Catch-Up Contributions, 2645-2661 [2025-00350]
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Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Proposed Rules
Workers’ Compensation Act: Civil
Money Penalties Procedures, 88 FR
62480 (Sept. 12, 2023). This rule would
establish new procedures for assessing
and adjudicating penalties under the
LHWCA. See 33 U.S.C. 901–50. The rule
also would set forth the procedures to
contest OWCP’s penalty determinations.
The comment period for this notice of
proposed rulemaking expired on
November 13, 2023.
Summary of Comments
The Department received six
comments on the proposed regulations.
The commenters represented a number
of stakeholders from the private sector,
including group self-insurance entities,
industry associations, and a business
advocacy organization.
Rationale for Withdrawal
OWCP has considered the detailed
feedback, analysis, and dialogue that the
publication of the NPRM produced.
OWCP continues to believe that there is
a need for a more defined and
transparent process for imposing and
adjudicating penalties.
Given the range of feedback received
and the need for additional examination
and input, however, OWCP believes
that, before proceeding with this
rulemaking, it would benefit from more
outreach and dialogue with interested
parties and the regulated community,
which it cannot complete in the near
future with its limited time and
resources. In addition, many aspects of
the proposed rule and the penalty
process are closely connected to
OWCP’s information technology
modernization project and cannot move
forward until that project is completed.
Therefore, OWCP is withdrawing this
proposed rule.
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Conclusion
By withdrawing the proposed rule,
OWCP is eliminating the pending nature
of this rulemaking. OWCP intends to
engage with all interested parties to
discuss and consider future revision to
the penalties procedures, as well as
impacts on the stakeholders. If OWCP
decides to establish new procedures for
the imposition and adjudication of civil
money penalties prescribed by the
LHWCA, it will issue a new NPRM in
the Federal Register.
Accordingly, the NPRM published in
the Federal Register on September 12,
2023 at 88 FR 62480, is withdrawn.
Christopher Godfrey,
Director, Office of Workers’ Compensation
Programs.
[FR Doc. 2025–00376 Filed 1–10–25; 8:45 am]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
[REG–101268–24]
RIN 1545–BR11
Catch-Up Contributions
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
AGENCY:
This document sets forth
proposed regulations that would
provide guidance for retirement plans
that permit participants who have
attained age 50 to make additional
elective deferrals that are catch-up
contributions. The proposed regulations
reflect statutory changes made by the
SECURE 2.0 Act of 2022, including the
requirement that catch-up contributions
made by certain catch-up eligible
participants must be designated Roth
contributions. The proposed regulations
would affect participants in,
beneficiaries of, employers maintaining,
and administrators of certain retirement
plans. This document also provides
notice of a public hearing.
DATES: Written or electronic comments
must be received by March 14, 2025. A
public hearing on this proposed
regulation has been scheduled for April
7, 2025, at 10 a.m. ET. Requests to speak
and outlines of topics to be discussed at
the public hearing must be received by
March 14, 2025. If no outlines are
received by March 14, 2025, the public
hearing will be cancelled. Requests to
attend the public hearing must be
received by 5 p.m. on April 3, 2025.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal
eRulemaking Portal at
www.regulations.gov (indicate IRS and
REG–101268–24) by following the
online instructions for submitting
comments. Requests for a public hearing
must be submitted as prescribed in the
‘‘Comments and Public Hearing’’
section. Once submitted to the Federal
eRulemaking Portal, comments cannot
be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish
for public availability any comment
submitted electronically or on paper to
its public docket on
www.regulations.gov. Send paper
submissions to: CC:PA:01:PR (REG–
101268–24), Room 5203, Internal
Revenue Service, P.O. Box 7604, Ben
PO 00000
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Franklin Station, Washington, DC
20044.
FOR FURTHER INFORMATION CONTACT:
26 CFR Part 1
SUMMARY:
2645
Concerning the proposed regulations,
call Jessica S. Weinberger at (202) 317–
6349 or Jason E. Levine at (202) 317–
4117; concerning submission of
comments, the hearing, and the access
code to attend the hearing by telephone,
call the Publications and Regulations
Section at (202) 317–6901 (not toll-free
numbers) or email publichearings@
irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Authority
This notice of proposed rulemaking
sets forth proposed amendments to the
Income Tax Regulations (26 CFR part 1)
under sections 401(k), 403(b), and
414(v) of the Internal Revenue Code
(Code) relating to catch-up
contributions. These proposed
regulations are issued by the Secretary
of the Treasury or the Secretary’s
delegate (Secretary) under the express
delegations of authority in sections
401(m)(9), 414(v)(7)(D), and 7805(a) of
the Code.
Section 401(m)(9) provides, in part,
that ‘‘[t]he Secretary shall prescribe
such regulations as may be necessary to
carry out the purposes of this subsection
and subsection (k).’’ Section
414(v)(7)(D) provides a specific
delegation of authority with respect to
the requirements of section 414(v)(7)(A),
stating, ‘‘[t]he Secretary may provide by
regulations that an eligible participant
may elect to change the participant’s
election to make additional elective
deferrals if the participant’s
compensation is determined to exceed
the limitation under subparagraph (A)
after the election is made.’’ Section
7805(a) provides that ‘‘the Secretary
shall prescribe all needful rules and
regulations for the enforcement of [the
Code], including all rules and
regulations as may be necessary by
reason of any alteration of law in
relation to internal revenue.’’
Background
This notice of proposed rulemaking
sets forth proposed amendments to the
Income Tax Regulations under section
414(v) of the Code. Section 414(v)
permits a plan to allow catch-up eligible
participants to make additional elective
deferrals that are catch-up contributions
and sets forth requirements relating to
those contributions. These proposed
regulations would amend the
regulations under section 414(v) to
reflect changes to the catch-up
contribution requirements for certain
catch-up eligible participants pursuant
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Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Proposed Rules
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to sections 109, 117, and 603 of Division
T of the Consolidated Appropriations
Act, 2023, Public Law 117–328, 136
Stat. 4459 (2022), known as the SECURE
2.0 Act of 2022 (SECURE 2.0 Act).
This document also proposes
conforming amendments to the
regulations under sections 401(k) and
403(b) of the Code that reflect section
603 of the SECURE 2.0 Act.
I. Statutory and Regulatory Framework
Section 414(v)(1) of the Code provides
that an applicable employer plan will
not be treated as failing to meet any
requirement of the Code solely because
it permits an eligible participant to
make additional elective deferrals (as
defined in section 414(v)(6)(B)) in any
plan year. ‘‘Applicable employer plan’’
is defined in section 414(v)(6)(A) to
mean a qualified plan under section
401(a) (qualified plan), a plan under
which amounts are contributed by an
individual’s employer for an annuity
contract described in section 403(b)
(section 403(b) plan), an eligible
deferred compensation plan under
section 457 of an eligible employer
described in section 457(e)(1)(A)
(eligible governmental 457(b) plan),1 an
arrangement meeting the requirements
of section 408(k) (SEP arrangement), or
an arrangement meeting the
requirements of section 408(p) (SIMPLE
IRA plan). Under section 414(v)(5), an
eligible participant is a participant who
is generally eligible to make elective
deferrals under an applicable employer
plan and who would attain age 50 by
the end of the taxable year, with respect
to whom no further elective deferrals
may (without regard to section 414(v))
be made to the plan for the plan year (or
other applicable year) by reason of a
limitation or restriction listed in section
414(v)(3) or a comparable limitation or
restriction included in the terms of the
plan.
Under section 414(v)(2)(A), the
amount of additional elective deferrals
that a plan may permit a participant to
make pursuant to section 414(v)(1) for a
taxable year is limited to the lesser of:
(1) the applicable dollar amount under
section 414(v)(2)(B) (referred to as the
applicable dollar catch-up limit), and (2)
the excess (if any) of the participant’s
compensation (as defined in section
415(c)(3)) for the year over any other
elective deferrals of the participant for
such year that are made without regard
to section 414(v). Section 414(v)(2)(B)(i)
provides the applicable dollar catch-up
1 Section 414(v)(6)(C) provides that section 414(v)
does not apply to a participant in an eligible
governmental 457(b) plan for any year for which a
higher limitation applies to the participant under
section 457(b)(3).
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limit for an applicable employer plan
other than a plan described in section
401(k)(11) (SIMPLE 401(k) plan) or a
SIMPLE IRA plan. Section
414(v)(2)(B)(ii) provides the applicable
dollar catch-up limit for a SIMPLE
401(k) plan or a SIMPLE IRA plan
(collectively referred to as SIMPLE
plans). Section 414(v)(2)(C) provides
that the applicable dollar catch-up
limits under section 414(v)(2)(B)(i) and
(ii) are subject to annual adjustment
based on changes in the cost of living.
Section 414(v)(2)(D) provides that, for
purposes of section 414(v)(2), all
applicable employer plans, other than
eligible governmental 457(b) plans, that
are maintained by the same employer
(as determined under section 414(b), (c),
(m), or (o)) are treated as a single plan,
and all eligible governmental 457(b)
plans that are maintained by the same
employer are treated as a single plan.
Under section 414(v)(3)(A)(i), a catchup contribution is not, with respect to
the year in which the contribution is
made, subject to certain otherwise
applicable limitations, including those
contained in section 401(a)(30) (limiting
a participant’s elective deferrals during
a calendar year to the amount permitted
under section 402(g)), section 403(b)
(including the requirement under
section 403(b)(1)(E) that a contract
purchased under a salary reduction
agreement must meet the requirements
of section 401(a)(30)), and section
457(b)(2) (limiting a participant’s
elective deferrals for a taxable year,
determined without regard to any
increase to the limitation under section
457(b)(3), to the applicable dollar
amount in section 457(e)(15)). Under
section 414(v)(3)(B), catch-up
contributions are excluded from
consideration for purposes of certain
nondiscrimination tests.
Section 414(v)(4) provides that an
applicable employer plan is treated as
failing to meet the nondiscrimination
requirements under section 401(a)(4)
with respect to benefits, rights, and
features unless the plan allows all catchup eligible participants to make the
same election with respect to catch-up
contributions. For purposes of section
414(v)(4), all plans maintained by
employers who are treated as a single
employer under section 414(b), (c), (m),
or (o) are treated as one plan (with the
exception of a plan described in section
410(b)(6)(C)(i) for the duration of the
transition period described in section
410(b)(6)(C)(ii) with respect to that
plan).
Section 414(v) was added to the Code
by section 631 of the Economic Growth
and Tax Relief Reconciliation Act of
2001, Public Law 107–16, 115 Stat. 38,
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and the Treasury Department and the
IRS issued comprehensive regulations
under section 414(v) in 2003 (TD 9072,
68 FR 40510). Subsequently, provisions
relating to catch-up contributions under
section 414(v) were incorporated into
regulations under sections 401(k),
403(b), and 457(b).
II. SECURE 2.0 Act Changes to Section
414(v)
A. Section 109 of the SECURE 2.0 Act
For a taxable year beginning after
December 31, 2024, section 109 of the
SECURE 2.0 Act amends section
414(v)(2) of the Code to increase the
applicable dollar catch-up limit under
section 414(v)(2)(B)(i) and (ii) in the
case of a catch-up eligible participant
who attains age 60, 61, 62, or 63 during
the taxable year. For such a participant
in an applicable employer plan other
than a SIMPLE plan, the increased
applicable dollar catch-up limit is 150
percent of the otherwise applicable
dollar catch-up limit under section
414(v)(2)(B)(i) in effect for 2024. For
such a participant in a SIMPLE plan, the
increased applicable dollar catch-up
limit is 150 percent of the otherwise
applicable dollar catch-up limit under
section 414(v)(2)(B)(ii) in effect for 2025.
In either case, for a year beginning after
December 31, 2025, the increased
applicable dollar catch-up limit is
subject to adjustment to reflect changes
in the cost of living, in accordance with
the last sentence of section 414(v)(2)(C).
B. Section 117 of the SECURE 2.0 Act
A SIMPLE plan is an alternative plan
design under which employees of an
eligible employer as defined in section
408(p)(2)(C)(i) (that is, generally, an
employer that had no more than 100
employees who received at least $5,000
of compensation from the employer for
the preceding calendar year) are
permitted to elect to have salary
reduction contributions (or elective
contributions, in the case of a SIMPLE
401(k) plan) made on their behalf.2
Among other things, section 117 of the
SECURE 2.0 Act amends section
414(v)(2) of the Code to increase the
applicable dollar catch-up limit under
section 414(v)(2)(B)(ii) for SIMPLE plans
sponsored by certain eligible employers
who are described in section
408(p)(2)(E)(iv).3 The increased
2 The annual limit on salary reduction
contributions or elective contributions is lower for
SIMPLE plans than for other types of plans.
However, SIMPLE plans are not subject to
nondiscrimination testing, and the employer must
make certain contributions.
3 An eligible employer is described in section
408(p)(2)(E)(iv) if, during the three-taxable-year
period preceding the first year that the employer
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applicable dollar catch-up limit is
available automatically to a SIMPLE
plan sponsored by an eligible employer
described in section 408(p)(2)(E)(iv) that
had no more than 25 employees who
received at least $5,000 of compensation
from the employer for the preceding
calendar year. Other eligible employers
described in section 408(p)(2)(E)(iv)
may make an election for the increased
applicable dollar catch-up limit to apply
and, if the election is made, the
employer must make additional
matching or nonelective contributions.
The increased applicable dollar catchup limit, which applies to taxable years
beginning after December 31, 2023, is
110 percent of the otherwise applicable
dollar catch-up limit under section
414(v)(2)(B)(ii) for calendar year 2024.
For a year beginning after December 31,
2024, the increased applicable dollar
catch-up limit is subject to adjustment
to reflect changes in the cost of living,
in accordance with section
414(v)(2)(C)(ii).
C. Section 603 of the SECURE 2.0 Act
Section 603(a) of the SECURE 2.0 Act
amends section 414(v) of the Code to
add section 414(v)(7). Section
414(v)(7)(A) sets forth the requirement
that catch-up contributions made by
certain catch-up eligible participants
must be designated Roth contributions
(the Roth catch-up requirement).
Specifically, under section 414(v)(7)(A),
in the case of a catch-up eligible
participant whose wages as defined in
section 3121(a) (that is, wages for
purposes of the Federal Insurance
Contributions Act (FICA), codified at
subtitle C, chapter 21 of the Code, or
FICA wages) for the preceding calendar
year from the employer sponsoring the
plan exceeded $145,000, section
414(v)(1) applies only if any catch-up
contributions made by the participant
are designated Roth contributions (as
defined in section 402A(c)(1)).
Section 414(v)(7)(B) provides that, in
the case of an applicable employer plan
with respect to which section
414(v)(7)(A) applies to any participant
for a plan year, section 414(v)(1) does
not apply to the plan unless the plan
provides that any catch-up eligible
participant may make catch-up
contributions as designated Roth
contributions.
maintained the SIMPLE plan, the employer
(including any member of the employer’s controlled
group or any predecessor of the employer or
member of its controlled group) has not established
or maintained a qualified plan, a section 403(a)
annuity plan, or a section 403(b) plan under which
contributions were made or benefits were accrued
for substantially the same employees as are eligible
to participate in the SIMPLE plan. See Q&A E–1 in
Notice 2024–2, 2024–2 IRB 316.
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Section 414(v)(7)(C) provides that
section 414(v)(7)(A) does not apply to
SEP arrangements or SIMPLE IRA plans.
Under section 414(v)(7)(D), regulations
may provide that a catch-up eligible
participant may elect to change the
participant’s election to make catch-up
contributions if the participant’s
compensation is determined to exceed
the wage limitation under section
414(v)(7)(A) (Roth catch-up wage
threshold) after the election is made.
Under section 414(v)(7)(E), for taxable
years beginning after December 31,
2024, the Roth catch-up wage threshold
is adjusted for changes in the cost of
living.
