The IRS issued guidance on Friday, August 25, 2023, under Section 603 of the SECURE 2.0 Act of 2022, which requires age-based catch-up contributions by high-paid employees to a 401(k), 403(b), or governmental 457(b) plan to be made on a Roth after-tax basis. The SECURE 2.0 Act required this change to be made for January 1, 2024, but many employers have asked for relief so that payroll and recordkeeping systems can be updated. IRS Notice 2023-62 (which can be found here) provides this welcome relief.

The IRS guidance makes the following announcements:

• Enforcement of the Roth catch-up contribution provision for high-paid employees (defined as employees with wages of more than $145,000 in the prior year) is delayed until January 1, 2026.
• Age-based catch-up contributions will continue to be available after 2023. There had been some concern that a drafting error in the SECURE 2.0 Act inadvertently eliminated catch-up contributions.
• If an employee makes elective deferrals to two or more plans during a year, those deferrals are aggregated for purposes of both the annual limit on elective deferrals ($22,500 for 2023) and the catch-up contribution limit ($7,500 for 2023).
• The U.S. Treasury Department and the IRS expect to issue further guidance on the Roth catch-up contribution provision, including guidance on the following topics:

• Clarification that the Roth catch-up contribution provision would not apply to individuals who do not have wages for FICA purposes (e.g., partners and self-employed individuals, including self-employed clergy).
• Guidance indicating that a plan administrator would be permitted to treat a high-paid employee’s election to make pre-tax catch-up contributions as a deemed election to make catch-up contributions on a Roth after-tax basis.
• Guidance for multi-employer plans and multiple employer plans in applying the Roth catch-up contribution provision.

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