Payroll Briefs

Transition Period Announced for SECURE 2.0 Act Roth Requirement

September 5, 2023

At the end of August 2023, the IRS announced an administrative transition period for catch-up contributions, extending the deadline to 2026. This will allow higher earners, age 50 and up, to receive two more years to use pre-tax dollars for their retirement savings in 401(k) and similar plans. Employers had been warning officials, after the law was announced, about the difficulty of changing their systems by the deadline. This transition period gives employers more time to implement this change. 

In the notice, the IRS stated the reason for the transition period was to create an orderly transition to the new system. Under the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act, the new Roth IRA catch-up contribution rule applies to employees who participate in a 401(k), 403(b) or 457(b) plan, and whose prior-year social security wages exceeded $145,000. The rule was set to take effect on Jan. 1, 2024, but the transition period provides employers until Jan. 1, 2026, to fully implement the new requirements. 

Under the current law, contributions to 401(k) and similar plans are capped at $22,500 for 2023. Savers age 50 and older can make catch-up contributions beyond that into their savings accounts each year, with eligible workers allowed to put an extra $7,500 into their accounts, for a total of $30,000 in 2023. Those catch-up payments can be made with pre-tax or post-tax dollars. Under the new law, Congress requires high earners to make those catch-up contributions in post-tax dollars.  

Helping You Streamline the Changes 

With these constant changes in legislation, keeping up can be challenging. At DM Payroll Solutions, we provide end-to-end solutions to help manage all your benefits administration, including 401(k) plans. Compiling sensitive employee data for transfer to your 401(k) provider is simple and straightforward with our 401(k) 360° integration reporting to easily upload to any major third-party 401(k) administrator’s site. Let us help eliminate frustrating data submissions and expedite plan deposits, as well as year-end compliance requirements. To learn more about this feature and how we can support your benefits administration, contact us today.