Section 603(b) of the SECURE 2.0 Act
includes conforming amendments with
respect to section 603(a). Section
603(b)(1) of the SECURE 2.0 Act strikes
section 402(g)(1)(C) of the Code. Prior to
its elimination, section 402(g)(1)(C)
provided that a catch-up eligible
participant’s gross income did not
include elective deferrals in excess of
the applicable dollar amount under
section 402(g)(1)(B) to the extent that
the amount of those elective deferrals
did not exceed the applicable dollar
catch-up limit under section
414(v)(2)(B)(i) for the taxable year
(without regard to the treatment of the
elective deferrals by an applicable
employer plan under section 414(v)).
Section 603(b)(2) of the SECURE 2.0
Act amends section 457(e)(18)(A)(ii) of
the Code and, pursuant to this
amendment, a portion of the catch-up
contributions made to an eligible
governmental 457(b) plan in accordance
with section 457(b)(3) and (e)(18) by a
catch-up eligible individual for the last
three taxable years ending before the
individual attains normal retirement age
must be designated Roth contributions.
The portion that is subject to this Roth
requirement is the amount by which the
applicable dollar catch-up limit under
section 414(v)(2)(B)(i) exceeds the
maximum permitted contribution set
forth in section 457(b)(3) (determined
without regard to section 457(e)(18)).
Under section 603(c) of the SECURE
2.0 Act, the amendments made by
section 603 of the SECURE 2.0 Act
apply to taxable years beginning after
December 31, 2023.
III. Notice 2023–62
In August 2023, the Treasury
Department and the IRS issued Notice
2023–62, 2023–37 IRB 817. Notice
2023–62 clarifies that, despite the
elimination of section 402(g)(1)(C) of the
Code under section 603(b)(1) of the
SECURE 2.0 Act, applicable employer
plans may, for taxable years beginning
after December 31, 2023, continue to
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permit catch-up eligible participants to
make elective deferrals that exceed the
applicable dollar amount under section
402(g)(1)(B) of the Code (or deferrals
that exceed the applicable dollar
amount under section 457(e)(15)) if
those contributions in excess of the
applicable dollar amount satisfy the
requirements for catch-up contributions
under section 414(v). In addition,
pursuant to Notice 2023–62, the first
two taxable years beginning after
December 31, 2023, are regarded as an
administrative transition period with
respect to the Roth catch-up
requirement. During the administrative
transition period, catch-up
contributions made by a participant
who is subject to the Roth catch-up
requirement will be treated as satisfying
the requirements of section 414(v)(7)(A),
even if the contributions are not
designated Roth contributions.
Notice 2023–62 also summarizes
anticipated guidance from the Treasury
Department and the IRS with respect to
the implementation of section 603 of the
SECURE 2.0 Act as follows: (1) the Roth
catch-up requirement would not apply
in the case of a catch-up eligible
participant who did not have FICA
wages for the preceding calendar year
from the employer sponsoring the plan;
(2) in the case of a catch-up eligible
participant who is subject to the Roth
catch-up requirement, a plan
administrator and an employer would
be permitted to treat an election by the
participant to make catch-up
contributions on a pre-tax basis as an
election by the participant to make
catch-up contributions that are
designated Roth contributions; and (3) a
catch-up eligible participant’s FICA
wages for the preceding calendar year
from one participating employer in an
applicable employer plan that is
maintained by more than one employer
(including a multiemployer plan) would
not be aggregated with the participant’s
FICA wages for the preceding calendar
year from another participating
employer in the plan for purposes of
determining whether the participant’s
FICA wages for that year exceeded the
Roth catch-up wage threshold. The
notice requested comments with respect
to the anticipated guidance summarized
in the notice, additional matters under
consideration relating to a plan without
a qualified Roth contribution program,
and, more generally, the provisions of
section 603 of the SECURE 2.0 Act.
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Explanation of Provisions
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I. Amendments to Regulations Under
Sections 401(k) and 403(b)—Deemed
Roth Catch-Up Election
Section 414(v)(7)(A) of the Code
provides that in the case of a participant
who is subject to the Roth catch-up
requirement, section 414(v)(1) applies
only if any catch-up contributions made
by the participant are designated Roth
contributions made pursuant to the
participant’s election. Notice 2023–62
requested comments on anticipated
future guidance expected to permit plan
administrators and employers to treat an
election by a participant to make catchup contributions on a pre-tax basis as an
election to make catch-up contributions
as designated Roth contributions if the
participant is subject to the Roth catchup requirement. All comments received
were in favor of this approach.
Accordingly, proposed § 1.401(k)–
1(f)(5)(iii) would permit a plan to
provide, for taxable years beginning
after December 31, 2023, that a
participant who is subject to the Roth
catch-up requirement is deemed to have
irrevocably designated any catch-up
contributions as designated Roth
contributions in accordance with the
requirements of § 1.401(k)–1(f)(1)(i).
Under the proposed regulation, a plan
that provides for such a deemed Roth
catch-up election would be required, as
is the case for any other designated Roth
contribution, to: (1) treat catch-up
contributions subject to the deemed
Roth catch-up election as not excludible
from the participant’s gross income, and
(2) maintain the catch-up contributions
in a designated Roth account. A plan
would be permitted to provide for a
deemed Roth catch-up election without
regard to whether it requires separate
elections for elective deferrals that are
not catch-up contributions and for
additional elective deferrals that are
catch-up contributions or uses a
spillover design.4 However, in
accordance with section 414(v)(7)(D),
the application of a deemed Roth catchup election to a participant would be
conditioned, under proposed § 1.401(k)–
1(f)(5)(iv), on the participant having an
effective opportunity (determined based
on all of the relevant facts and
circumstances, in accordance with
§ 1.401(k)–1(e)(2)(ii)) to make a new
4 Under a spillover design, a participant who
would attain age 50 by the end of the taxable year
makes one election with respect to elective deferrals
for a plan year and, after the participant’s elective
deferrals reach a Code or plan limitation on elective
deferrals that are not catch-up contributions,
additional elective deferrals automatically begin
counting toward the applicable dollar catch-up
limit under section 414(v)(2).
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election that is different than the
deemed election. For example, under
the proposed regulation, a plan would
need to permit a participant subject to
a deemed Roth catch-up election to elect
to cease making additional elective
deferrals.
The proposed amendments to
§ 1.403(b)–3(c)(1) would incorporate
proposed § 1.401(k)–1(f)(5)(iii) and (iv),
so that a section 403(b) plan would be
permitted to include a deemed Roth
catch-up election, subject to the
requirement to provide a participant
subject to a deemed catch-up election
with the effective opportunity to make
a different election. This amendment
would be part of a broader incorporation
of all of § 1.401(k)–1(f)(3) and (5) into
the rules relating to designated Roth
contributions under section 403(b)
plans; the incorporation of § 1.401(k)–
1(f)(3), (f)(5)(i), and (f)(5)(ii) is not a
substantive legal change, as these
provisions were previously applicable
with respect to section 403(b) plans.5
II. Proposed Revisions to § 1.414(v)–1
A. Overview
The proposed revisions and additions
to § 1.414(v)–1 would mainly reflect
changes made by sections 109 and 117
of the SECURE 2.0 Act. In particular, the
revisions to § 1.414(v)–1 would: (1)
reflect the increased applicable dollar
catch-up limits permitted under
sections 109 and 117 of the SECURE 2.0
Act (along with updated cost-of-living
adjustments), and (2) clarify the
application of the universal availability
requirement under Code section
414(v)(4) to an applicable employer plan
that permits certain catch-up eligible
participants to make catch-up
contributions in an amount equal to the
increased applicable dollar catch-up
limit for participants attaining age 60
through 63. In addition, a provision
would be added to the general rules
under § 1.414(v)–1(a) indicating that the
rules relating to the Roth catch-up
requirement under section 414(v)(7) can
be found in proposed § 1.414(v)–2.
5 This Notice of Proposed Rulemaking (NPRM)
does not propose to incorporate proposed
§ 1.401(k)–1(f)(5)(iii) and (iv) into the regulations
relating to eligible governmental 457(b) plans
because those regulations do not currently provide
for the inclusion of a qualified Roth contribution
program in an eligible governmental 457(b) plan.
On June 22, 2016, proposed regulations relating to
the inclusion of a qualified Roth contribution
program in an eligible governmental 457(b) plan
were published in the Federal Register (81 FR
40548) and those proposed regulations have not
been finalized.
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B. Increased Applicable Dollar Catch-Up
Limit During the Year of Attainment of
Age 60 Through 63 Under Section 109
of the SECURE 2.0 Act
Current § 1.414(v)–1(c)(2)(i) sets forth
the applicable dollar catch-up limit that
applies to all catch-up eligible
participants in an applicable employer
plan that is not a SIMPLE plan. The
proposed regulations would retain that
rule (other than the provisions
applicable to taxable years beginning in
calendar years before 2006) and would
note the existence of a higher limit for
individuals attaining age 60 through 63
set forth in proposed § 1.414(v)–
1(c)(2)(i)(B). Specifically, proposed
§ 1.414(v)–1(c)(2)(i)(B) sets forth the
increased applicable dollar catch-up
limit that would apply for a taxable year
beginning after 2024 with respect to a
catch-up eligible participant in an
applicable employer plan other than a
SIMPLE plan who would attain age 60,
61, 62, or 63 on the participant’s
birthday occurring during the taxable
year. The increased applicable dollar
catch-up limit under proposed
§ 1.414(v)–1(c)(2)(i)(B) is 150 percent of
the applicable dollar catch-up limit that
applies during a taxable year beginning
in 2024 (that is, $11,250, which is 150
percent of $7,500), adjusted for changes
in the cost of living.
Similarly, current § 1.414(v)–
1(c)(2)(ii) sets forth the applicable dollar
catch-up limit that applies to all catchup eligible participants in a SIMPLE
plan. The proposed regulations would
retain those provisions (other than the
provisions applicable to taxable years
beginning in calendar years before 2006)
and would note the existence of a higher
limit for individuals attaining age 60
through 63 set forth in proposed
§ 1.414(v)–1(c)(2)(ii)(B) (and a higher
limit for participants in certain SIMPLE
plans set forth in proposed § 1.414(v)–
1(c)(2)(ii)(C)). Specifically, proposed
§ 1.414(v)–1(c)(2)(ii)(B) sets forth the
increased applicable dollar catch-up
limit that would apply for a taxable year
beginning after 2024, with respect to a
catch-up eligible participant in a
SIMPLE plan who would attain age 60,
61, 62, or 63 on the participant’s
birthday occurring during the taxable
year. The increased applicable dollar
catch-up limit under proposed
§ 1.414(v)–1(c)(2)(ii)(B) is 150 percent of
the applicable dollar catch-up limit that
applies during a taxable year beginning
in 2025 (that is, $5,250, which is 150
percent of $3,500), adjusted for changes
in the cost of living.
Current § 1.414(v)–1(c)(2)(iii) provides
for cost-of-living adjustments to the
applicable dollar catch-up limits that
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apply under current § 1.414(v)–1(c)(2)(i)
and (ii). The proposed regulations
would retain that provision and would
also set forth the cost-of-living
adjustments to the increased applicable
dollar catch-up limits for individuals
attaining age 60 through 63.
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C. Increased Applicable Dollar Catch-Up
Limit for Certain SIMPLE Plans Under
Section 117 of the SECURE 2.0 Act
In accordance with section 117 of the
SECURE 2.0 Act, proposed § 1.414(v)–
1(c)(2)(ii)(C) would set forth an
increased applicable dollar catch-up
limit that would apply for a taxable year
beginning in 2024 under a SIMPLE plan
that is sponsored by an eligible
employer described in Code section
408(p)(2)(E)(iv) and for which the
increased applicable dollar catch-up
limit under section 414(v)(2)(B)(iii)
applies automatically or by election.
The increased applicable dollar catchup limit is 110 percent of the applicable
dollar catch-up limit that applies during
a taxable year beginning in 2024 (that is,
$3,850, which is 110 percent of $3,500),
adjusted for changes in the cost of
living. For taxable years beginning after
2024, proposed § 1.414(v)–1(c)(2)(iii)(C)
would set forth the cost-of-living
adjustments to this increased applicable
dollar catch-up limit.
D. Different Applicable Dollar Catch-Up
Limits and Universal Availability
In accordance with the universal
availability requirement in section
414(v)(4), existing § 1.414(v)–1(e)(1)(i)
sets forth a general rule that an
applicable employer plan that offers
catch-up contributions and that is
otherwise subject to section 401(a)(4)
(including a plan that is subject to
section 401(a)(4) pursuant to section
403(b)(12)) will not satisfy the
requirements of section 401(a)(4) unless
all catch-up eligible participants who
participate under any applicable
employer plan maintained by the
employer are provided with an effective
opportunity to make the same dollar
amount of catch-up contributions.
The Treasury Department and the IRS
do not believe that a plan should fail to
satisfy the universal availability
requirement merely because the plan
utilizes the increased limit for catch-up
eligible participants attaining age 60
through 63 that is permitted under the
Code pursuant to section 414(v)(2)(E).
Thus, a new provision would be added
to § 1.414(v)–1(e)(1) setting forth an
exception to the general rule in
§ 1.414(v)–1(e)(1)(i) for a plan that
permits each catch-up eligible
participant to make elective deferrals up
to the statutory maximum dollar amount
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of catch-up contributions permitted
with respect to the participant. Under
this new exception, an applicable
employer plan would not fail to satisfy
the requirements of section 401(a)(4)
merely because the plan allows catch-up
eligible participants who are subject to
the increased applicable dollar catch-up
limit for participants attaining age 60
through 63 under section 414(v)(2)(E) to
make catch-up contributions up to that
increased limit, while permitting other
catch-up eligible participants to make
catch-up contributions only up to the
applicable dollar catch-up limit that
applies generally under section
414(v)(2)(B)(i) or (ii), as applicable.6
Similarly, an applicable employer
plan that covers employees in both the
United States and Puerto Rico would
not fail to satisfy the requirements of
section 401(a)(4) merely because the
plan allows catch-up eligible
participants whose catch-up
contributions are subject to the limit set
forth in section 1081.01(d)(7) of the
Puerto Rico Internal Revenue Code of
2011 (13 L.P.R.A. section 30391(d)(7)),
as amended (Puerto Rico Code), to make
catch-up contributions only up to the
amount of that limit.7 The Treasury
Department and the IRS request
comments on the application of the
limits in the case of an employee who
performs service for an employer both
in Puerto Rico and the United States in
the same year.
III. Proposed § 1.414(v)–2
A. General Rules Relating to the
Requirements of Section 414(v)(7)
1. Roth Catch-Up Requirement Under
Section 414(v)(7)(A)
Proposed § 1.414(v)–2(a) would set
forth general rules relating to the Roth
catch-up requirement under section
414(v)(7)(A). Under proposed
§ 1.414(v)–2(a)(2), if a catch-up eligible
participant in an applicable employer
plan had FICA wages for the preceding
calendar year from the employer
sponsoring the plan (as defined in
proposed § 1.414(v)–2(b)(3)) that
exceeded $145,000, then section
414(v)(1) would apply with respect to
the participant’s elective deferrals that
are catch-up contributions only if they
6 The higher applicable dollar catch-up limit for
participants attaining age 60 through 63 may, but
is not required to be, included in an applicable
employer plan. Thus, an applicable employer plan
may also be designed to limit the catch-up
contributions for those participants to the same
applicable dollar catch-up limit that applies for all
other catch-up eligible participants.
7 For taxable years beginning in 2024, the limit on
catch-up contributions that can be made by a
participant who is eligible to make catch-up
contributions under the Puerto Rico Code is $1,500.
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2649
are designated Roth contributions (as
defined in section 402A(c)(1)). Under
proposed § 1.414(v)–2(a)(3), the
$145,000 Roth catch-up wage threshold
would be subject to cost-of-living
adjustments, in accordance with section
414(v)(7)(E).8 Under proposed
§ 1.414(v)–2(a)(4), the Roth catch-up
requirement would not apply to a
participant in a SEP arrangement or a
SIMPLE IRA plan, in accordance with
section 414(v)(7)(C).
