Secure 2.0

This revenue raiser in the SECURE 2.0 law is causing lots of angst:

Requiring high earners to put 401(k) catch-up contributions into a Roth. In 2023, 401(k) participants who are 50 and older can put in up to $7,500 more each year in a pretax 401(k), an after-tax Roth 401(k) or a combination of the two, provided their employer offers the Roth savings options. Beginning in 2024, employees who are 50 and older and whose annual compensation exceeds $145,000 in the preceding year can make catch-up contributions only to a post-tax Roth 401(k). The impact is that this will slash the up-front tax savings of those catch-ups for many workers who decide to max out their annual 401(k) payins.

Retirement plan sponsors are pleading for more time to implement the change,

Citing the administrative burdens on payroll providers and the need for IRS guidance. And a glitch in the law might ban 401(k) catch-up contributions altogether. Retirement professionals have pointed out that drafters of the SECURE 2.0 legislation inadvertently eliminated 401(k) catch-up contributions in their entirety after 2023. They want Congress to step in. If that’s a no-go, they are relying on Treasury and IRS to resolve the technical error through the issuance of public guidance before year-end.