IRS COLA Announement is Missing Something Important

"The Roth catch-up wage threshold for 2024, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan (other than a plan described in section 408(k) or (p)) for 2025 must be designated Roth contributions, remains $145,000."

Why aren't they telling me today what the 2025 limit is, since this rule is first effective in 2026??

19 hours ago, austin3515 said:

"The Roth catch-up wage threshold for 2024, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan (other than a plan described in section 408(k) or (p)) for 2025 must be designated Roth contributions, remains $145,000."

Why aren't they telling me today what the 2025 limit is, since this rule is first effective in 2026??

The 2025 comp limit for 2026 would have to be released in Oct/Nov of 2025 when we know what 2025 inflation looks right?  So they cant tell you today what the limit will be at the end of 2025.

I haven’t looked at the measures and arithmetic of the inflation adjustments.

Internal Revenue Code of 1986 (26 U.S.C.) § 414(v)(7)(E): “In the case of a year beginning after December 31, 2024, the Secretary shall adjust annually the $145,000 amount in subparagraph (A) for increases in the cost-of-living at the same time and in the same manner as adjustments under [§] 415(d); except that the base period taken into account shall be the calendar quarter beginning July 1, 2023, and any increase under this subparagraph which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000.”

For this measure for the first year after 2024, might the applicable cost-of-living increase have been less than 3.45%?
 

4 minutes ago, Peter Gulia said:

In the case of a year beginning after December 31, 2024, the Secretary shall adjust annually the $145,000

Makes sense.  IRS had to release the 2024 comp limit for 2025 because that's what the law requires. The IRS delay doesn't change that legal requirement, and as I recall, people questioned whether the IRS even had the authority to delay implementation until 2026.

I get all of that, but literally every other limit relevant to 2025 activity was just released. Save this one.  A "guru" confirmed what you guys said above.  But it is wholly inconsistent with every other limit ever released for 50 years of ERISA.  It's just never been done this way. Surely everyone can agree that that is unusual?

For example, the HCE threshold is precisely analegous.  If you make more than $160K in 2025 your an HCE for 2026.  There is literally no difference for this Roth comp threshold in terms of how it is applied.

The IRS’s 2025 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living, Notice 2024-80, expressly states: “The Roth catch-up wage threshold for 2024, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan (other than a plan described in section 408(k) or (p)) for 2025 must be designated Roth contributions, remains [for 2025] $145,000.” https://www.irs.gov/pub/irs-drop/n-24-80.pdf

The IRS uses the word “remains” for 16 items in the Notice. The IRS uses the lingo and syntax consistently for an amount that, following a rounding rule, doesn’t change for 2025.

I'm not questionning whether or not the limit works as described, I'm only bemoaning the fact that they chose this one limit to handle differently (yes I know Congress wrote the law and the law says what it says).  But again, we have to agree that this is most unfortunate and will necessarily lead to confusion.  I mean talk about a nuance.  This is defintely going to trick people.

Just curious, do you like or dislike that the Internal Revenue Service announced two years' nonenforcement?

I'm not sure I even know what that means.  I'm telling my clients to follow limits.  What have they agreed to not enforce?

Maybe the new administration/Congress will see their way to getting rid of this before 2026.

I've been talking about that as the worst possible outcome of all.  Hundreds of millions have been spent on this across the industry.  I personally have spent tens of hours discussing it over the past 2 years with clients, adding Roth etc.  I will lose my _________if that happens with any of these rules, and I hope Empower and Fidelity and the rest of them will join me.

Well i will say if they got rid of the auto enrollment rule that would be ok with me (I would be over the moon actually).  Auto enrollment already exists and the related infrastructure.  IT was only a question of whether it was mandatory.

11 minutes ago, austin3515 said:

I will lose my _________if that happens with any of these rules, and I hope Empower and Fidelity and the rest of them will join me.

Point taken.  I withdraw by comment.