Under the SECURE 2.0 Act of 2022, participants in 401(k), 403(b) and governmental 457(b) plans with prior year FICA wages over $145,000 (as indexed) must make catch-up contributions as Roth contributions — known as the Roth catch-up requirement. This requirement applies to plan years beginning after December 31, 2023; however, Notice 2023-62 established a two-year transition period during which the Roth catch-up requirement will generally be treated as satisfied. This transition period is currently set to expire on December 31, 2025.
In January 2025, the IRS issued proposed regulations addressing the Roth catch-up requirement.[1] These included a proposal that appears to provide that the final regulations would only apply to tax years that begin more than six months after final regulations are issued (with a further delayed effective date for collectively bargained plans). Since final regulations were not issued before the beginning of July, it seems that compliance with the future final regulations would not be required until 2027 at the earliest. As of this writing, the deadline for complying with the Roth catch-up requirement continues to be January 1, 2026, and it remains unclear whether the IRS intends to delay this deadline further. However, if the Roth catch-up deadline is not extended and final regulations are not in effect until 2027, there will be questions about the best approach for complying with the Roth catch-up requirement. Until the IRS provides clarity, plan sponsors should continue to work with their payroll providers and plan administrators to implement the Roth catch-up requirement based on the proposed rule and only consider relying on a good-faith interpretation when necessary and after discussion with legal counsel.
Assuming that a final rule would not be effective until 2027 at the earliest, plans would have several options on how to prepare for compliance with the Roth catch-up requirement during 2026.
Despite the uncertainty surrounding the timing of final regulations or whether the Roth catch-up requirement will be further delayed, after reviewing all options with legal counsel, employers should consider moving forward with implementation based on the proposed rule to avoid any last-minute rush or unforeseen compliance challenges.
