Mandatory Roth Catch-Up Contributions

The recently proposed regulations state that plans may include a provision deeming high-paid individuals (HPI) as having irrevocably elected to have their catch-up contributions treated as Roth. Should this provision be incorporated into the plan document itself, or should it be added as part of the SECURE 2.0 amendment?

Welcome to the twilight zone!

If you are working with a preapproved plan document (Cycle 3), your plan provide may provide an amendment that includes this so you should pose the question to the preapproved plan document provider.  

Note that the Cycle 4 restatement cycle that should open 10/1/2026 (yes, folks, that is 19 months away) and this particular feature is not on the list of provisions that are required in the Cycle 4 documents.

Here is where the fun really begins!  amendment for SECURE 2.0 have to be amended by December 31, 2026, which is 4 months after opening of Cycle 4.

The proposed regulations say the mandatory Roth catch-up rules will be effective for the first day of the plan year starting 6 months after the rules are published in the Federal Register.  Given the timing of the comment, review and approval process (and several thousand IRS employees laid off), the earliest effective date will be January 1, 2027.  BUT, in the meantime, the plan must operate in accordance with a good-faith interpretation of the proposed rues.

The least complicated action to take right now is to adopt an administrative policy about how the mandatory Roth catch-ups will be administered, communicate this policy to the plan participants, and share it across all service providers working with the plan.

Thank you, Paul I.