Delayed and Deferred 401(k) changes.
The Congress in SECURE 2.0 (pension and IRA changes) mandated that for employees participating in 401(k) deferrals in their employers plans and contributing “make up” additions (those over age 50) could only do so as ROTH contributions after 2023, if they are paid at least $ 145,000. This would tax the contributions, immediately, to the participant, although payouts in retirement (including earnings) would be income tax free.
To accommodate this change, many employers will need to amend their plans and the IRS, along with administrators, need to alter tracking and reporting systems for this change.
The IRS has just announced that it is delaying the effective application of this provision until 2026, due to all of the above amendments and changes.
Mark Misselbeck, CPA, is a Tax Principal at Katz, Nannis + Solomon, P.C. If you have any questions or would like to speak with one of our tax professionals, please contact our office at 781-453-8700.