SECURE Act 2.0: How to Start Planning for Upcoming Catch-Up Contributions
As part of the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 of 2022, permitted retirement plan catch-up contributions must be made on a Roth basis for employees whose wages from the same employer were over $145,000 in the prior year. This remaining provision is effective in 2026.
If they aren’t already, plan administrators should begin working with payroll and retirement plan providers to address the key contribution factors that will be impacted by the SECURE Act when the provision takes effect.
Implement the SECURE Act’s remaining provision successfully with insights into the focus areas that facilitate effective planning.
Wage Limits
Plan sponsors should work with teams to identify employees who are over the $145,000 wage limit in calendar year 2025 as well as over age 50 in calendar year 2026. This wage limit needs to be calculated for the calendar year even if you use a non-calendar year for your plan year. These highly paid individuals must have any catch-up contributions—including super catch-up contributions for age 60-63 employees, if supported by the plan—made as a Roth contribution.
Affected employees may need to have written communication informing them of this impact.
Companies also need to identify this population for successive years to identify the next set of highly paid individuals.
Traditional or Catch-Up Contributions
Some retirement plans may allow employees to elect a certain amount or percentage for catch-up specifically. Other plans may apply the same amount or percentage used for pre-tax or Roth traditional for the catch-up contributions.
Plans that don’t allow for Roth contributions will not allow catch-up contributions for employees over the $145,000 wage limit.
Track Contributions by Type
Reconcile and track year-to-date contributions for traditional and catch-up contributions. Confirming highly paid individuals aren’t making pre-tax catch-up contributions may be a new compliance procedure to add as part of a contribution amount audit.
We’re Here to Help
To learn more about SECURE Act 2.0, how it can affect you, and how your company can prepare, contact your Moss Adams professional.