Ronald Cluett Weighs in on Additional SECURE 2.0 Guidance in Tax Notes

Taxpayers received additional implementation guidance from the IRS and Treasury January 10 on SECURE 2.0 Act provisions regarding automatic enrollment and catch-up contributions.

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The proposed regs require contributions to be designated as after-tax Roth contributions for taxpayers whose prior-year Social Security wages exceeded $145,000. High-income employees subject to the Roth catch-up requirement won’t be able to make any catch-up contributions if their employer doesn’t incorporate a Roth program.

“I see this as an employer-friendly rule, even if some grumbling from affected participants results, potentially including requests to adopt a Roth feature,” Ronald G. Cluett of Caplin & Drysdale said.

The proposed regs provide that the Roth catch-up requirement doesn’t apply to employees who don’t have FICA wages from the employer sponsoring the plan for the preceding calendar year.

Cluett said that this was an expected approach that he thinks “was the correct regulatory outcome given the statutory language.”

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Cluett explained that some employers had expressed concerns over the implementation timeline of the “super catch-up” contribution provision, but its optional design feature “will afford them the flexibility to adopt the enhanced catch-up on a discretionary basis, if and when they choose to do.”

The IRS has scheduled a public hearing on the proposed regs for April 7.

For the full article, please visit Tax Notes’ website (subscription required).