Consistent with section 414(v)(7)(A)
and the description of anticipated
guidance in Notice 2023–62, proposed
§ 1.414(v)–2(a)(2) would provide that a
participant who did not have FICA
wages exceeding $145,000 (as adjusted)
from the employer sponsoring the plan
for the preceding calendar year would
not be subject to the Roth catch-up
requirement under the plan for the
current year. Proposed § 1.414(v)–2(a)(2)
would define FICA wages by reference
to the FICA taxes imposed by sections
3101(a) and 3111(a), not sections
3101(b) and 3111(b), and notes that the
wages are taken into account for this
purpose in the same year that they are
taken into account for FICA tax
purposes. Accordingly, an individual
who did not have any FICA wages from
the employer sponsoring the plan for
the preceding calendar year (for
example, a partner who had only selfemployment income; an individual who
had wages under section 3231(e) that
are subject to taxation under the
Railroad Retirement Tax Act, codified at
title 45, chapter 9 of the United States
Code, rather than FICA; or a State or
local government employee whose
services were excluded from the
definition of employment under section
3121(b)(7) without regard to section
3121(u)) would not be subject to the
Roth catch-up requirement under the
plan in the current year. Similarly, an
individual who received cash
compensation from the employer
sponsoring the plan in the preceding
calendar year but nevertheless did not
have any FICA wages from the employer
for that year (for example, because the
compensation was taxed in an earlier
year pursuant to section 3121(v)(2))
would not be subject to the Roth catchup requirement under the plan in the
current year.
8 The Roth catch-up wage threshold of $145,000
would be applied to a catch-up eligible participant’s
2023 FICA wages to determine whether the Roth
catch-up requirement applies to the participant’s
catch-up contributions made for 2024. In
accordance with Notice 2024–80, 2024–47 IRB
1120, the Roth catch-up wage threshold that would
be applied to a catch-up eligible participant’s 2024
FICA wages to determine whether the Roth catchup requirement applies to the participant’s catchup contributions made for 2025 remains $145,000.
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Further, proposed § 1.414(v)–2 would
not require that the Roth catch-up wage
threshold be prorated for the first year
of hire. Thus, a participant who worked
for the employer sponsoring the plan for
only part of the preceding calendar year
would be subject to the Roth catch-up
requirement in the current year only if
the participant had wages exceeding the
full Roth catch-up wage threshold from
the employer for the preceding calendar
year.
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2. Availability of Roth Catch-Up
Contributions Under Section
414(v)(7)(B)
Section 414(v)(7)(B) provides that, in
the case of an applicable employer plan
with respect to which section
414(v)(7)(A) applies to any participant
for a plan year, section 414(v)(1) shall
not apply to the plan unless the plan
provides that any catch-up eligible
participant may make catch-up
contributions as designated Roth
contributions. In accordance with
section 414(v)(7)(B), proposed
§ 1.414(v)–2(a)(5)(i) would provide that
if any catch-up eligible participant who
is subject to the Roth catch-up
requirement is permitted to make catchup contributions as designated Roth
contributions under an applicable
employer plan for a plan year, then the
plan would be required to allow all
other catch-up eligible participants to
also make catch-up contributions as
designated Roth contributions for the
plan year.9
Proposed § 1.414(v)–2(a)(5)(ii) sets
forth a rule that would address the
application of section 414(v)(7)(B) to a
plan that is subject to the qualification
requirements of both section 401(a) and
section 1081.01 of the Puerto Rico Code
(dual-qualified plan).10 If a dualqualified plan that covers both
employees in the United States and
employees in Puerto Rico permits any
catch-up eligible participant who is
subject to the Roth catch-up
requirement to make catch-up
contributions as designated Roth
9 By contrast, if none of the participants who are
subject to the Roth catch-up requirement are
permitted to make catch-up contributions under a
plan for a plan year (for example, if a plan does not
include a qualified Roth contribution program),
then section 414(v)(7)(A) would not be considered
to apply to any catch-up eligible participant in the
plan for the plan year (and the requirement of
section 414(v)(7)(B) would not apply to the plan).
This interpretation of section 414(v)(7)(B) is
consistent with the Joint Committee on Taxation
general explanation of the provision. See JCS–1–23
(December 2023).
10 For purposes of this NPRM, a dual-qualified
plan includes a plan for which an election under
section 1022(i)(2) of the Employee Retirement
Income Security Act of 1974 (Pub. L. 93–406, 88
Stat. 829), as amended (ERISA), has been made.
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contributions for a plan year, then, in
accordance with section 414(v)(7)(B),
the plan is generally required to permit
all catch-up eligible participants to
make catch-up contributions as
designated Roth contributions for the
plan year. The Puerto Rico Code does
not provide for designated Roth
contributions, but it does allow plans to
offer the opportunity to make after-tax
contributions. Accordingly, in the case
of a dual-qualified plan that permits
Roth catch-up contributions for
participants in the United States,
proposed § 1.414(v)–2(a)(5)(ii) would
treat the requirements of section
414(v)(7)(B) as satisfied with respect to
a catch-up eligible participant who is
subject to section 1081.01 of the Puerto
Rico Code if the plan permits the
participant to make catch-up
contributions as after-tax contributions
within the meaning of section
1081.01(a)(15) of the Puerto Rico Code.
B. Rules of Operation for Implementing
the Roth Catch-Up Requirement
1. Designated Roth Contributions That
Are Treated as Catch-Up Contributions
for Purposes of the Roth Catch-Up
Requirement
The Treasury Department and the IRS
received comments in response to
Notice 2023–62 requesting clarification
that designated Roth contributions made
at any point within a year may be
counted towards satisfaction of the Roth
catch-up requirement, even if the
designated Roth contributions are made
earlier than the contributions that are
determined to be catch-up contributions
(that is, before the participant is
considered to have reached an
applicable limit on elective deferrals for
the year).
In general, under existing § 1.414(v)–
1(b)(2)(i)(A) and (c)(3), the amount of a
participant’s elective deferrals in excess
of an applicable limit is determined as
of the end of a plan year (or limitation
year, in the case of the section 415(c)
limit) by comparing the participant’s
total elective deferrals for the plan year
(or total annual additions for the
limitation year) with the applicable
limit for the plan year (or limitation
year). However, under § 1.414(v)–
1(c)(3), in the case of an applicable limit
that is applied on the basis of a year
other than the plan year or limitation
year (for example, the calendar-year
limit on elective deferrals under section
401(a)(30)), the determination of
whether elective deferrals are treated as
catch-up contributions is made at the
time they are deferred. Thus, if the
timing rule in § 1.414(v)–1(c)(3) that
applies for purposes of determining
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whether an elective deferral is a catchup contribution also applies for
purposes of determining whether a
designated Roth contribution is a catchup contribution that satisfies the Roth
catch-up requirement, then, in the case
of elective deferrals that are catch-up
contributions because they exceed a
calendar-year limit (such as the section
401(a)(30) limit), only elective deferrals
that are made after reaching that limit
would be taken into account in
satisfying the Roth catch-up
requirement.
Commenters suggested that limiting
the designated Roth contributions that
may be taken into account in satisfying
the Roth catch-up requirement in this
manner is not an appropriate approach.
For example, a commenter noted that if
this approach is used, then a catch-up
eligible participant who would like to
make elective deferrals for a calendar
year in an amount equal to the sum of
the section 401(a)(30) limit on elective
deferrals and the applicable dollar
catch-up limit would be required to
make the elective deferrals as
designated Roth contributions during
the latter part of the year (or after the
section 401(a)(30) limit is reached). This
would be required even if the
participant would prefer to have
designated Roth contributions made
throughout the year or even if the
participant had already frontloaded the
designated Roth contributions by
making elective deferrals in an amount
equal to the applicable dollar catch-up
limit as designated Roth contributions
during the earlier part of the year.
To address commenters’ concerns,
provide maximum flexibility for
participants, and alleviate
administrative burdens, proposed
§ 1.414(v)–2(b)(1) would take into
account designated Roth contributions
that are made prior to an applicable
limit being reached for purposes of
determining whether the Roth catch-up
requirement is satisfied. Under
proposed § 1.414(v)–2(b)(1), an elective
deferral that is determined to be a catchup contribution at the time of
contribution under the timing rules in
§ 1.414(v)–1(c)(3) (for example, on
account of exceeding the section
401(a)(30) limit) would be required to be
made as a designated Roth contribution
by a participant who is subject to the
Roth catch-up requirement only to the
extent the participant has not previously
made elective deferrals as designated
Roth contributions during the calendar
year or taxable year equal to the
applicable dollar catch-up limit. Thus, if
a catch-up eligible participant’s total
elective deferrals that are designated
Roth contributions over the course of a
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calendar year or taxable year equal or
exceed the total elective deferrals that
are determined to be catch-up
contributions, then the participant
would satisfy the Roth catch-up
requirement.11
2. Plans That Do Not Include a Qualified
Roth Contribution Program
In accordance with section 402A(a),
an applicable employer plan may, but is
not required to, include a qualified Roth
contribution program within the
meaning of section 402A(b). However,
in the case of a catch-up eligible
participant who is subject to the Roth
catch-up requirement, section 414(v)(1)
applies only if any catch-up
contributions made by the participant
are designated Roth contributions.
Therefore, if an applicable employer
plan does not include a qualified Roth
contribution program, then a participant
who is subject to the Roth catch-up
requirement would be prohibited from
making catch-up contributions under
the plan.
The proposed regulations would not
require an applicable employer plan to
include a qualified Roth contribution
program. Thus, under the proposed
regulations, an applicable employer
plan that does not have a qualified Roth
contribution program would be allowed
to permit catch-up eligible participants
who are not subject to the Roth catchup requirement to make catch-up
contributions even though catch-up
eligible participants who are subject to
the Roth catch-up requirement would
not be permitted to make catch-up
contributions.
However, the universal availability
requirement under existing § 1.414(v)–
1(e) provides that an applicable
employer plan will be treated as failing
to meet the nondiscrimination
requirements under section 401(a)(4)
with respect to benefits, rights, and
features unless all catch-up eligible
participants under the plan are provided
with an effective opportunity to make
the same dollar amount of catch-up
contributions. Proposed § 1.414(v)–
1(e)(1)(iii) would add a rule providing
that an applicable employer plan would
not violate the universal availability
requirement merely because the plan
permits each catch-up eligible
participant to make elective deferrals up
11 This is also the case with respect to elective
deferrals that are determined to be catch-up
contributions because the plan would fail the actual
deferral percentage (ADP) test under section
401(k)(3) if it did not correct under section
401(k)(8). The determination of elective deferrals
that are catch-up contributions because they are in
excess of this ADP limit in § 1.414(v)–1(b)(1)(iii)
occurs in the plan year following the plan year for
which the elective deferrals are made.
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to the maximum dollar amount of catchup contributions permitted under
applicable law with respect to that
participant. If a plan does not include a
qualified Roth contribution program,
then the maximum dollar amount of
catch-up contributions permitted based
on applicable law with respect to a
catch-up eligible participant in the plan
who is subject to the Roth catch-up
requirement is $0. Proposed § 1.414(v)–
2(b)(2) would address this situation by
providing that an applicable employer
plan that does not include a qualified
Roth contribution program does not fail
to satisfy the universal availability
requirement merely because the plan (or
another applicable employer plan
maintained by the employer that does
not include a qualified Roth
contribution program) does not permit
catch-up eligible participants who are
subject to the Roth catch-up
requirement to make catch-up
contributions.
Generally, under § 1.414(v)–1(d)(4),
an applicable employer plan does not
violate § 1.401(a)(4)–4 merely because
the group of employees for whom catchup contributions are currently available
is not a group of employees that would
satisfy the minimum coverage
requirements of section 410(b). Under
the proposed regulations, § 1.414(v)–
1(d)(4) would not apply to an applicable
employer plan that does not include a
qualified Roth contribution program and
permits only catch-up eligible
participants who are not subject to the
Roth catch-up requirement to make
catch-up contributions. The reason the
proposed regulations would provide
that § 1.414(v)–1(d)(4) does not apply to
such a plan is that not all catch-up
eligible employees under the plan will
be able to make catch-up contributions.
Because the Roth catch-up wage
threshold is slightly lower than the
wage threshold used in the definition of
highly compensated employee (HCE)
under section 414(q)(1)(B), some nonHCEs may be subject to the Roth catchup requirement.12 Thus, if a plan that
does not include a qualified Roth
contribution program prohibits catch-up
eligible participants who are subject to
the Roth catch-up requirement from
making catch-up contributions, while
permitting other catch-up eligible
participants to make catch-up
contributions, then the outcome of the
nondiscrimination test with respect to
the availability of catch-up
contributions performed under
§ 1.401(a)(4)–4 may be affected.
12 This is particularly true if an employer makes
the top-paid group election under section
414(q)(1)(B)(ii).
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2651
Accordingly, proposed § 1.414(v)–
2(b)(2) would permit such a plan to also
preclude one or more catch-up eligible
participants who are HCEs and who are
not subject to the Roth catch-up
requirement (for example, because they
did not receive FICA wages for the
preceding year) from making catch-up
contributions if doing so facilitates
satisfaction of § 1.401(a)(4)–4 with
respect to the availability of catch-up
contributions.
3. Determination of Employer
Sponsoring the Plan
The determination as to whether the
Roth catch-up requirement applies to a
catch-up eligible participant is based on
the amount of the participant’s FICA
wages for the preceding year ‘‘from the
employer sponsoring the plan,’’ but that
phrase is not defined in section
414(v)(7). For purposes of determining
an individual’s FICA wages, the term
‘‘employer’’ generally means the person
for whom the individual performs
service as an employee under the
common law standards that apply under
§ 31.3121(d)–1(c). Thus, for purposes of
determining the individual’s FICA
wages, the term ‘‘employer’’ generally
refers solely to an individual’s common
law employer.13 Because the phrase
‘‘from the employer sponsoring the
plan’’ modifies the reference to FICA
wages in section 414(v)(7)(A), the
determination of whether the Roth
catch-up requirement applies to a
participant would generally follow the
FICA rules and be based on the FICA
wages from the participant’s common
law employer.
Thus, proposed § 1.414(v)–2(b)(3)
would provide that, with respect to each
catch-up eligible participant who is
subject to the Roth catch-up
requirement, the term ‘‘employer
sponsoring the plan’’ only refers to the
participant’s common law employer
contributing to the plan.14 Under the
13 In general, FICA wages are determined
separately by related employers. See
§ 31.3121(a)(1)–(a)(3) (‘‘If during a calendar year the
employee receives remuneration from more than
one employer, the annual wage limitation does not
apply to the aggregate remuneration received from
all of such employers, but instead applies to the
remuneration received during such calendar year
from each employer.’’). See also § 31.3121(s)–1(a)
(‘‘For purposes of section . . . 3121(a)(1), except as
otherwise provided . . . , when two or more
related corporations concurrently employ the same
individual and compensate that individual . . . ,
each of the corporations is considered to have paid
only the remuneration it actually disburses to that
individual.’’).
14 This rule applies even if responsibilities under
chapter 21 of the Code are imposed on a third party,
such as a section 3401(d) statutory employer, a
section 3504 agent, a section 3121(s) common
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proposed regulation, the ‘‘employer
sponsoring the plan’’ would not include
other entities that are treated as a single
employer with a catch-up eligible
participant’s common law employer
under section 414(b), (c), (m), or (o). For
example, if there are multiple employers
participating in a plan that are treated
as a single employer under the
controlled group rules, each of the
participating employers that is a
common law employer would be a
separate employer sponsoring the plan.
