IRS Notice 2023-62 provides guidance on particular issues to assist in the implementation of Section 603 of the SECURE 2.0. The notice also announces a two-year administrative transition period with respect to the requirement that catch-up contributions made on behalf of certain eligible participants be designated as Roth contributions. Finally, the notice announces an intent to issue further guidance and invites public comments on the notice and on any aspect of Section 603 until October 24, 2023.

What You Should Know

Review all plan management accounts including ERISA budget and all forfeiture accounts. Reach out to your recordkeeper for account balance information. Refer to plan document for guidance on usage.

  • The notice clarified that employer plans may continue to permit eligible participants to make deferrals that exceed 402(g) limits for taxable years beginning after December 31, 2023, if those contributions satisfy the requirements for catch-up contributions.
  • The notice clarified that participants who made less than $145,000 (as indexed) can still make non-Roth catch-up contributions and that those contributions are not includable in the participant’s gross income.
  • The notice stated that if an individual makes elective deferrals to two or more plans during a taxable year, then, those elective deferrals are aggregated for purposes of determining whether the total exceeds applicable limits.
  • An administrative transition period, until December 31, 2025,  was announced with respect to catch-up contributions made on behalf of certain eligible participants being designated as Roth contributions.
  • The IRS provided a two-year administrative transition period through December 31, 2025, during which time catch-up contributions made on behalf of participants who made more than $145,000 (as indexed) need not be Roth contributions, and plans that do not offer Roth contributions may continue to allow catch-up contributions.

What Is Next

  • The Treasury Department and the IRS intend to issue further guidance to assist taxpayers with the implementation of Section 603.  That guidance is expected to: clarify the rules for self-employed individuals, allow for the treatment of a pre-tax catch-up election as an election to make a Roth catch-up contribution, and, to provide guidance specific to plans adopted by more than one employer.
  • Plan sponsors should work with their advisors, recordkeepers, and legal counsel to stay current on applicable requirements as more develops.

Source: IRS