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Got Roth? SECURE 2.0 Mandatory Catch-up Contribution Changes

Best TPA 401(k) Plan Roth Secure 2.0 Mandatory Catch-up Contribution Changes

IMPORTANT UPDATE: Friday, August 25th 2023, the IRS announced a two-year delay in the mandate that catch-up contributions must be Roth for "High-Paid Participants". This means, catch-up contributions can be made on a pre-tax basis through 2025, regardless of income. So the dates the article below are no longer accurate. This rule is still on the books and is now slated to take effect January 2026. We will keep you posted on any updates.

Starting in January 2024, “High-Paid Participants” who wish to make catch-up contributions to their 401(k) plan will be required to characterize those contributions as Roth contributions, rather than pre-tax contributions. This is due to SECURE 2.0 mandatory catch-up contribution changes.

By design, not all 401(k) plans currently offer a Roth contribution option. Plan sponsors that currently offer catch-up contributions but do not offer Roth contributions have two options: 1) add a Roth contribution feature or 2) eliminate the plan's catch-up contribution feature.

It is unlikely that plan sponsors want to eliminate an existing catch-up contribution feature, so they need to take action to amend their plans to include the Roth contribution option. Employers who want to use the option should take action now. It is important for plan sponsors to understand that if they wait until the last minute, it could be too late to offer a catch-up option for 2024.

Often the business owners themselves or their key employees are the ones who will be most impacted by this change. For example, you have a “High-Paid” husband and wife or two business owners who are both currently taking advantage of the catch-up contribution option each year. $7,500 is the per participant catch-up contributions limit for 2023. That is $15,000 of annual contributions they would not be able to make if the Roth feature is not added, or if the catch-up feature is eliminated.

Beginning in tax years after December 31, 2024, the benefit of allowing catch-up contribution is increased even more. Higher catch-up contribution limits apply to participants who reach ages 60, 61, 62, or 63 during the year. For tax years after December 31, 2024, this group of participants may make catch-up contributions during the calendar year up to the greater of $10,000 or 150% of the regular catch-up contribution amount, adjusted for inflation. For 2023, 150% of the regular catch-up contribution limit ($7,500) is $11,250, so the increased catch-up contribution limit for 2024 will be more than $10,000. That means there would be significant amounts of retirement plans contributions and wealth accumulation in jeopardy if the plan sponsor does not allow catch-up contributions.

Adventure into the Unknown

Mandatory Roth catch-up contributions for High-Paid Participants creates a new set of administrative complexities. Plans and their service providers need to come up with a process for identifying High-Paid Participants using a compensation definition that is most likely different from a plan's existing compensation definition used for determining plan contributions and other compliance purposes. The added administrative complexity of the mandatory Roth catch-up rule will require careful monitoring by plan administrators to ensure compliance and accurate reporting of taxable income for affected High-Paid Participants. In addition, currently it’s not clear how new guidance from the IRS relating to catch-up contribution elections will interact with existing rules and regulations. Here are some other questions that arise in the interpretation of the new mandate:

-- Can a plan require that all catch-up contributions be made only on a Roth basis?

-- Can a plan currently without a Roth option adopt Roth provisions solely for catch-up contributions?

-- SECURE 2.0 measures whether compensation exceeded $145,000 by reference to FICA wages in Code section 3121(a). Does the Roth catch-up contribution requirement also apply to participants who are self-employed, such as partners in a partnership (since they don’t have “wages”)?

The Time to Take Action is Now

Questions about the new Roth catch-up contribution requirements remain. However, plan sponsors should not wait to act when it comes to requesting amendments to update their plan, to permit the Roth and catch-up contributions they want to allow. The option to make catch-up contributions is a highly valuable benefit, and plan sponsors should be evaluating their options today.

Participants who make over the $145,000 limit should be alerted to this change. Plan sponsors should be alerted to the change and educated about their options. This requirement is effective on January 1, 2024 (for calendar year plans), so plan sponsors need to be informed and make decisions by September or October, so that coordination can be done, and plan participants can be educated before the start of 2024. Also, plan sponsors will need to work with their payroll provider to accommodate the Roth contribution changes and create a process to ensure the withholding from wages is done properly.


Providence is here to help you navigate these complex changes. For our clients we are reviewing your plan and will be reaching out if your plan is impacted by these new rules.

If you have questions about your plan and how this impacts you, please contact us. Email or call Nic Miller: or 512-814-5752.

*For these purposes, a “High-Paid Participant” is an employee whose wages from the employer sponsoring the plan during the preceding calendar year exceeded $145,000. Beginning after December 31, 2024, the $145,000 will be adjusted annually for increases in cost-of-living.


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