Compliance Stuff

  Beginning January 1, 2026, age 50+ catch‑up contributions for “high‑paid participants” of 401(k), 403(b), and governmental 457(b) retirement plans must be made on a Roth basis. As a result, employers must identify who is a “high-paid participant” and ensure that corresponding catch-up contributions are characterized as Roth — even if a participant’s standing catch-up deferral election is pre‑tax.   The Internal Revenue Service (IRS) recently released final regulations   implementing the mandatory Roth catch-up, which will create pressure points for payroll systems, retirement plan recordkeepers, and plan sponsors. This update summarizes the new mandatory Roth catch-up requirement, highlights selected issues for payroll and human resources to consider, and recommends solutions to reduce compliance risk.  The New Mandatory Roth Catch‑Up Rule Under final IRS regulations, a catch‑up eligible participant with FICA wages paid by applicable employer(s) above a wage thresh...

Recently, the Department of the Treasury and the IRS issued the long-awaited final regulations regarding the provisions of SECURE 2.0 relating to catch-up contributions made by participants in qualified defined contribution plans (including 401(k), 403(b), and governmental 457(b) plans) (the “ Final Regulation s”). In general, the Final Regulations followed the proposed regulations that were published in January. However, the IRS did make some key changes in the Final Regulations in response to comments submitted after the proposed regulations were published. Notably, despite pressure from plan sponsors and service providers, the IRS did not extend the administrative transition period with respect to required Roth catch-up contributions for certain higher paid catch-up eligible employees. Accordingly, the required Roth catch-up rules become mandatory effective January 1, 2026, for plans with calendar year plan years . However, the Final Regulations do provide some relief for reasonable...