Secure 2.0 Act’s New 401(k) Catch-Up
As you may recall, we previously covered a major change regarding high wage earners, stemming from the Secure 2.0 Act that was to go into effect January 1, 2024.
That is, Congress’ attempt to raise more tax revenue by requiring those with prior-year wages exceeding $145,000 to make their catch-up contributions (applicable to those age 50 and over) to an after-tax Roth account rather than the traditional pre-tax account.
Employers, plan administrators, and financial institutions were left scrambling to make the changes in retirement plans to accommodate these rules.
As a result, on August 25, 2023, the IRS issued an advance release of their Notice 2023-62. This Notice extends the effective date to January 1, 2026, meaning that for the next two years, high wage earners will still have the choice to allocate their catch-up contributions to their tax-deferred accounts instead of their after-tax accounts.
The goal of this two-year administrative period is to help all involved transition smoothly to the new Roth catch-up rules. Once the final notice is issued, we will share any updates, if significant.
Author:
Terri Mozaffarian, CPA, CFP®, Wealth Advisor