Contributed by: Kali Hassinger, CFP®, CSRIC™
In late 2022, Secure Act 2.0 was passed by Congress with the intention of expanding access to retirement savings. The package requires retirement plans to implement many changes and updates based on the new rules. Of the nearly 100 provisions within Secure Act 2.0, only a few went into effect in 2023, and many changes were scheduled to become effective in 2024.
One of these provisions would require future retirement plan catch-up contributions (those ages 50 and over) to be categorized as Roth for participants who earned more than $145,000 in the prior year. Although more employer-sponsored retirement plans have included access to Roth savings over the years, not all plans offer that option to participants. With the new rule, they would either need to offer Roth savings to all employees or remove the option to make catch-up savings contributions for future years.
As the fall open enrollment period for 2024 is quickly approaching, many plan administrators and participants were waiting for guidance on implementing and monitoring this change for 2024. In late August, the IRS announced a two-year delay or “administrative transition period,” meaning that plans don’t need to implement this change until 2026.
For those retirement plan participants who are 50 and older and contributing more than the base savings amount ($22,500 for 2023), pre-tax catch-up contributions can continue for 2024 and 2025 as they have in the past. For retirement plans that aren’t already offering a Roth savings option, they won’t need to make any changes yet!
We are monitoring this and future changes as information and guidance are released on Secure Act 2.0 provisions. As always, we are here to help if you have questions on how this could affect you and your financial plan!
Kali Hassinger, CFP®, CSRIC™ is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.
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