Similarly, in the context of catch-up
contributions made to a multiple
employer plan or multiemployer plan
by a catch-up eligible participant subject
to the Roth catch-up requirement, the
‘‘employer sponsoring the plan’’ means
the participant’s common law employer
that is the source of the participant’s
FICA wages and contributions to the
plan. Some commenters have suggested
that the Roth catch-up requirement does
not apply to a multiemployer plan
because section 3(16)(B) of ERISA
defines the ‘‘plan sponsor’’ of a
multiemployer plan as the joint board of
trustees rather than the contributing
employers. Under the interpretation of
section 414(v)(7)(A) suggested by the
commenters, the employer that is the
source of the employee’s FICA wages
would be a signatory of the collective
bargaining agreement pursuant to which
the employer’s employees participate in
the multiemployer plan and a
contributor to that plan, but would not
be the ‘‘employer sponsoring the plan’’
for purposes of section 414(v)(7)(A).15
The Treasury Department and the IRS
do not agree that this is a reasonable
interpretation of section 414(v)(7)(A)
because ERISA is a separate statute from
the Code and does not include any
provisions that directly apply, or are
even parallel, to the Code’s catch-up
contribution rules. Rather, in the
context of the Roth catch-up
requirement, the ‘‘employer sponsoring
the plan’’ is the common law employer
that is the source of the participant’s
FICA wages and contributions to the
multiemployer plan.
The Treasury Department and the IRS
understand from comments received
that multiemployer plans and other
plans maintained pursuant to a
collective bargaining agreement would
benefit from an extended applicability
date for the Roth catch-up requirement
paymaster, a section 3511 certified PEO, or a
section 3512 motion picture project employer.
15 This would not be the case with respect to an
employee of the joint board of trustees who
participates in the plan. In that case, the joint board
of trustees would be both the ‘‘sponsor’’ within the
meaning of section 3(16)(B) of ERISA and the
common law employer.
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so that the terms of any applicable
collective bargaining agreement can be
conformed to that requirement. In
response to these comments, proposed
§ 1.414(v)–2(e)(2)(ii) would provide that
proposed § 1.414(v)–2 does not apply to
a plan maintained pursuant to one or
more collective bargaining agreements
until the first taxable year beginning
more than 6 months after the date that
final regulations adding § 1.414(v)–2 to
the Code of Federal Regulations are
issued, or, if later, the first taxable year
beginning after the date on which the
last collective bargaining agreement
related to the plan that is in effect on
December 31, 2025, terminates
(determined without regard to any
extension of those collective bargaining
agreements).
4. Plans With More Than One Employer
Sponsoring the Plan
Consistent with the treatment of the
term ‘‘employer sponsoring the plan’’ as
referring to a catch-up eligible
participant’s common law employer
without aggregation with other
employers under section 414(b), (c), (m),
or (o), proposed § 1.414(v)–2(b)(4)
would apply the Roth catch-up
requirement on the basis of FICA wages
(if any) for the preceding calendar year
solely from a participant’s common law
employer without aggregating those
wages with the FICA wages from other
employers, including employers that
participate in the same plan or
employers that are treated as a single
employer together with the common law
employer under section 414(b), (c), (m),
or (o). Thus, a catch-up eligible
participant who had FICA wages
exceeding $145,000 (as adjusted) in the
preceding calendar year from any
employer other than the employer
sponsoring the plan (as defined with
respect to the participant in accordance
with proposed § 1.414(v)–2(b)(3)) would
not be subject to the Roth catch-up
requirement under the plan in the
current year if the participant did not
also have more than $145,000 (as
adjusted) of FICA wages for the
preceding year from the employer
sponsoring the plan. This is consistent
with the description of anticipated
guidance that was included in Notice
2023–62.
C. Treatment of Pre-Tax Catch-Up
Contributions That Are Required To Be
Designated Roth Contributions Under
Section 414(v)(7)
1. Correcting a Violation of the Section
414(v)(7) Roth Catch-Up Requirement
Section 414(v)(7)(A) provides that
section 414(v)(1) applies to catch-up
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contributions made by a participant
who is subject to the Roth catch-up
requirement only if the catch-up
contributions are designated Roth
contributions. If a participant who is
subject to the Roth catch-up
requirement makes a pre-tax elective
deferral in excess of an applicable limit,
then section 414(v)(1) will not apply to
that elective deferral and the plan will
fail to be qualified unless the plan
corrects the failure. A plan is permitted
to correct this type of error by
distributing the additional elective
deferrals that are not catch-up
contributions under section 414(v)(1)
from the plan in accordance with a
permitted correction method specific to
the limit on elective deferrals that the
additional elective deferrals exceeded
(for example, the correction method in
§ 1.402(g)–1(e) for elective deferrals that
exceeded the section 401(a)(30) limit,
the correction method in section 6.06(1)
and (2) of Revenue Procedure 2021–30,
2021–31 IRB 172, for elective deferrals
that resulted in the participant’s annual
additions exceeding the section 415(c)
limit, or the correction method in
§ 1.401(k)–2(b)(2) or Appendix B,
section 2.01, of Revenue Procedure
2021–30 for elective deferrals that
exceeded the ADP limit).
In response to Notice 2023–62, the
Treasury Department and the IRS
received several comments requesting
guidance that would permit a pre-tax
elective deferral that exceeds an
applicable limit to be treated as a
designated Roth contribution in order to
satisfy the Roth catch-up requirement
(as an alternative to distribution of these
elective deferrals from the plan).
Commenters requested this guidance
with respect to elective deferrals that
were intended to be catch-up
contributions at the time amounts were
contributed (because the contributions
exceeded plan or statutory limits) but
which were not made as Roth
contributions because of an error.
Commenters also raised specific
concerns relating to elective deferrals
that are catch-up contributions because
they exceed the ADP limit. This concern
arises because the determination of
whether an elective deferral exceeds the
ADP limit (and, therefore, could be a
catch-up contribution) cannot be made
until after the close of the plan year
(that is, after the elective deferral is
made).
The Treasury Department and the IRS
agree that a correction procedure by
which a plan can correct a section
414(v)(7) failure (that is, a failure to
satisfy the Roth catch-up requirement),
other than through distribution from the
plan of elective deferrals in excess of an
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Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Proposed Rules
applicable limit which fail to comply
with section 414(v)(7)(A), is warranted.
Thus, proposed § 1.414(v)–2(c) would
set forth additional permissible methods
and related rules for correcting a pre-tax
elective deferral that exceeds an
applicable limit in order to comply with
the Roth catch-up requirement, which
are discussed in the next section of this
Explanation of Provisions.16
2. Additional Permissible Correction
Methods for Elective Deferrals That
Exceed an Applicable Limit
Proposed § 1.414(v)–2(c)(2) sets forth
two new methods that a plan would be
permitted to use to correct a failure of
the Roth catch-up requirement as it
applies to elective deferrals that exceed
an applicable limit. Under proposed
§ 1.414(v)–2(c)(2)(i), a plan would be
permitted to provide for either
correction method but, with respect to
a plan year, the plan would be required
to apply the same correction method for
all participants with elective deferrals in
excess of the same applicable limit.
a. Form W–2 Correction Method
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Under the correction method set forth
in proposed § 1.414(v)–2(c)(2)(ii), a plan
would be permitted to correct a
participant’s pre-tax catch-up
contribution that was required to be a
designated Roth contribution by
transferring the elective deferral
(adjusted for allocable gain or loss) from
the participant’s pre-tax account to the
participant’s designated Roth account
and reporting the contribution (not
adjusted for allocable gain or loss) as a
designated Roth contribution on the
participant’s Form W–2 (Wage and Tax
Statement) for the year of the deferral
(that is, reporting the contribution as if
it had been correctly made as a
designated Roth contribution). Under
this correction method, the contribution
(not adjusted for allocable gain or loss)
would be includible in the participant’s
gross income for the year of the deferral
as if the contribution had been correctly
made as a designated Roth contribution.
However, this method would not be
permitted to be used if the participant’s
16 Commenters also suggested that a plan be
permitted to avoid having to correct section
414(v)(7) failures by requiring that all catch-up
contributions be made as designated Roth
contributions. The Treasury Department and the
IRS have considered that suggestion and concluded
that, for a participant who is not subject to the Roth
catch-up requirement, allowing a plan design that
requires all participants’ catch-up contributions to
be designated Roth contributions would be
inconsistent with the language of section
402A(b)(1), which provides that a designated Roth
contribution must be elected by an employee ‘‘in
lieu of all or a portion of elective deferrals the
employee is otherwise eligible to make.’’
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Form W–2 for that year has already been
filed or furnished to the participant.17
b. In-Plan Roth Rollover Correction
Method
Under proposed § 1.414(v)–2(c)(2)(iii),
a plan would be permitted to correct a
participant’s pre-tax catch-up
contribution that was required to be a
designated Roth contribution through an
in-plan Roth rollover in accordance
with section 402A(c)(4)(E). Under this
method, a plan would directly roll over
the elective deferral (adjusted for
allocable gain or loss) from the
participant’s pre-tax account to the
participant’s designated Roth account
and report the amount of the in-plan
Roth rollover on Form 1099–R
(Distributions From Pensions,
Annuities, Retirement or Profit-Sharing
Plans, IRAs, Insurance Contracts, etc.)
for the year of rollover. The provisions
of Notice 2010–84, 2010–51 IRB 872,
and Notice 2013–74, 2013–52 IRB 819,
would generally apply to an in-plan
Roth rollover used to correct a section
414(v)(7) failure. Thus, the amount
directly rolled over to the participant’s
designated Roth account would be the
same as the amount reported on Form
1099–R, and the contribution (adjusted
for allocable gain or loss) would be
includible in the participant’s gross
income for the year of the rollover.
3. General Correction Requirements and
Deadlines To Correct
a. Prerequisite To Correct Certain
Section 414(v)(7) Failures Under the
New Correction Methods
Under proposed § 1.414(v)–2(c)(3)(i),
a plan would be eligible to use a new
correction method with respect to pretax elective deferrals that exceed a
statutory limit described in § 1.414(v)–
1(b)(1)(i) (such as contributions that
exceed the section 401(a)(30) limit or
that result in the participant’s annual
additions exceeding the section 415(c)
limit) only if the plan sponsor or plan
administrator has in place practices and
procedures designed to result in
compliance with section 414(v)(7) at the
time an elective deferral is made.18 A
17 This method would generally not be available
with respect to an elective deferral that is a catchup contribution because it exceeds the ADP limit
under a plan with a calendar year plan year. This
is because a participant’s Form W–2 for a year is
generally filed and furnished to the participant
prior to determination of any catch-up
contributions made by the participant because the
elective deferrals exceed the ADP limit for such a
plan year.
18 A plan would not be required under proposed
§ 1.414(v)–2(c)(3)(i) to have such practices and
procedures in place in order to correct a pre-tax
catch-up contribution that is a catch-up
contribution because it exceeds an employer-
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2653
plan would not meet this requirement
unless the plan provides for a deemed
Roth catch-up election in accordance
with proposed § 1.401(k)–1(f)(5)(iii) and
(iv). Under the deemed Roth catch-up
election approach, if a participant who
is subject to the Roth catch-up
requirement has made pre-tax elective
deferrals for a calendar year that equal
the section 401(a)(30) limit for the
taxable year that begins in the calendar
year, then subsequent elective deferrals
made by the participant in the calendar
year would automatically be made as
designated Roth contributions, even if
the participant has not made an
affirmative election to make catch-up
contributions as designated Roth
contributions. Similarly, if such a
participant has made pre-tax elective
deferrals for a limitation year that result
in the participant’s annual additions for
the limitation year exceeding the section
415(c) limit, then subsequent elective
deferrals made by the participant in the
limitation year would automatically be
made as designated Roth contributions.
If a plan does not provide for a
deemed Roth catch-up election and the
plan accepts a pre-tax elective deferral
that would be a catch-up contribution
on account of exceeding a statutory
limit described in § 1.414(v)–1(b)(1)(i)
and the elective deferral is required to
be a designated Roth contribution in
accordance with the Roth catch-up
requirement, then the plan would not be
eligible to use a correction method
described in § 1.414(v)–2(c)(2) and,
therefore, would have to use an
otherwise-applicable correction method
to distribute the elective deferral (for
example, the correction method in
§ 1.402(g)–1(e) relating to an elective
deferral that exceeds the section
401(a)(30) limit).19
A plan would not fail to meet the
requirement to have in place practices
and procedures that are designed to
result in compliance with the Roth
provided limit as described in § 1.414(v)–1(b)(1)(ii).
A plan would also not be required to have such
practices and procedures in place in order to correct
a pre-tax elective deferral that is a catch-up
contribution because it exceeds the ADP limit as
described in § 1.414(v)–1(b)(1)(iii). This is because
these elective deferrals are not determined to be
catch-up contributions under § 1.414(v)–1(c)(3)
until the last day of the plan year of deferral or in
the following plan year.
19 In the case of a plan that does not provide for
a deemed Roth catch-up election, if the plan
provides that it will not accept an elective deferral
that exceeds an applicable limit on elective
deferrals unless the elective deferral is a catch-up
contribution, then the plan may be designed to
automatically stop elective deferrals for a catch-up
eligible participant who is subject to the Roth catchup requirement after the participant’s elective
deferrals reach an applicable limit (unless the
participant has designated the additional elective
deferrals as Roth contributions).
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Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Proposed Rules
catch-up requirement at the time an
elective deferral is made merely because
the plan determines the applicability of
the Roth catch-up requirement to a
participant solely on the basis of the
participant’s FICA wages from the
employer sponsoring the plan for the
preceding calendar year as reported on
a timely-filed Form W–2 with respect to
the participant. However, if the amount
of a participant’s FICA wages for the
preceding calendar year that is timely
reported on a Form W–2 is later
determined to be incorrect, a plan
would have to correct any pre-tax catchup contributions that should have been
designated Roth contributions on the
basis of the adjusted FICA wages for the
preceding calendar year.20
ddrumheller on DSK120RN23PROD with PROPOSALS1
b. Deadline To Correct Section 414(v)(7)
Failures
Proposed § 1.414(v)–2(c)(3)(iii)
provides the deadlines that would apply
for correction of a pre-tax catch-up
contribution under the new correction
methods for a section 414(v)(7) failure.
Under the proposed regulation, the
deadline to correct a section 414(v)(7)
failure would depend on which limit is
the basis for the pre-tax elective deferral
being designated a catch-up
contribution.21
If the elective deferral is a catch-up
contribution because it exceeds the
section 401(a)(30) limit on elective
deferrals, then § 1.414(v)–2(c)(3)(iii)(A)
would provide that the deadline to
complete the corrective steps under
proposed § 1.414(v)–2(c)(2) is April 15
of the calendar year following the
calendar year for which the elective
deferral was made. This is consistent
with the deadline that applies for
correcting excess deferrals above the
section 401(a)(30) limit by distribution
under § 1.402(g)–1(e).
If the elective deferral is a catch-up
contribution because it results in the
participant’s annual additions for a
limitation year exceeding the section
415(c) limit, then § 1.414(v)–
2(c)(3)(iii)(B) would provide that the
deadline to complete the corrective
steps under proposed § 1.414(v)–2(c)(2)
is the deadline that applies under
§ 1.415(c)–1(b)(6) for allocating amounts
20 The Treasury Department and the IRS invite
comments on whether there are scenarios in which
it would not be appropriate to require correction of
pre-tax catch-up contributions that are required to
be designated Roth contributions on the basis of a
subsequent determination that the amount of FICA
wages reported on the Form W–2 was incorrect.
21 If the applicable deadline for a new correction
method under the proposed regulations is not
satisfied, then a section 414(v)(7) failure would
need to be corrected by a distribution from the plan
in accordance with the correction principles set
forth in section 6 of Revenue Procedure 2021–30.
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Jkt 265001
to the limitation year for which the
elective deferral was made.
Under proposed § 1.414(v)–
2(c)(3)(iii)(C), the deadline to correct a
pre-tax catch-up contribution that
exceeds the ADP limit under the new
correction methods would be the date
that is 21⁄2 months (6 months, in the
case of plans that include an eligible
automatic contribution arrangement
within the meaning of section 414(w))
after the close of the plan year for which
the excess contribution was made. This
is consistent with the deadline under
§ 1.401(k)–2(b)(5) for distributing excess
contributions above the ADP limit in
order to avoid a 10 percent excise tax on
the excess contributions. Under the
proposed regulations, this would also be
the deadline to correct a pre-tax catchup contribution that is a catch-up
contribution because it exceeds an
employer-provided limit (because the
determination of catch-up contributions,
which are disregarded for purposes of
the ADP test, needs to be made before
the performance of the ADP test).
