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What You Have to Know
- Catch-up contributions made by rich 401(okay) individuals should be designated as after-tax Roth contributions by 2026.
The Inner Income Service stated Friday that it has granted an administrative transition interval that extends till 2026 the brand new requirement that any catch-up contributions made by greater‑earnings individuals in 401(okay) and comparable retirement plans should be designated as after-tax Roth contributions.
The IRS additionally clarified in Discover 2023-62 that plan individuals who’re age 50 and older can proceed to make catch‑up contributions after 2023, no matter earnings.
The discover gives preliminary steering for Part 603 of the Safe 2.0 Act, enacted in December 2022.
“Below that provision, beginning in 2024, the brand new Roth catch-up contribution rule applies to an worker who participates in a 401(okay), 403(b) or governmental 457(b) plan and whose prior-year Social Safety wages exceeded $145,000,” the IRS states.
The executive transition interval, the company defined, “will assist taxpayers transition easily to the brand new Roth catch-up requirement and is designed to facilitate an orderly transition for compliance with that requirement.”
The IRS discover additionally clarifies that the SECURE 2.0 Act “doesn’t prohibit plans from allowing catch-up contributions, so plan individuals who’re age 50 and over can nonetheless make catch-up contributions after 2023.”
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