regulations recommending that the IRS address a safe harbor for Form W-2 reliance and the application of the proposed regulations to disregarded entities.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.