Summary
The IRS and Treasury Department have set new rules for "catch-up" retirement contributions for older workers under the SECURE 2.0 Act. This law affects how higher-income workers aged 50 and older should allocate extra retirement savings, switching these contributions to Roth accounts. The changes aim to improve retirement savings and simplify plan use for employees and employers.
Key Facts
- The IRS finalized rules on catch-up contributions for older workers.
- Catch-up contributions are extra retirement savings for employees aged 50 and older.
- Under SECURE 2.0, higher-income workers must make catch-up contributions as Roth contributions, meaning they pay taxes on the money now.
- Roth contributions grow tax-free and can be withdrawn tax-free if certain conditions are met.
- The SECURE 2.0 Act was signed into law in December 2022.
- The new Roth requirements mainly start in 2027, affecting contributions for years beginning after December 31, 2026.
- There are exceptions for certain government and collectively bargained plans with later start dates.
- The IRS made adjustments to the final rules based on public feedback, allowing more flexibility in wage aggregation for the Roth option.
