New IRS Rule Deems Catch-Up Contributions After-Tax for Select Participants
The Department of the Treasury and the IRS recently issued proposed regulations addressing key changes under the SECURE 2.0 Act focused on catch-up contributions for 401(k) and similar retirement plans. Catch-up contributions are additional contributions allowed by employees who are age 50 or older. These updates are significant for plan administrators and participants alike.
The new guidance clarifies that catch-up contributions for participants with Social Security wages exceeding $145,000 in the prior year must now be made as after-tax Roth contributions effective January 1, 2026. (Note that this was previously postponed twice.) This rule is designed to increase tax revenue while maintaining the benefits of additional retirement savings.
Another important change expands catch-up contribution limits for specific groups. Employees between the ages of 60 and 63 are eligible for a super catch-up contribution of $11,250 effective January 1, 2025, providing an enhanced opportunity to bolster retirement savings. Additionally, the rules address increased limits for employees participating in SIMPLE retirement plans.
These updates build on Notice 2023-62, released last August, which introduced an administrative transition period to help plan sponsors and participants adapt to the new Roth catch-up contribution requirements and clarified that catch-up contributions remain available for all eligible participants. Proposed regulations aim to streamline implementation and address practical concerns raised by stakeholders.
How We Help
AAFCPAs helps plan administrators and participants navigate the complexities of the new IRS regulations on catch-up contributions under the SECURE 2.0 Act. We provide tailored guidance on implementing after-tax Roth contributions for high-income participants, ensuring compliance while helping to maximize the advantages of additional retirement savings.
We also assist eligible employees in leveraging the increased super catch-up contribution limits, offering strategies to optimize retirement savings. For clients participating in SIMPLE retirement plans, our team advises on the expanded contribution limits, providing actionable insights to capitalize on these opportunities.
Our approach combines deep expertise in tax planning, employee benefit plan audits, and compliance. We deliver collaborative, proactive solutions that address both regulatory changes and fiduciary responsibilities. By partnering with AAFCPAs, clients gain clarity, confidence, and a clear path to long-term financial success.
If you have questions, please contact AAF Wealth Management, Daniel Seaman, CPA, Tax Partner at 774.512.4025 or dseaman@nullaafcpa.com, Davide Villani, CPA, CGMA, Partner, Employee Benefit Plans at 774.512.4012 or dvillani@nullaafcpa.com—or your AAFCPAs tax advisor.
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