Mandatory Roth catch-up

I am confused about a provision in the recently-issued proposed regs The IRS says that a plan may allow deemed Roth catch-up elections for affected participants who have mistakenly elected pre-tax. The regs also say that a deemed election provision is a prerequire for using the two new correction methods. But wouldn't a deemed elected provision allow a plan to automatically allocate the catch-ups to a Roth account, thereby negating the need to make a correction?

Obviously, I'm not understanding this correctly. Any help would be greatly appreciated.

The rules attempt to address the various combinations of plan document provisions and administrative policies, and the interplay of each combination with a participant's personal taxation.

One scenario is where the plan doesn't have any provisions about allowing Roth catch-up contribution for a High Paid employee.  The correction procedure in this scenario is to treat any amount that would be a catch-up contribution for the employee as an excess deferral using existing correction rules (e.g., timely refunding of the excess plus earnings).

If the plan has provisions for deemed Roth catch-up election and the plan accepts a pre-tax elective deferrals in that should be treated as Roth, then the plan can use the new correction methods.  One of the new correction methods says that the amount that needs to be treated as Roth can be put in a Roth account in the plan (applying the deemed election) and the amount is included on the employee's Form W-2 as Roth for the year.  This has to be done before Form W-2 are issued and will require the plan informing payroll of the amounts.  The other correction method says that the amount that needs to be treated as Roth can be put in a Roth account in the plan (applying the deemed election and treating the amount as an In-Plan Roth Rollover) and the amount is reported to the participant on a Form 1099R.  Either correction must be made by April 15th. 

This is just an example of some of the rules.  The rules also address scenarios such as treating amounts as catch-up after failed ADP testing (including the 6 month ADP test deadline for EACAs), 415 excess amounts, excess amounts over employer-provided limits (versus 402(g) limits).

Getting all of this sorted out among payroll, recordkeepers, and High Paid participants by January 1, 2026 is going to be a major challenge.

The IRS did what is could with Notice 2023-62 to delay implementation, but the IRS could not retract what Congress wrote into law. The motivation in Congress was meeting the law's overall revenue impact and was not based on the implications of implementing the law.  In 2025, the burden now falls on service providers, plan sponsors, and participants to try to get this to work.

Thank you for the helpful response!