The retirement planning landscape is constantly evolving; thus, it's essential to stay informed about the latest changes that may impact your retirement plan. One such change you may have heard about is the significant updates to Section 603 of the SECURE Act 2.0. What exactly are these changes? In this blog post, we outline the details and provide the essential information you need to know.
The New Catch-up Requirements
On August 25th, the IRS released new guidance on Section 603 of the SECURE Act 2.0. This notice introduces an administrative transition period for Roth catch-up requirements, offering sponsors and administrators a two-year delay.
Until taxable years beginning after December 31, 2025, catch-up contributions will be regarded as satisfying the requirements of Section 603, even if they are not designated as Roth contributions. This means individuals can continue to make catch-up contributions on a pre-tax basis, regardless of their income level. Additionally, if a retirement plan does not currently offer designated Roth contributions, it will still satisfy the requirements of Section 603 during this period.
Why the Change?
Prior to this, Section 603 of the SECURE Act 2.0 mandated catch-up contributions for individuals with FICA compensation above $145,000 must be made as Roth contributions. This provision was scheduled to take effect January 1, 2024. However, it became evident that the technical wording of the legislation created confusion, potentially endangering and eliminating all catch-up contributions—whether Roth or pre-tax—from 2024 onward. This ambiguity posed significant challenges for plan sponsors, participants, and recordkeepers, and prompted the need for corrective action.
Adapting with a CEFEX Certified Partner
These changes can be challenging to adapt to, but it's vital to ensure you're fully compliant with the latest rules and regulations surrounding retirement plans. This is where RPCSI comes in. As Certified Center for Fiduciary Excellence (CEFEX) partners, RPCSI provides clients with fiduciary governance consulting and support. Our team of experts helps you understand the implications of the SECURE Act 2.0, including the recent changes to Section 603. We work closely with our clients to ensure compliance with all laws and regulations to make sure they're making appropriate plan design decisions for their retirement strategy. Rest assured that our experts will keep your plan compliant, regardless of rule changes.