Proposed Applicability Date
The amendments to § 1.414(v)–1 are
proposed to apply with respect to
contributions in taxable years that begin
more than 6 months after the date that
final regulations amending § 1.414(v)–1
are issued. However, the proposed
regulations would permit a taxpayer to
elect to apply: (1) proposed § 1.414(v)–
1(c)(2)(ii)(C) and (c)(2)(iii)(C) (relating to
the higher catch-up limit for certain
newly-established SIMPLE plans) with
respect to taxable years beginning after
December 31, 2023, and (2) proposed
§ 1.414(v)–1(c)(2)(i)(B), (c)(2)(ii)(B), and
(c)(2)(iii)(B) (relating to the higher catchup limit applicable during the taxable
year of attainment of age 60 through 63)
with respect to taxable years beginning
after December 31, 2024.
For a plan that is not maintained
pursuant to a collective bargaining
agreement, proposed § 1.414(v)–2 and
the proposed amendments to
§§ 1.401(k)–1 and 1.403(b)–3 are
proposed to apply with respect to
contributions in taxable years beginning
more than 6 months after the date that
final regulations adding § 1.414(v)–2 to
the Code of Federal Regulations are
issued. For a plan that is maintained
pursuant to one or more collective
bargaining agreements, proposed
§ 1.414(v)–2 and the proposed
amendments to §§ 1.401(k)–1 and
1.403(b)–3 are proposed to apply with
respect to contributions in taxable years
beginning after the later of the first
taxable year described in the preceding
sentence, or the first taxable year that
begins after the date on which the last
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collective bargaining agreement related
to the plan that is in effect on December
31, 2025, terminates (determined
without regard to any extension of those
agreements). However, under the
proposed regulations, a plan would be
permitted to apply § 1.414(v)–2 and the
amendments to §§ 1.401(k)–1 and
1.403(b)–3 with respect to contributions
in taxable years beginning after
December 31, 2023.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury
Regulations under Executive Order
12866 (June 9, 2023), tax regulatory
actions issued by the IRS are not subject
to the requirements of section 6 of
Executive Order 12866, as amended.
Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) requires that a
Federal agency obtain the approval of
the Office of Management and Budget
(OMB) before collecting information
from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit. A Federal agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information unless the collection of
information displays a valid control
number.
These proposed regulations contain
reporting requirements, contained in
§ 1.414(v)–2(c), that relate to corrections
of pre-tax elective deferrals that are
catch-up contributions subject to the
requirement under section 414(v)(7)(A)
of the Code to be designated Roth
contributions. These collections of
information generally would be used by
the IRS for tax compliance purposes and
may involve submission of a Form
1099–R to the IRS. This form and its
associated burden are approved by the
OMB under 1545–0119. The proposed
regulation is not changing the reporting
procedures already established for this
form.
The proposed regulations also contain
a recordkeeping requirement that plan
administrators maintain written
practices and procedures designed to
result in real-time compliance with
certain requirements of section
414(v)(7)(A). These recordkeeping
requirements are expected to be usual
and customary business practices that
would impose no additional burden on
respondents. Therefore, the
recordkeeping requirement would not
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require OMB approval under 5 CFR
1320.3(b)(2).
ddrumheller on DSK120RN23PROD with PROPOSALS1
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby
certified that these proposed regulations
will not have a significant economic
impact on a substantial number of small
entities. These proposed regulations
would affect individuals and
businesses, some of which may be small
entities.
Even if a substantial number of small
entities would be affected, the economic
impact of these proposed regulations is
not expected to be significant. As
discussed in the Paperwork Reduction
Act section of this preamble, these
proposed regulations may involve
reporting and ordinary recordkeeping
but are not expected to result in an
increase in estimated burden. Any
additional recordkeeping or
administrative costs resulting from the
changes relating to catch-up
contributions that apply to certain
section 401(k) plans, 403(b) plans, and
eligible governmental 457(b) plans
sponsored by small entities are
consistent with existing procedures and
are not expected to be significant.
Therefore, a regulatory flexibility
analysis under the Regulatory
Flexibility Act is not required.
The Treasury Department and the IRS
invite comments on the impacts these
proposed regulations may have on small
entities. Pursuant to section 7805(f) of
the Code, these proposed regulations
will be submitted to the Chief Counsel
for Advocacy of the Small Business
Administration for comment on their
impact on small businesses.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act of 1995 requires
that agencies assess anticipated costs
and benefits and take certain other
actions before issuing a final rule that
includes any Federal mandate that may
result in expenditures in any one year
by a State, local, or Tribal government,
in the aggregate, or by the private sector,
of $100 million in 1995 dollars, updated
annually for inflation. The proposed
regulations do not propose any rule that
would include any Federal mandate that
may result in expenditures by State,
local, or Tribal governments, or by the
private sector, in excess of that
threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial,
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18:31 Jan 09, 2025
Jkt 265001
direct compliance costs on State and
local governments, and is not required
by statute, or preempts State law, unless
the agency meets the consultation and
funding requirements of section 6 of the
Executive order. The proposed
regulations do not propose rules that
would have federalism implications,
impose substantial direct compliance
costs on State and local governments, or
preempt State law within the meaning
of the Executive order.
Comments and Public Hearing
Before these proposed regulations and
proposed amendments to the
regulations are adopted as final
regulations, consideration will be given
to comments regarding the notice of
proposed rulemaking that are submitted
timely to the IRS as prescribed in the
preamble under the ADDRESSES section.
The Treasury Department and the IRS
request comments on all aspects of the
proposed regulations. All comments
will be made available at
www.regulations.gov. Once submitted to
the Federal eRulemaking Portal,
comments cannot be edited or
withdrawn.
A public hearing has been scheduled
for April 7, 2025, beginning at 10 a.m.
EST in the Auditorium of the Internal
Revenue Building, 1111 Constitution
Avenue NW, Washington, DC. Due to
building security procedures, visitors
must enter at the Constitution Avenue
entrance. In addition, all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts.
Participants may alternatively attend the
public hearing by telephone.
The rules of 26 CFR 601.601(a)(3)
apply to the hearing. Persons who wish
to present oral comments must submit
an outline of the topics to be addressed
and the time to be devoted to each topic
by March 14, 2025 as prescribed in the
preamble under the DATES section. A
period of 10 minutes will be allocated
to each person for making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has
passed. Copies of the agenda will be
available free of charge at the hearing.
If no outline of the topics to be
discussed at the hearing is received by
March 14, 2025, the public hearing will
be cancelled. If the public hearing is
cancelled, a notice of cancellation of the
public hearing will be published in the
Federal Register.
Individuals who want to testify in
person at the public hearing must send
an email to publichearings@irs.gov to
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2655
have your name added to the building
access list. The subject line of the email
must contain the regulation number
REG–101268–24 and the language
TESTIFY In Person. For example, the
subject line may say: Request to
TESTIFY In Person at Hearing for REG–
101268–24.
Individuals who want to testify by
telephone at the public hearing must
send an email to publichearings@irs.gov
to receive the telephone number and
access code for the hearing. The subject
line of the email must contain the
regulation number REG–101268–24 and
the language TESTIFY Telephonically.
For example, the subject line may say:
Request to TESTIFY Telephonically at
Hearing for REG–101268–24.
Individuals who want to attend the
public hearing in person without
testifying must also send an email to
publichearings@irs.gov to have your
name added to the building access list.
The subject line of the email must
contain the regulation number REG–
101268–24 and the language ATTEND
In Person. For example, the subject line
may say: Request to ATTEND Hearing In
Person for REG–101268–24. Requests to
attend the public hearing must be
received by 5 p.m. EST on April 3, 2025.
Individuals who want to attend the
public hearing by telephone without
testifying must also send an email to
publichearings@irs.gov to receive the
telephone number and access code for
the hearing. The subject line of the
email must contain the regulation
number REG–101268–24 and the
language ATTEND Hearing
Telephonically. For example, the
subject line may say: Request to
ATTEND Hearing Telephonically for
REG–101268–24. Requests to attend the
public hearing must be received by 5
p.m. EST on April 3, 2025.
Hearings will be made accessible to
people with disabilities. To request
special assistance during the hearing,
please contact the Publications and
Regulations Branch of the Office of
Associate Chief Counsel (Procedure and
Administration) by sending an email to
publichearings@irs.gov (preferred) or by
telephone at (202) 317–6901 (not a tollfree number) by April 2, 2025.
Statement of Availability of IRS
Documents
IRS Revenue Procedures, Revenue
Rulings notices, and other guidance
cited in this document are published in
the Internal Revenue Bulletin (or
Cumulative Bulletin) and are available
from the Superintendent of Documents,
U.S. Government Publishing Office,
Washington, DC 20402, or by visiting
the IRS website at https://www.irs.gov.
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Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Proposed Rules
Drafting Information
The principal authors of these
proposed regulations are Jessica S.
Weinberger and Jason E. Levine, of the
Office of the Associate Chief Counsel
(Employee Benefits, Exempt
Organizations, and Employment Taxes
(EEE)). However, other personnel from
the Treasury Department and the IRS
participated in the development of the
proposed regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1–INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries,
in numerical order, for §§ 1.401(k)–1
and 1.414(v)–2 to read in part, as
follows:
■
Authority: 26 U.S.C. 7805 * * *
*
*
*
*
*
Section 1.401(k)–1 also issued under 26
U.S.C. 401(m)(9).
*
*
*
*
*
Section 1.414(v)–2 also issued under 26
U.S.C. 414(v)(7)(D).
*
*
*
*
*
Par. 2. Section 1.401(k)–1 is amended
by adding paragraphs (f)(5)(iii) and (iv)
to read as follows:
■
§ 1.401(k)–1 Certain cash or deferred
arrangements.
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*
*
*
*
*
(f) * * *
(5) * * *
(iii) Deemed Roth catch-up
contribution elections. For taxable years
beginning after December 31, 2023, a
plan that satisfies the requirements of
paragraph (f)(5)(iv) of this section may
provide that an employee who is subject
to the requirement under section
414(v)(7) to make any catch-up
contributions as designated Roth
contributions is deemed to have
irrevocably designated any elective
deferrals that are catch-up contributions
as designated Roth contributions in
accordance with paragraph (f)(1)(i) of
this section. In such a case, the elective
deferrals must be—
(A) Treated by the employer as not
excludible from the employee’s gross
income, in accordance with paragraph
(f)(2) of this section; and
(B) Maintained by the plan in a
separate account, in accordance with
paragraph (f)(3) of this section.
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(iv) Election for employees subject to
section 414(v)(7)(A). A plan satisfies the
requirements of this paragraph (f)(5)(iv)
only if it provides to an employee who
is described in paragraph (f)(5)(iii) of
this section an effective opportunity (as
determined under paragraph (e)(2)(ii) of
this section) to make a new election that
is different than the deemed election
described in paragraph (f)(5)(iii) of this
section.
*
*
*
*
*
■ Par. 3. Section 1.403(b)–3 is amended
in paragraph (c)(1) by:
■ a. Removing the reference ‘‘§ 1.401(k)–
1(f)(1) and (2)’’ and adding, in its place,
the reference ‘‘§ 1.401(k)–1(f)(1), (2), (3),
and (5)’’;
■ b. Adding the language ‘‘(or is deemed
to be so irrevocably designated in
accordance with § 1.401(k)–1(f)(5)(iii))’’
immediately following the language
‘‘otherwise eligible to make under the
plan’’; and
■ c. Removing the language ‘‘(within the
meaning of § 1.401(k)–1(f)(2))’’ and
adding, in its place, the language
‘‘(within the meaning of § 1.401(k)–
1(f)(3))’’.
■ Par. 4. Section 1.414(v)–1 is amended
by:
■ a. In the last sentence of paragraph
(a)(1), removing the language ‘‘this
section and § 1.402(g)–2’’ and adding, in
its place, the language ‘‘this section, and
§§ 1.414(v)–2 and 1.402(g)–2’’;
■ b. Adding paragraph (a)(4);
■ c. Revising and republishing
paragraph (c)(2);
■ d. Adding paragraph (e)(1)(iii); and
■ e. Revising and republishing
paragraph (i).
The additions and revisions read as
follows:
§ 1.414(v)–1
Catch-up contributions.
(a) * * *
(4) Catch-up contributions must be
designated Roth contributions for
certain participants. For provisions
relating to the requirement under
section 414(v)(7) that catch-up
contributions made by certain catch-up
eligible participants must be designated
Roth contributions, see § 1.414(v)–2.
*
*
*
*
*
(c) * * *
(2) Applicable dollar catch-up limit—
(i) Plans other than SIMPLE Plans—(A)
In general. Except as provided in
paragraph (c)(2)(i)(B) of this section, the
applicable dollar catch-up limit that
applies under an applicable employer
plan, other than a SIMPLE 401(k) plan
described in section 401(k)(11) or a
SIMPLE IRA plan described in section
408(p), for a taxable year is $5,000, as
adjusted for changes in the cost of living
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under paragraph (c)(2)(iii)(A) of this
section.
(B) Higher limit applicable during the
taxable year of attainment of age 60
through 63. For a taxable year beginning
after 2024, with respect to a catch-up
eligible participant who would attain
age 60, 61, 62, or 63 during the taxable
year, the applicable dollar catch-up
limit for the taxable year under an
applicable employer plan described in
paragraph (c)(2)(i)(A) of this section is
$11,250 (which is 150 percent of the
applicable dollar catch-up limit
described in paragraph (c)(2)(i)(A) of
this section for a taxable year beginning
in 2024), as adjusted for changes in the
cost of living under paragraph
(c)(2)(iii)(B) of this section.
(ii) SIMPLE plans—(A) In general.
Except as provided in paragraph
(c)(2)(ii)(B) or (C) of this section, the
applicable dollar catch-up limit that
applies under a SIMPLE 401(k) plan
described in section 401(k)(11) or a
SIMPLE IRA plan described in section
408(p) for a taxable year is $2,500, as
adjusted for changes in the cost of living
under paragraph (c)(2)(iii)(A) of this
section.
(B) Higher limit applicable during the
taxable year of attainment of age 60
through 63. For a taxable year beginning
after 2024, with respect to a catch-up
eligible participant who would attain
age 60, 61, 62, or 63 during the taxable
year, the applicable dollar catch-up
limit for the taxable year under an
applicable employer plan described in
paragraph (c)(2)(ii)(A) of this section is
$5,250 (which is 150 percent of the
applicable dollar catch-up limit under
paragraph (c)(2)(ii)(A) of this section for
a taxable year beginning in 2025), as
adjusted for changes in the cost of living
under paragraph (c)(2)(iii)(B) of this
section.
(C) Higher limit for certain SIMPLE
plans. For a taxable year beginning after
2023, the applicable dollar catch-up
limit under an applicable employer plan
described in paragraph (c)(2)(ii)(A) of
this section that is maintained by an
eligible employer meeting the
requirements in section 408(p)(2)(E)(iv)
is $3,850 (which is 110 percent of the
applicable dollar catch-up limit in effect
under paragraph (c)(2)(ii)(A) of this
section for a taxable year beginning in
2024), as adjusted for changes in the
cost of living under paragraph
(c)(2)(iii)(C) of this section. The
preceding sentence applies with respect
to a taxable year only if the taxable year
begins in a calendar year for which the
eligible employer is described in section
408(p)(2)(E)(i)(I) or makes the election
described in section 408(p)(2)(E)(i)(II).
