A new rule now requires certain older, higher-earning employees to make their retirement plan catch-up contributions as Roth instead of pre-tax. This mainly affects those age 50+ earning over $150,000, shifting how their contributions are taxed today versus in retirement.
In a recent article published by Employee Benefit News, Jay Cirame emphasizes that “the question is no longer how to get ready — it’s whether the plan is operating as intended.” He highlights that payroll is the foundation of compliance and stresses the importance of confirming systems correctly identify eligible employees, apply Roth treatment at the right time, and ensure accurate tracking and reporting.
The change may impact how employees experience their pay, since Roth contributions no longer reduce taxable income today. As Jay notes, clear communication and context are critical, especially in helping participants understand the tradeoff of paying taxes now for tax-free growth later, along with the added opportunity to save more through higher catch-up limits.
“Positioning this change within a broader tax strategy can help participants see the bigger picture.”
Interested in learning more? Read the full Employee Benefit News article here.
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