On Friday, August 25, 2023, the IRS released Notice 2023-62, which provides guidance related to section 603 of the SECURE 2.0 Act, also known as the Roth catch-up rule. Section 603 requires employees with wages in excess of $145,000 in the prior year to make their catch-up contributions on a Roth basis. This provision was to be effective beginning January of 2024; however, many questions were raised by the industry along with the concern that there was not enough time to make the required changes to comply with this provision by January 2024. Therefore, industry trade associations and individual companies sought a delay to allow time for the provision to be implemented.

Catch-up contribution guidance

The IRS Notice provides relief in the form of a two-year “administrative transition period.” This means that until January 1, 2026, catch-up contributions made by individuals with wages in excess of $145,000 will be automatically treated as satisfying the new rule, even if they are not made on a Roth basis, and a plan that does not allow for Roth contributions at all will not be treated in violation of this provision.

 

Additionally, the Notice confirms that catch-up contributions are still allowed for participants who are age 50 or over. It also requests comments on their proposed interpretations of the Roth catch‑up rule.

 

While the two-year delayed implementation to January 2026 provides needed relief to ensure readiness, we encourage plan sponsors to continue working with their payroll providers to implement the changes needed to support provision 603, along with adding a Roth option to their plan, if necessary, as soon as possible.