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(iii) Cost-of-living adjustments—(A) In
general. For a taxable year beginning
after 2006, the applicable dollar catchup limit under paragraph (c)(2)(i)(A) or
(c)(2)(ii)(A) of this section (whichever
applies to the plan) is the initial amount
($5,000 or $2,500, respectively),
increased for changes in the cost of
living. The increase is made at the same
time and in the same manner as
adjustments under section 415(d),
except that the base period is the
calendar quarter beginning July 1, 2005,
and any increase that is not a multiple
of $500 is rounded to the next lower
multiple of $500.
(B) Adjustments to higher limit
applicable during the taxable year of
attainment of age 60 through 63. For a
taxable year beginning after 2025, the
applicable dollar catch-up limit under
paragraph (c)(2)(i)(B) or (c)(2)(ii)(B) of
this section (whichever applies to the
plan) is the initial amount ($11,250 in
the case of paragraph (c)(2)(i)(B) of this
section and $5,250 in the case of
paragraph (c)(2)(ii)(B) of this section),
increased for changes in the cost of
living. The increase is made at the same
time and in the same manner as
adjustments under section 415(d),
except that the base period is the
calendar quarter beginning July 1, 2024,
and any increase that is not a multiple
of $500 is rounded to the next lower
multiple of $500.
(C) Adjustments to higher limit for
certain SIMPLE plans. For a taxable year
beginning after 2024, the applicable
dollar catch-up limit under paragraph
(c)(2)(ii)(C) of this section is the initial
amount ($3,850), increased for changes
in the cost of living. The increase is
made at the same time and in the same
manner as adjustments under section
415(d), except that the base period is the
calendar quarter beginning July 1, 2023,
and any increase that is not a multiple
of $500 is rounded to the next lower
multiple of $500.
*
*
*
*
*
(e) * * *
(1) * * *
(iii) Plans providing the statutory
maximum catch-up contributions. An
applicable employer plan does not fail
to satisfy the universal availability
requirement of this paragraph (e) merely
because of differences among catch-up
eligible participants as to the dollar
amount of catch-up contributions they
are permitted to make, provided that
each catch-up eligible participant who
participates under any applicable
employer plan maintained by the
employer is provided with an effective
opportunity to make the maximum
amount of catch-up contributions
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permitted for that participant under
section 414(v) or, if applicable, section
1081.01(d)(7) of the Puerto Rico Internal
Revenue Code of 2011 (13 L.P.R.A.
section 30391(d)(7)), as amended. For
example, an applicable employer plan
does not fail to satisfy the universal
availability requirement of this
paragraph (e) merely because the plan
permits catch-up eligible participants
who would attain age 60, 61, 62, or 63
during a taxable year to make catch-up
contributions up to the increased
applicable dollar catch-up limit in
section 414(v)(2)(E) while only
permitting other catch-up eligible
participants to make catch-up
contributions up to the applicable dollar
catch-up limit in section 414(v)(2)(B)
without regard to section 414(v)(2)(E).
*
*
*
*
*
(i) Applicability dates—(1) In general.
Except as described in paragraph (i)(2)
of this section or § 1.414(v)–2(e), section
414(v) applies to contributions in
taxable years beginning on or after
January 1, 2002. Except as provided in
paragraph (i)(2) of this section,
paragraphs (a) through (h) of this section
apply to contributions in taxable years
beginning on or after January 1, 2004.
(2) Increases in applicable dollar
catch-up limit under section 414(v)(2)—
(i) Higher limit during the taxable year
of attainment of age 60 through 63. The
amendments to section 414(v)(2) made
by section 109 of Division T of the
Consolidated Appropriations Act, 2023,
Public Law 117–328, 136 Stat. 4459
(2022), known as the SECURE 2.0 Act of
2022 (SECURE 2.0 Act) to provide for a
higher applicable dollar catch-up limit
for individuals who attain age 60, 61,
62, or 63 during the taxable year apply
to contributions in taxable years
beginning after December 31, 2024.
Paragraphs (c)(2)(i)(B), (c)(2)(ii)(B), and
(c)(2)(iii)(B) of this section apply to
contributions in taxable years beginning
after [DATE SIX MONTHS AFTER
DATE OF PUBLICATION OF FINAL
RULE] (or, at the election of the
taxpayer, taxable years beginning after
December 31, 2024). Except as provided
in paragraph (i)(2)(ii) of this section, for
taxable years beginning on or before
December 31, 2024, the applicable
dollar catch-up limit is determined
under § 1.414(v)–1(c)(2) as it appeared
in the April 1, 2024, edition of 26 CFR
part 1.
(ii) Higher limit for certain SIMPLE
plans. The amendments to section
414(v)(2) made by section 117 of the
SECURE 2.0 Act to provide for a higher
applicable dollar catch-up limit for
certain SIMPLE plans apply to
contributions in taxable years beginning
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2657
after December 31, 2023. Paragraphs
(c)(2)(ii)(C) and (c)(2)(iii)(C) of this
section apply to contributions in taxable
years beginning after [DATE SIX
MONTHS AFTER DATE OF
PUBLICATION OF FINAL RULE] (or, at
the election of the taxpayer, taxable
years beginning after December 31,
2023). For taxable years beginning on or
before December 31, 2023, the
applicable dollar catch-up limit for a
SIMPLE 401(k) plan described in
section 401(k)(11) or a SIMPLE IRA plan
described in section 408(p) is
determined under § 1.414(v)–1(c)(2)(ii)
as it appeared in the April 1, 2024,
edition of 26 CFR part 1.
■ Par. 5. Section 1.414(v)–2 is added to
read as follows:
§ 1.414(v)–2 Catch-up contributions
required to be designated Roth
contributions under section 414(v)(7).
(a) Section 414(v)(7) Roth catch-up
contribution requirement—(1)
Organization of this section. Paragraphs
(a)(2) through (5) of this section provide
general rules relating to the
requirements of section 414(v)(7).
Paragraph (b) of this section provides
certain rules of operation for
implementing the requirements of
section 414(v)(7) addressed in this
paragraph (a). Paragraph (c) of this
section provides rules relating to the
treatment of pre-tax catch-up
contributions that were required to be
designated Roth contributions under
section 414(v)(7). Paragraph (d) of this
section provides examples illustrating
the application of the rules of this
section. Paragraph (e) of this section sets
forth the statutory and regulatory
effective dates relating to the section
414(v)(7) Roth catch-up requirement.
(2) Roth catch-up contribution
requirement in general. For a taxable
year beginning on or after January 1,
2024, if, for the calendar year preceding
the calendar year in which the taxable
year begins, a catch-up eligible
participant in an applicable employer
plan had wages (as defined in section
3121(a) for purposes of the taxes
imposed by sections 3101(a) and
3111(a), for the year the wages are
required to be taken into account for
purposes of chapter 21 of the Code)
from the employer sponsoring the plan
(as determined under paragraph (b)(3) of
this section) that exceeded the
applicable Roth catch-up wage
threshold, then § 1.414(v)–1(a)(1)
applies only if that participant’s catchup contributions (as described in
§ 1.414(v)–1(a)(1)) under the plan are
designated Roth contributions (as
defined in section 402A(c)(1)). The Roth
catch-up wage threshold that applies for
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a calendar year is $145,000, as adjusted
for changes in the cost of living under
paragraph (a)(3) of this section.
(3) Cost-of-living adjustment. For a
calendar year beginning after December
31, 2024, the applicable Roth catch-up
wage threshold in paragraph (a)(2) of
this section is the initial amount
($145,000), increased for changes in the
cost of living. The increase is made at
the same time and in the same manner
as adjustments under section 415(d),
except that the base period is the
calendar quarter beginning July 1, 2023,
and any increase that is not a multiple
of $5,000 is rounded to the next lower
multiple of $5,000.
(4) Certain plans not subject to section
414(v)(7). Paragraph (a)(2) of this section
does not apply to a plan described in
section 408(k) or (p).
(5) Availability of designated Roth
catch-up contributions—(i) In general.
Except as provided in paragraph
(a)(5)(ii) of this section, if, under an
applicable employer plan, any catch-up
eligible participant who is subject to the
Roth catch-up requirement under
paragraph (a)(2) of this section is
permitted to make catch-up
contributions as designated Roth
contributions for a plan year, then all
catch-up eligible participants in the
plan must be permitted to make catchup contributions as designated Roth
contributions for the plan year.
(ii) Special rule for participants
subject to the Puerto Rico Code. In the
case of a catch-up eligible participant
who is subject to the Roth catch-up
requirement under paragraph (a)(2) of
this section and is subject to section
1081.01 of the Puerto Rico Internal
Revenue Code of 2011 (13 L.P.R.A.
section 30391), as amended (Puerto Rico
Code), paragraph (a)(5)(i) of this section
is treated as satisfied if, under the
applicable employer plan, that
participant is permitted to make catchup contributions as after-tax
contributions within the meaning of
section 1081.01(a)(15) of the Puerto Rico
Code.
(b) Rules of operation—(1)
Determination of catch-up contributions
subject to section 414(v)(7) Roth
requirement. For a participant who is
subject to the Roth catch-up
requirement under paragraph (a)(2) of
this section for a plan year, an elective
deferral that, in accordance with
§ 1.414(v)–1(c)(3), is treated as a catchup contribution at the time of deferral
(for example, an elective deferral that is
a catch-up contribution because it
exceeds the section 401(a)(30) limit on
elective deferrals) is required to be a
designated Roth contribution only to the
extent the participant has not previously
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made elective deferrals that are
designated Roth contributions during
the calendar year or taxable year equal
to the applicable dollar catch-up limit
under § 1.414(v)–1(c)(2). Thus, for
example, if a participant who is subject
to the Roth catch-up requirement under
paragraph (a)(2) of this section has
already made elective deferrals that are
designated Roth contributions during
the calendar year that equal or exceed
the applicable dollar catch-up limit at
the time the participant’s elective
deferrals reach the section 401(a)(30)
limit on elective deferrals, section
414(v)(7) would not require the
participant’s subsequent elective
deferrals for the calendar year to be
designated Roth contributions even
though they are treated as catch-up
contributions under § 1.414(v)–1(c)(3).
(2) Treatment of plans without
qualified Roth contribution programs—
(i) In general. For purposes of
§ 1.414(v)–1(e)(1)(iii), if an applicable
employer plan does not include a
qualified Roth contribution program
(within the meaning of section 402A(b)),
then, for a catch-up eligible participant
who is subject to the Roth catch-up
requirement under paragraph (a)(2) of
this section, the maximum amount of
catch-up contributions permitted under
section 414(v) is $0. Such a plan does
not fail to satisfy the universal
availability requirement of § 1.414(v)–
1(e) merely because the plan (or another
applicable employer plan maintained by
the employer that does not include a
qualified Roth contribution program)
does not permit catch-up contributions
for participants who are subject to the
Roth catch-up requirement under
paragraph (a)(2) of this section.
(ii) Application of nondiscrimination
requirements. If an applicable employer
plan is described in paragraph (b)(2)(i)
of this section, then § 1.414(v)–1(d)(4)
does not apply to the plan. As a result,
a plan that has one or more highly
compensated employees (as defined in
section 414(q)) who are not subject to
the Roth catch-up requirement under
paragraph (a)(2) may need to preclude
one or more of those highly
compensated employees from making
catch-up contributions to facilitate
satisfaction of § 1.401(a)(4)–4 with
respect to the availability of catch-up
contributions. In such a case, the plan
is not treated as failing to satisfy the
universal availability requirement of
§ 1.414(v)–1(e) merely because of that
preclusion.
(3) Determination of employer
sponsoring the plan. For purposes of
determining the employer sponsoring
the plan with respect to a catch-up
eligible participant, the employer is the
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participant’s common law employer.
Thus, for purposes of this section, the
employer sponsoring the plan does not
include other entities that are treated as
a single employer with a catch-up
eligible participant’s common law
employer under section 414(b), (c), (m),
or (o).
(4) Plans with more than one
employer sponsoring the plan. If an
applicable employer plan has more than
one employer sponsoring the plan (that
is, the plan is sponsored by multiple
employers that are aggregated under
section 414(b), (c), (m), or (o), or is a
multiple employer plan or a
multiemployer plan), a catch-up eligible
participant’s wages for the preceding
calendar year from one employer
sponsoring the plan are not aggregated
with the wages from another employer
sponsoring the plan for purposes of
determining whether the participant’s
wages for the preceding calendar year
exceeded the applicable Roth catch-up
wage threshold in paragraph (a)(2) of
this section. Furthermore, even if a
catch-up eligible participant’s wages for
the preceding calendar year from one
employer sponsoring the plan exceeded
the applicable Roth catch-up wage
threshold in paragraph (a)(2) of this
section, elective deferrals made from the
participant’s compensation from
another employer sponsoring the plan
that are catch-up contributions would
not be required to be designated Roth
contributions unless the participant’s
wages for the preceding calendar year
from that other employer also exceeded
that wage threshold.
(c) Treatment of pre-tax catch-up
contributions that are required to be
designated Roth contributions—(1)
General rule. Subject to paragraph (c)(3)
of this section, a pre-tax elective deferral
in excess of an applicable limit
described in § 1.414(v)–1(b)(1) that, in
accordance with paragraph (a)(2) of this
section, is a catch-up contribution only
if it is a designated Roth contribution
does not cause an applicable employer
plan to fail to satisfy any requirement of
the Internal Revenue Code if the failure
to be a designated Roth contribution is
corrected in accordance with paragraph
(c)(2) of this section.
(2) Correction of section 414(v)(7)
failures—(i) In general. For purposes of
this paragraph (c), if an elective deferral
that exceeds a statutory limit, employerprovided limit, or ADP limit (as such
terms are defined in § 1.414(v)–1(b)(1))
fails to be a catch-up contribution under
section 414(v)(1) because the elective
deferral is not a designated Roth
contribution, then the failure to satisfy
section 414(v)(7) is referred to as a
‘‘section 414(v)(7) failure’’ and may be
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corrected in accordance with this
paragraph (c)(2). A plan may provide for
either of the correction methods
described in paragraphs (c)(2)(ii) and
(iii) of this section, but with respect to
a plan year, the plan must apply the
same correction method for all
participants with elective deferrals in
excess of the same applicable limit.
(ii) Permitted correction on Form W–
2. A plan may correct a section 414(v)(7)
failure by transferring the catch-up
contribution (adjusted for earnings and
losses) from the participant’s pre-tax
account to the participant’s designated
Roth account and reporting the
contribution (not adjusted for earnings
and losses) as an elective deferral that
is a designated Roth contribution on the
participant’s Form W–2 (Wage and Tax
Statement) for the year in which the
elective deferral was originally excluded
from the participant’s gross income.
However, this correction method may be
used only if the participant’s Form W–
2 for that year has not been filed or
furnished to the participant.
(iii) Permitted correction by in-plan
Roth rollover. As an alternative to the
correction method permitted under
paragraph (c)(2)(ii) of this section, a
plan may correct a section 414(v)(7)
failure by directly rolling over the catchup contribution (adjusted for earnings
and losses) from the participant’s pretax account to the participant’s
designated Roth account, in accordance
with section 402A(c)(4)(E), and
reporting the amount of the in-plan Roth
rollover on Form 1099–R (Distributions
from Pensions, Annuities, Retirement or
Profit-Sharing Plans, IRAs, Insurance
Contracts, etc.) for the year of the
rollover.
(3) General correction requirements—
(i) Practices and procedures. For a plan
to be eligible to use either of the
correction methods described under
paragraph (c)(2) of this section with
respect to an elective deferral that is a
catch-up contribution because it
exceeds a statutory limit described in
§ 1.414(v)–1(b)(1)(i), the plan sponsor or
plan administrator must have in place
practices and procedures designed to
result in compliance with section
414(v)(7) at the time the elective deferral
is made. As part of these practices and
procedures, the plan must provide that
the elective deferrals of a participant
who is subject to the Roth catch-up
requirement under paragraph (a)(2) of
this section, but who has not made an
affirmative election to make catch-up
contributions as designated Roth
contributions nor made designated Roth
contributions equal to the applicable
dollar catch-up limit earlier in a
calendar year, are automatically treated
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as designated Roth contributions after
the participant’s pre-tax elective
deferrals made during the calendar year
equal the section 401(a)(30) limit on
elective deferrals for the taxable year
that begins in the calendar year.
