IRS Notice 2023-62: Guidance for Section 603 of SECURE 2.0.
The Internal Revenue Service (IRS) released Notice 2023-62 on Friday, August 25th, 2023, providing guidance on Section 603 of SECURE 2.0 requiring catch-up contributions made by participants whose prior year wages exceeded $145,000 in 401(a)/(k), 403(b) and 457(b) plans be designated as Roth contributions.
The Notice provides a two-year administrative transition period for the 2024 and 2025 tax years. Catch-up contributions made by impacted participants will be automatically treated as satisfying the new rule, even if they are not made on a Roth basis. Also, a plan that does not permit Roth contributions will not be treated as violating Section 603 of SECURE 2.0. Therefore, absent further relief from the IRS, plans will need to implement the rule beginning January 1, 2026.
This administrative transition period is intended to assist taxpayers and employers with transitioning to the new Roth catch-up requirement and support an orderly transition for compliance requirements.
Additionally, to correct a drafting error from SECURE 2.0, the Notice clarified that plan participants who are age 50 and over can continue to make catch-up contributions after 2023, regardless of income.