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The Treasury Department has still not decided whether it will/can delay the effective date of the SECURE 2.0 rule that requires plan participants earning more than $145,000 to make their catch-up contributions on a Roth basis (i.e., after-tax contribution, tax-free withdrawals).

SECURE 2.0, enacted last year, includes the “Roth catch-up contribution” rule and makes it effective as of January 1, 2024. However, most plan sponsors have determined that they either cannot or will have great difficulty (and expense) in meeting that deadline. Many plans must be amended to allow a Roth option, and all must build the computer systems that will allow interaction between payroll and plan contribution data in order to determine who among their employees (those with wages above $145,000) will be subject to the rule.

The end result, plan sponsors say, is that if they cannot amend their plans and build their systems prior to the end of the year, they will have no choice other than to not allow

NAIFA, in conjunction with coalitions of literally hundreds of employers, retirement groups, and others, has written to both Treasury and Congress seeking a two-year delay in the 2024 effective date. The letters include a discussion of the legal grounds on which Treasury could delay enforcement of the Roth catch-up contribution rule. But, so far, Treasury has not responded to the lobbying—from both the private sector and from concerned Senators and Members of the House of Representatives.

The retirement community is also asking Congress to enact legislation to delay the rule’s effective date, but Hill personnel think it will be impossible to pass such legislation before year-end. They agree that legislation would be ideal but are encouraging Treasury to provide regulatory relief given the seeming impossibility of a timely enactment of corrective legislation.

Prospects: Hill insiders believe Treasury will issue “grab-bag” guidance by the end of the month, and that guidance may include some kind of statement on the effective date of the Roth catch-up contribution rule. At the moment, Treasury is being fairly tight-lipped about their thinking, but there are some indications that there might be some relief provided in the form of an extension, although possibly not for two years. One possible outcome is an announcement that Treasury will not enforce the effective date for a year. But that is speculation; it is by no means certain.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.