In Notice 2023-62, the IRS walked back the SECURE 2.0 rule that required catch-up contributions to be designated as Roth contributions except in the case of employees with compensation of $145,000 or less (indexed), by announcing a 2-year administrative transition period. As reported in the January 2023 Monthly Minute, under current law, catch-up contributions can be made on a pre-tax or Roth basis, however, Section 603 of Secure 2.0 changed that by instituting a Roth requirement for higher earners, effective for taxable years beginning after December 31, 2023. Under the new transitional period, until taxable years beginning after December 31, 2025, (1) catch-up contributions will be treated as satisfying the new requirements even if they are not designated as Roth, and (2) a plan that does not provide for designated Roth contributions will be treated as satisfying the new requirements as well.

Given the approaching deadline, plan sponsors and third party administrators who struggled with the tight implementation timeframe can now breathe a sigh of relief. We will keep you apprised as additional guidance is released.