Similarly, the elective deferrals of such
a participant who has not made an
affirmative election to make catch-up
contributions as designated Roth
contributions nor made designated Roth
contributions equal to the applicable
dollar catch-up limit earlier in the
limitation year must be automatically
treated as designated Roth contributions
after the participant’s pre-tax elective
deferrals result in the participant’s
annual additions for the limitation year
exceeding the section 415(c) limit for
the limitation year.
(ii) Reliance on Form W–2. A plan
sponsor or plan administrator does not
fail to have in place practices and
procedures in accordance with
paragraph (c)(3)(i) of this section merely
because a plan determines the
applicability of the section 414(v)(7)(A)
Roth catch-up requirement to a
participant on the basis of a timely-filed
Form W–2 with respect to the
participant.
(iii) Deadlines for corrections of
section 414(v)(7) failures under
paragraph (c)(2) of this section—(A)
Elective deferrals in excess of a statutory
limit. If the section 414(v)(7) failure
arises with respect to an elective
deferral that is a catch-up contribution
because it exceeds the section 401(a)(30)
limit on elective deferrals, the deadline
to complete all corrective steps required
under paragraph (c)(2) of this section in
order to avoid a qualification failure is
April 15 of the calendar year following
the calendar year for which the elective
deferral was made. If the section
414(v)(7) failure arises with respect to
an elective deferral that is a catch-up
contribution because it results in the
participant’s annual additions for the
limitation year exceeding the section
415(c) limit, the deadline to complete
the corrective steps required under
paragraph (c)(2) of this section in order
to avoid a qualification failure is the
deadline that applies under § 1.415(c)–
1(b)(6) for allocating amounts to the
limitation year for which the elective
deferral was made.
(B) Elective deferrals in excess of an
employer-provided limit. If the section
414(v)(7) failure arises with respect to
an elective deferral that is a catch-up
contribution because it exceeds an
employer-provided limit as described in
§ 1.414(v)–1(b)(1)(ii), the deadline to
complete the corrective steps required
under paragraph (c)(2) of this section in
order to avoid a qualification failure is
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2659
the date that is 21⁄2 months (6 months,
in the case of an applicable employer
plan that includes an eligible automatic
contribution arrangement within the
meaning of section 414(w)) after the
close of the plan year for which the
catch-up contribution was made.
(C) Elective deferrals in excess of the
ADP limit. If the section 414(v)(7) failure
arises with respect to an elective
deferral that is a catch-up contribution
because it exceeds the ADP limit, the
deadline to complete the corrective
steps required under paragraph (c)(2) of
this section in order to avoid a
qualification failure is the date that is
21⁄2 months (6 months, in the case of an
applicable employer plan that includes
an eligible automatic contribution
arrangement within the meaning of
section 414(w)) after the close of the
plan year for which the excess
contribution was made.
(d) Examples. The following examples
illustrate the application of this section.
For purposes of these examples, assume
that the participant’s elective deferrals
under all plans of the employer do not
exceed the participant’s section
415(c)(3) compensation, the
participant’s annual additions for a
limitation year do not exceed the
section 415(c) limit, the taxable year of
the participant is the calendar year, the
plan includes a qualified Roth
contribution program, and the plan year
is the calendar year (except as
specifically provided). Assume further
that this section applies to contributions
in taxable years beginning in 2026, the
section 401(a)(30) limit on elective
deferrals for 2026 is $24,000, the
applicable dollar catch-up limit for 2026
that is applicable to each participant in
the examples is $8,000, and the Roth
catch-up wage threshold to be applied
to 2025 FICA wages for determining
applicability of the Roth catch-up
requirement under section 414(v)(7)(A)
for a plan year beginning in 2026 is
$150,000.
(1) Example 1: Application of Roth
catch-up wage threshold—(A) Facts. In
January 2025, Participant A became an
employee of an accounting firm that is
structured as a partnership. Through
October 2025, A had $151,000 of FICA
wages from the accounting firm. In
November 2025, Participant A became a
partner in the accounting firm, and, for
2025, Participant A had a $30,000
distributive share of partnership income
from the accounting firm, all of which
was self-employment income.
Participant A is a partner with the
accounting firm for all of 2026.
(B) Analysis. Although Participant A
is a partner with the accounting firm for
the last two months of 2025 and for all
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of 2026 (and thus has self-employment
income rather than FICA wages for that
period), Participant A had more than
$150,000 in FICA wages from the
accounting firm for 2025. Thus,
Participant A is subject to section
414(v)(7)(A) for 2026, and if Participant
A makes elective deferrals in excess of
an applicable limit for 2026 under a
plan sponsored by the accounting firm,
those elective deferrals must be
designated Roth contributions.
(2) Example 2: Application of Roth
catch-up wage threshold—(A) Facts.
The facts are the same as in paragraph
(d)(1) of this section (Example 1), except
that Participant A became a partner of
the accounting firm in May 2025, and
had FICA wages from the firm of
$60,000 before becoming partner. In
addition, for 2025, Participant A had a
$150,000 distributive share of
partnership income from the accounting
firm, all of which was self-employment
income.
(B) Analysis. Although Participant A
had total compensation of $210,000 for
the services Participant A performed for
the accounting firm in 2025, only
$60,000 of that amount were FICA
wages. Because Participant A did not
have more than $150,000 of FICA wages
from the accounting firm for 2025, any
elective deferrals in excess of an
applicable limit that Participant A
makes for 2026 under a plan sponsored
by the accounting firm are not required
to be designated Roth contributions.
(3) Example 3: Application of section
414(v)(7)(B) to a plan with a plan year
other than the calendar year—(A) Facts.
Participant B participates in an
applicable employer plan sponsored by
Employer E. The plan year begins on
July 1 and ends on June 30. Participant
B had $155,000 in wages within the
meaning of section 3121(a) from
Employer E for calendar year 2025, and
is a catch-up eligible participant for
calendar year 2026. For the plan year
beginning July 1, 2026, and ending June
30, 2027, the plan allows all catch-up
eligible participants to make catch-up
contributions and requires that any
elective deferrals in excess of an
applicable limit made by catch-up
eligible participants who are subject to
the requirements of section 414(v)(7)(A)
be designated Roth contributions.
(B) Analysis. Because Participant B’s
FICA wages from Employer E for
calendar year 2025 exceeded $150,000,
Participant B is subject to the
requirements of section 414(v)(7)(A) for
the first half of the plan year beginning
July 1, 2026, and any catch-up
contributions that Participant B makes
under the plan during that period must
be designated Roth contributions.
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18:31 Jan 09, 2025
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Because Participant B is permitted to
make catch-up contributions that are
designated Roth contributions under the
plan for the plan year beginning July 1,
2026 (after Participant B reaches an
applicable limit (as defined in
§ 1.414(v)–1(b)(1)), all catch-up eligible
participants under the plan must be
permitted to make catch-up
contributions that are designated Roth
contributions for the plan year.
(4) Example 4: Plans with more than
one employer sponsoring the plan—(A)
Facts. Employer F and Employer G are
members of a controlled group of
corporations within the meaning of
section 414(b). Participant C was hired
by Employer F on January 1, 2025, and
remained employed by Employer F
through October 31, 2025. Effective
November 1, 2025, Participant C
transferred to Employer G and was
employed by Employer G for the
remainder of 2025. Participant C is
employed by Employer G for all of 2026,
the year in which Participant C attains
age 55. Employer F reported $155,000 of
FICA wages on a Form W–2 for
Participant C for 2025. Employer G
reported $35,000 of FICA wages on a
Form W–2 for Participant C for 2025.
Employers F and G are participating
employers in a section 401(k) plan, Plan
P. Participant C becomes eligible to
participate in Plan P on January 1, 2026,
and all of Participant C’s elective
deferrals for 2026 are made from
compensation paid by Employer G.
(B) Analysis. Employers F and G are
common law employers of Participant C
during different portions of 2025, and,
under paragraph (b)(3) of this section,
they are both employers sponsoring the
plan. Because Participant C’s FICA
wages from Employer G in 2025 did not
exceed $150,000, Participant C is not
subject to the requirements of section
414(v)(7)(A) with respect to elective
deferrals that are made from
compensation paid by Employer G in
2026. Accordingly, Participant C is not
required to designate any catch-up
contributions made for 2026 under Plan
P as designated Roth contributions. This
is the case even though Participant C
had wages from Employer F (an
employer sponsoring the plan) that
exceeded $150,000 for 2025.
(5) Example 5: Correction of section
414(v)(7) failure—(A) Facts. Participant
D, who attains age 55 in 2026,
participates in a section 401(k) plan,
Plan Q, sponsored by Employer H. Plan
Q does not limit elective deferrals
except as necessary to comply with
sections 401(a)(30) and 415(c). Plan Q
does not provide catch-up eligible
participants with a separate election for
elective deferrals that are in excess of
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Sfmt 4702
the section 401(a)(30) limit and provides
that such a participant is permitted to
defer amounts in excess of the section
401(a)(30) limit on elective deferrals up
to the applicable dollar catch-up limit
for the year. For 2025, Participant D had
$151,000 in wages (within the meaning
of section 3121(a)) from Employer H.
For 2026, Participant D elects to defer
$1,250 into Participant D’s account in
Plan Q for each of 24 pay periods.
Employer H has in place practices and
procedures that are designed to prevent
section 414(v)(7) failures and to result in
compliance with the section 414(v)(7)
Roth catch-up requirement at the time
an elective deferral is made, and Plan Q
provides for a deemed Roth catch-up
election as described in paragraph
(c)(3)(i) of this section. Nonetheless,
Employer H discovers that all of
Participant D’s elective deferrals under
Plan Q during 2026 (a total of $30,000)
were pre-tax elective deferrals.
(B) Analysis. Because Participant D
had over $150,000 in wages from
Employer H for 2025, under section
414(v)(7)(A), Participant D’s catch-up
contributions under Plan Q for 2026
(that is, the elective deferrals that
exceed the section 401(a)(30) limit) are
required to be designated Roth
contributions. Thus, $6,000 of
Participant D’s elective deferrals for
2026 (that is, the elective deferrals in
excess of the section 401(a)(30) limit of
$24,000) are required to be designated
Roth contributions. To keep these
contributions in the plan, Employer H
must correct the section 414(v)(7) failure
with respect to $6,000 of Participant D’s
pre-tax elective deferrals for 2026, using
one of the methods set forth under
paragraph (c)(2) of this section, by April
15, 2027 (the deadline under paragraph
(c)(3)(iii)(A) of this section).
(6) Example 6: Designated Roth
contributions that can satisfy the section
414(v)(7) Roth catch-up requirement—
(A) Facts. The facts are the same as in
paragraph (d)(5) of this section
(Example 5), except that the first $5,000
of the $30,000 total elective deferrals
Participant D makes for 2026 are
designated Roth contributions. (Thus,
during each of the first 4 pay periods in
2026, Participant D makes $1,250 of
elective deferrals that are designated
Roth contributions, and then
subsequently makes $25,000 in pre-tax
elective deferrals ratably over the
remaining 20 pay periods.) Participant D
reaches the section 401(a)(30) limit on
elective deferrals during the twentieth
pay period of 2026 and does not make
any designated Roth contributions after
reaching the section 401(a)(30) limit on
elective deferrals in 2026.
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Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Proposed Rules
(B) Analysis. In accordance with
paragraph (b)(1) of this section, the
$5,000 in elective deferrals that are
designated Roth contributions that
Participant D made at the beginning of
2026 can be taken into account for
purposes of satisfying Participant D’s
Roth catch-up requirement under
section 414(v)(7). Thus, the portion of
Participant D’s pre-tax elective deferrals
that are required to be corrected is
$1,000 ($6,000 of elective deferrals that
are in excess of the section 401(a)(30)
limit, minus $5,000 of elective deferrals
that were made as designated Roth
contributions within the taxable year),
and Employer H must correct the
section 414(v)(7) failure with respect to
only $1,000 of Participant D’s pre-tax
elective deferrals. To keep the $1,000 in
the plan, Employer H must correct the
section 414(v)(7) failure using one of the
methods set forth under paragraph (c)(2)
of this section, by April 15, 2027 (the
deadline under paragraph (c)(3)(iii)(A)
of this section).
(e) Applicability dates—(1) Statutory
applicability date. Section 414(v)(7)
applies to contributions in taxable years
beginning after December 31, 2023.
(2) Regulatory applicability dates—(i)
General rule. Except as provided in
paragraphs (e)(2)(ii) and (iii) of this
section, this section applies to
contributions in taxable years beginning
after [DATE SIX MONTHS AFTER
DATE OF PUBLICATION OF FINAL
RULE].
(ii) Collectively bargained plans. In
the case of an applicable employer plan
maintained pursuant to one or more
collective bargaining agreements,
paragraphs (a) through (d) of this section
shall not apply until the first taxable
year described in paragraph (e)(2)(i) of
this section, or, if later, the first taxable
year beginning after the date on which
the last collective bargaining agreement
related to the plan that is in effect on
December 31, 2025, terminates
(determined without regard to any
extension to those agreements).
(iii) Early implementation permitted.
A plan is permitted to apply the rules
of this section to contributions in any
taxable year beginning after December
31, 2023.
Douglas W. O’Donnell,
Deputy Commissioner.
[FR Doc. 2025–00350 Filed 1–10–25; 8:45 am]
BILLING CODE 4830–01–P
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ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 180
[EPA–HQ–OPP–2024–0059; FRL–11682–11–
OCSPP]
Receipt of a Pesticide Petition Filed for
Residues of Pesticide Chemicals in or
on Various Commodities (November
2024)
Environmental Protection
Agency (EPA).
ACTION: Notification of filing of petition
and request for comment.
AGENCY:
This document announces the
Agency’s receipt of an initial filing of a
pesticide petition requesting the
establishment or modification of
regulations for residues of pesticide
chemicals in or on various commodities.
DATES: Comments must be received on
or before February 12, 2025.
ADDRESSES: Submit your comments,
identified by docket identification (ID)
number EPA–HQ–OPP–2024–0059,
through the Federal eRulemaking Portal
at https://www.regulations.gov. Follow
the online instructions for submitting
comments. Do not submit electronically
any information you consider to be
Confidential Business Information (CBI)
or other information whose disclosure is
restricted by statute. Additional
instructions on commenting and visiting
the docket, along with more information
about dockets generally, is available at
https://www.epa.gov/dockets.
FOR FURTHER INFORMATION CONTACT:
Anita Pease, Antimicrobials Division
(AD) (7510P), main telephone number:
(202) 566–0736; email address:
ADFRNotices@epa.gov or Charles
Smith, Registration Division (RD)
(7505T), main telephone number: (202)
566–1030, email address:
RDFRNotices@epa.gov. The mailing
address for each contact person is Office
of Pesticide Programs, Environmental
Protection Agency, 1200 Pennsylvania
Ave. NW, Washington, DC 20460–0001.
As part of the mailing address, include
the contact person’s name, division, and
mail code.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. General Information
A. Does this action apply to me?
You may be potentially affected by
this action if you are an agricultural
producer, food manufacturer, or
pesticide manufacturer. The following
list of North American Industrial
Classification System (NAICS) codes is
not intended to be exhaustive, but rather
provides a guide to help readers
PO 00000
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2661
determine whether this document
applies to them. Potentially affected
entities may include:
• Crop production (NAICS code 111).
• Animal production (NAICS code
112).
• Food manufacturing (NAICS code
311).
• Pesticide manufacturing (NAICS
code 32532).
B. What should I consider as I prepare
my comments for EPA?
