SECURE 2.0 was a package of legislation signed into law in December 2022 as a follow-up to the Setting Every Community Up for Retirement Enhancement Act of 2019 (aka SECURE 1.0).
There has been some confusion since the passage of SECURE 2.0 regarding the new treatment of 401(k) contributions for older workers.
Upon passage of the legislation, it was assumed that beginning in 2024, employees who are 50 and older, and whose annual pay exceeds $145,000, would need to make catch up contributions only to a post-tax Roth 401(k). Currently, the maximum allowable 401(k) contribution from employees is $22,500, and the catch up is $7,500, for a total of $30,000 for employees 50 years and older.
The administrative aspects of this impending change caused concern by the administrators of 401(k) plans. The IRS recently provided guidance to clear up the ambiguity. Now, the IRS Is giving two years of administrative relief so payroll providers and others have extra time to implement the change.
For employees who are 50 and older, if your income exceeds $145,000, you can continue to make your catch-up contributions into a pre-tax (traditional) 401(k) account in 2024 and 2025.
Starting in 2026, catch-up contributions for 401(k) plans will need to be made after tax and directed to a Roth version of the 401(k).
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