HRPA Supports Two-Year Delay on Roth Catch-Up Retirement Contributions

HR Policy Association signed a coalition letter to Congress urging transition relief to give companies time to make the internal changes required to implement  a SECURE 2.0 Act provision which requires catch-up contributions to be made on an after-tax Roth basis for retirement plan participants earning over $145,000. 

The letter seeks Congressional legislation that would provide a two-year delay (to January 1, 2026) of the Roth catch-up requirement described in Section 603 of SECURE 2.0. The letter also requests additional time for state governments to consider and enact additional required legislation, as well as considerations for collective bargaining agreements. 

The coalition letter emphasizes the need for expeditious action, stating “unless this requirement is delayed very quickly (i.e., this summer), their only means of compliance will be to eliminate all catch-up contributions for 2024.” Thus, many retirement plan participants would lose the ability to make catch-up contributions after December 31, 2023, if no relief is taken. Retirement experts cite administrative complexities such as plan designs that do not offer a Roth feature, payroll systems that lack the mechanism to identify 2023 wages of more than $145,000 by January 1, 2024, and system integration between in-house payroll and HRIS systems and service providers as some of the practical considerations to successfully comply with the rule.

Additionally, a coalition letter has been sent to the IRS & U.S. Treasury Department this month highlighting the specific challenges and areas needing additional guidance. The Treasury Department has historically provided transition relief by announcing that the IRS will not seek penalties for non-compliance for an extended period of time.