global Tax SECURE Act 2.0: Mandatory Roth Catch-up Contributions for High Net Worth February 09, 2023 Editor's Note: As of August 25, 2023, this provision has been delayed until 2026. Check out our updated blog for the details: IRS Delays Mandatory Roth 401(k) Catch-up Rule until 2026 The Securing a Strong Retirement Act, H.R. 2954, otherwise known as SECURE 2.0, signed December 29, 2022 expands retirement savings options and introduces several changes to tax provisions. One notable change is that highly compensated employees’ catchup contributions to employer sponsored plans are now subject to Roth tax treatment. What impact will this have? We explore here. What is SECURE 2.0? The Securing a Strong Retirement Act, H.R. 2954, SECURE 2.0, expands and increases retirement savings and simplifies some existing rules. What is the change to catch-up contributions for highly compensated employees? Effective for tax years beginning after December 31, 2023, individuals age 50 or older earning more than $145,000 in the prior calendar year will be required to deposit any catch up contributions to Roth (i.e, after-tax) account. In prior years, affected individuals age 50 or older were able to make pre-tax catch up contributions to their employer-sponsored retirement plans. Under this SECURE 2.0 change, these high earners will no longer be able to receive a tax deduction for these contributions. What can high earners do now to save tax? Since the change does not take effect until 2024, you will want to consider implementing tax strategies now, with the knowledge that you will lose this valuable tax deduction next tax year. Questions on SECURE 2.0? We can help. Contact us. Visit our SECURE Act 2.0 Knowledge Center for more information on retirement changes that could impact you and your business.
