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Require all participants to make catch-up contributions on Roth basis?


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Posted

I have clients seeking to simplify the administration of the SECURE 2.0 Roth requirement for catch-up contributions made by participants earning more than $145,000. One potential way to do this is to require all participants (regardless of compensation) to make catch-up contributions on a Roth basis, but it's not clear to me whether that would be permissible. 

May plan sponsors require all catch-up contributions to be made on a Roth basis? More generally, how have you advised clients who are concerned about the complexity of administering the new Roth catch-up requirement, but who don't want to eliminate catch-up contributions from their plans?

Posted

I don't think that would be allowed. Sec. 603 notwithstanding, part of the definition of a Roth contribution is that it has to be made at the employee's election. If you force certain contributions to be Roth then they're not valid Roth contributions. Likewise, catch-up contributions have a requirement that if any employee is allowed to make a catch-up, then every employee has to be able to make a catch-up. So you couldn't take away somebody's ability to make a catch-up merely because they didn't make a Roth election.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

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