1. Submitting CBI. Do not submit this
information to EPA through
regulations.gov or email. Clearly mark
the part or all of the information that
you claim to be CBI. For CBI
information in a disk or CD–ROM that
you mail to EPA, mark the outside of the
disk or CD–ROM as CBI and then
identify electronically within the disk or
CD–ROM the specific information that
is claimed as CBI. In addition to one
complete version of the comment that
includes information claimed as CBI, a
copy of the comment that does not
contain the information claimed as CBI
must be submitted for inclusion in the
public docket. Information so marked
will not be disclosed except in
accordance with procedures set forth in
40 CFR part 2.
2. Tips for preparing your comments.
When preparing and submitting your
comments, see the commenting tips at
https://www.epa.gov/dockets/
comments.html.
3. Environmental justice. EPA seeks to
achieve environmental justice, the fair
treatment and meaningful involvement
of any group, including minority and/or
low-income populations, in the
development, implementation, and
enforcement of environmental laws,
regulations, and policies. To help
address potential environmental justice
issues, the Agency seeks information on
any groups or segments of the
population who, as a result of their
location, cultural practices, or other
factors, may have atypical or
disproportionately high and adverse
human health impacts or environmental
effects from exposure to the pesticides
discussed in this document, compared
to the general population.
II. What action is the Agency taking?
EPA is announcing receipt of a
pesticide petition filed under section
408 of the Federal Food, Drug, and
Cosmetic Act (FFDCA), 21 U.S.C. 346a,
requesting the establishment or
modification of regulations in 40 CFR
part 180 for residues of pesticide
chemicals in or on various food
commodities. The Agency is taking
public comment on the request before
E:\FR\FM\13JAP1.SGM
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Agencies
[Federal Register Volume 90, Number 7 (Monday, January 13, 2025)]
[Proposed Rules]
[Pages 2645-2661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00350]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-101268-24]
RIN 1545-BR11
Catch-Up Contributions
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
-----------------------------------------------------------------------
SUMMARY: This document sets forth proposed regulations that would
provide guidance for retirement plans that permit participants who have
attained age 50 to make additional elective deferrals that are catch-up
contributions. The proposed regulations reflect statutory changes made
by the SECURE 2.0 Act of 2022, including the requirement that catch-up
contributions made by certain catch-up eligible participants must be
designated Roth contributions. The proposed regulations would affect
participants in, beneficiaries of, employers maintaining, and
administrators of certain retirement plans. This document also provides
notice of a public hearing.
DATES: Written or electronic comments must be received by March 14,
2025. A public hearing on this proposed regulation has been scheduled
for April 7, 2025, at 10 a.m. ET. Requests to speak and outlines of
topics to be discussed at the public hearing must be received by March
14, 2025. If no outlines are received by March 14, 2025, the public
hearing will be cancelled. Requests to attend the public hearing must
be received by 5 p.m. on April 3, 2025.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically via the Federal eRulemaking Portal at
www.regulations.gov (indicate IRS and REG-101268-24) by following the
online instructions for submitting comments. Requests for a public
hearing must be submitted as prescribed in the ``Comments and Public
Hearing'' section. Once submitted to the Federal eRulemaking Portal,
comments cannot be edited or withdrawn. The Department of the Treasury
(Treasury Department) and the IRS will publish for public availability
any comment submitted electronically or on paper to its public docket
on www.regulations.gov. Send paper submissions to: CC:PA:01:PR (REG-
101268-24), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
call Jessica S. Weinberger at (202) 317-6349 or Jason E. Levine at
(202) 317-4117; concerning submission of comments, the hearing, and the
access code to attend the hearing by telephone, call the Publications
and Regulations Section at (202) 317-6901 (not toll-free numbers) or
email [email protected] (preferred).
SUPPLEMENTARY INFORMATION:
Authority
This notice of proposed rulemaking sets forth proposed amendments
to the Income Tax Regulations (26 CFR part 1) under sections 401(k),
403(b), and 414(v) of the Internal Revenue Code (Code) relating to
catch-up contributions. These proposed regulations are issued by the
Secretary of the Treasury or the Secretary's delegate (Secretary) under
the express delegations of authority in sections 401(m)(9),
414(v)(7)(D), and 7805(a) of the Code.
Section 401(m)(9) provides, in part, that ``[t]he Secretary shall
prescribe such regulations as may be necessary to carry out the
purposes of this subsection and subsection (k).'' Section 414(v)(7)(D)
provides a specific delegation of authority with respect to the
requirements of section 414(v)(7)(A), stating, ``[t]he Secretary may
provide by regulations that an eligible participant may elect to change
the participant's election to make additional elective deferrals if the
participant's compensation is determined to exceed the limitation under
subparagraph (A) after the election is made.'' Section 7805(a) provides
that ``the Secretary shall prescribe all needful rules and regulations
for the enforcement of [the Code], including all rules and regulations
as may be necessary by reason of any alteration of law in relation to
internal revenue.''
Background
This notice of proposed rulemaking sets forth proposed amendments
to the Income Tax Regulations under section 414(v) of the Code. Section
414(v) permits a plan to allow catch-up eligible participants to make
additional elective deferrals that are catch-up contributions and sets
forth requirements relating to those contributions. These proposed
regulations would amend the regulations under section 414(v) to reflect
changes to the catch-up contribution requirements for certain catch-up
eligible participants pursuant
[[Page 2646]]
to sections 109, 117, and 603 of Division T of the Consolidated
Appropriations Act, 2023, Public Law 117-328, 136 Stat. 4459 (2022),
known as the SECURE 2.0 Act of 2022 (SECURE 2.0 Act).
This document also proposes conforming amendments to the
regulations under sections 401(k) and 403(b) of the Code that reflect
section 603 of the SECURE 2.0 Act.
I. Statutory and Regulatory Framework
Section 414(v)(1) of the Code provides that an applicable employer
plan will not be treated as failing to meet any requirement of the Code
solely because it permits an eligible participant to make additional
elective deferrals (as defined in section 414(v)(6)(B)) in any plan
year. ``Applicable employer plan'' is defined in section 414(v)(6)(A)
to mean a qualified plan under section 401(a) (qualified plan), a plan
under which amounts are contributed by an individual's employer for an
annuity contract described in section 403(b) (section 403(b) plan), an
eligible deferred compensation plan under section 457 of an eligible
employer described in section 457(e)(1)(A) (eligible governmental
457(b) plan),\1\ an arrangement meeting the requirements of section
408(k) (SEP arrangement), or an arrangement meeting the requirements of
section 408(p) (SIMPLE IRA plan). Under section 414(v)(5), an eligible
participant is a participant who is generally eligible to make elective
deferrals under an applicable employer plan and who would attain age 50
by the end of the taxable year, with respect to whom no further
elective deferrals may (without regard to section 414(v)) be made to
the plan for the plan year (or other applicable year) by reason of a
limitation or restriction listed in section 414(v)(3) or a comparable
limitation or restriction included in the terms of the plan.
---------------------------------------------------------------------------
\1\ Section 414(v)(6)(C) provides that section 414(v) does not
apply to a participant in an eligible governmental 457(b) plan for
any year for which a higher limitation applies to the participant
under section 457(b)(3).
---------------------------------------------------------------------------
Under section 414(v)(2)(A), the amount of additional elective
deferrals that a plan may permit a participant to make pursuant to
section 414(v)(1) for a taxable year is limited to the lesser of: (1)
the applicable dollar amount under section 414(v)(2)(B) (referred to as
the applicable dollar catch-up limit), and (2) the excess (if any) of
the participant's compensation (as defined in section 415(c)(3)) for
the year over any other elective deferrals of the participant for such
year that are made without regard to section 414(v). Section
414(v)(2)(B)(i) provides the applicable dollar catch-up limit for an
applicable employer plan other than a plan described in section
401(k)(11) (SIMPLE 401(k) plan) or a SIMPLE IRA plan. Section
414(v)(2)(B)(ii) provides the applicable dollar catch-up limit for a
SIMPLE 401(k) plan or a SIMPLE IRA plan (collectively referred to as
SIMPLE plans). Section 414(v)(2)(C) provides that the applicable dollar
catch-up limits under section 414(v)(2)(B)(i) and (ii) are subject to
annual adjustment based on changes in the cost of living. Section
414(v)(2)(D) provides that, for purposes of section 414(v)(2), all
applicable employer plans, other than eligible governmental 457(b)
plans, that are maintained by the same employer (as determined under
section 414(b), (c), (m), or (o)) are treated as a single plan, and all
eligible governmental 457(b) plans that are maintained by the same
employer are treated as a single plan.
Under section 414(v)(3)(A)(i), a catch-up contribution is not, with
respect to the year in which the contribution is made, subject to
certain otherwise applicable limitations, including those contained in
section 401(a)(30) (limiting a participant's elective deferrals during
a calendar year to the amount permitted under section 402(g)), section
403(b) (including the requirement under section 403(b)(1)(E) that a
contract purchased under a salary reduction agreement must meet the
requirements of section 401(a)(30)), and section 457(b)(2) (limiting a
participant's elective deferrals for a taxable year, determined without
regard to any increase to the limitation under section 457(b)(3), to
the applicable dollar amount in section 457(e)(15)). Under section
414(v)(3)(B), catch-up contributions are excluded from consideration
for purposes of certain nondiscrimination tests.
Section 414(v)(4) provides that an applicable employer plan is
treated as failing to meet the nondiscrimination requirements under
section 401(a)(4) with respect to benefits, rights, and features unless
the plan allows all catch-up eligible participants to make the same
election with respect to catch-up contributions. For purposes of
section 414(v)(4), all plans maintained by employers who are treated as
a single employer under section 414(b), (c), (m), or (o) are treated as
one plan (with the exception of a plan described in section
410(b)(6)(C)(i) for the duration of the transition period described in
section 410(b)(6)(C)(ii) with respect to that plan).
Section 414(v) was added to the Code by section 631 of the Economic
Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16,
115 Stat. 38, and the Treasury Department and the IRS issued
comprehensive regulations under section 414(v) in 2003 (TD 9072, 68 FR
40510). Subsequently, provisions relating to catch-up contributions
under section 414(v) were incorporated into regulations under sections
401(k), 403(b), and 457(b).
II. SECURE 2.0 Act Changes to Section 414(v)
A. Section 109 of the SECURE 2.0 Act
For a taxable year beginning after December 31, 2024, section 109
of the SECURE 2.0 Act amends section 414(v)(2) of the Code to increase
the applicable dollar catch-up limit under section 414(v)(2)(B)(i) and
(ii) in the case of a catch-up eligible participant who attains age 60,
61, 62, or 63 during the taxable year. For such a participant in an
applicable employer plan other than a SIMPLE plan, the increased
applicable dollar catch-up limit is 150 percent of the otherwise
applicable dollar catch-up limit under section 414(v)(2)(B)(i) in
effect for 2024. For such a participant in a SIMPLE plan, the increased
applicable dollar catch-up limit is 150 percent of the otherwise
applicable dollar catch-up limit under section 414(v)(2)(B)(ii) in
effect for 2025. In either case, for a year beginning after December
31, 2025, the increased applicable dollar catch-up limit is subject to
adjustment to reflect changes in the cost of living, in accordance with
the last sentence of section 414(v)(2)(C).
B. Section 117 of the SECURE 2.0 Act
A SIMPLE plan is an alternative plan design under which employees
of an eligible employer as defined in section 408(p)(2)(C)(i) (that is,
generally, an employer that had no more than 100 employees who received
at least $5,000 of compensation from the employer for the preceding
calendar year) are permitted to elect to have salary reduction
contributions (or elective contributions, in the case of a SIMPLE
401(k) plan) made on their behalf.\2\ Among other things, section 117
of the SECURE 2.0 Act amends section 414(v)(2) of the Code to increase
the applicable dollar catch-up limit under section 414(v)(2)(B)(ii) for
SIMPLE plans sponsored by certain eligible employers who are described
in section 408(p)(2)(E)(iv).\3\ The increased
[[Page 2647]]
applicable dollar catch-up limit is available automatically to a SIMPLE
plan sponsored by an eligible employer described in section
408(p)(2)(E)(iv) that had no more than 25 employees who received at
least $5,000 of compensation from the employer for the preceding
calendar year. Other eligible employers described in section
408(p)(2)(E)(iv) may make an election for the increased applicable
dollar catch-up limit to apply and, if the election is made, the
employer must make additional matching or nonelective contributions.
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\2\ The annual limit on salary reduction contributions or
elective contributions is lower for SIMPLE plans than for other
types of plans. However, SIMPLE plans are not subject to
nondiscrimination testing, and the employer must make certain
contributions.
\3\ An eligible employer is described in section
408(p)(2)(E)(iv) if, during the three-taxable-year period preceding
the first year that the employer maintained the SIMPLE plan, the
employer (including any member of the employer's controlled group or
any predecessor of the employer or member of its controlled group)
has not established or maintained a qualified plan, a section 403(a)
annuity plan, or a section 403(b) plan under which contributions
were made or benefits were accrued for substantially the same
employees as are eligible to participate in the SIMPLE plan. See Q&A
E-1 in Notice 2024-2, 2024-2 IRB 316.
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The increased applicable dollar catch-up limit, which applies to
taxable years beginning after December 31, 2023, is 110 percent of the
otherwise applicable dollar catch-up limit under section
414(v)(2)(B)(ii) for calendar year 2024. For a year beginning after
December 31, 2024, the increased applicable dollar catch-up limit is
subject to adjustment to reflect changes in the cost of living, in
accordance with section 414(v)(2)(C)(ii).
C. Section 603 of the SECURE 2.0 Act
Section 603(a) of the SECURE 2.0 Act amends section 414(v) of the
Code to add section 414(v)(7). Section 414(v)(7)(A) sets forth the
requirement that catch-up contributions made by certain catch-up
eligible participants must be designated Roth contributions (the Roth
catch-up requirement). Specifically, under section 414(v)(7)(A), in the
case of a catch-up eligible participant whose wages as defined in
section 3121(a) (that is, wages for purposes of the Federal Insurance
Contributions Act (FICA), codified at subtitle C, chapter 21 of the
Code, or FICA wages) for the preceding calendar year from the employer
sponsoring the plan exceeded $145,000, section 414(v)(1) applies only
if any catch-up contributions made by the participant are designated
Roth contributions (as defined in section 402A(c)(1)).
Section 414(v)(7)(B) provides that, in the case of an applicable
employer plan with respect to which section 414(v)(7)(A) applies to any
participant for a plan year, section 414(v)(1) does not apply to the
plan unless the plan provides that any catch-up eligible participant
may make catch-up contributions as designated Roth contributions.
Section 414(v)(7)(C) provides that section 414(v)(7)(A) does not
apply to SEP arrangements or SIMPLE IRA plans. Under section
414(v)(7)(D), regulations may provide that a catch-up eligible
participant may elect to change the participant's election to make
catch-up contributions if the participant's compensation is determined
to exceed the wage limitation under section 414(v)(7)(A) (Roth catch-up
wage threshold) after the election is made. Under section 414(v)(7)(E),
for taxable years beginning after December 31, 2024, the Roth catch-up
wage threshold is adjusted for changes in the cost of living.
Section 603(b) of the SECURE 2.0 Act includes conforming amendments
with respect to section 603(a). Section 603(b)(1) of the SECURE 2.0 Act
strikes section 402(g)(1)(C) of the Code. Prior to its elimination,
section 402(g)(1)(C) provided that a catch-up eligible participant's
gross income did not include elective deferrals in excess of the
applicable dollar amount under section 402(g)(1)(B) to the extent that
the amount of those elective deferrals did not exceed the applicable
dollar catch-up limit under section 414(v)(2)(B)(i) for the taxable
year (without regard to the treatment of the elective deferrals by an
applicable employer plan under section 414(v)).
Section 603(b)(2) of the SECURE 2.0 Act amends section
457(e)(18)(A)(ii) of the Code and, pursuant to this amendment, a
portion of the catch-up contributions made to an eligible governmental
457(b) plan in accordance with section 457(b)(3) and (e)(18) by a
catch-up eligible individual for the last three taxable years ending
before the individual attains normal retirement age must be designated
Roth contributions. The portion that is subject to this Roth
requirement is the amount by which the applicable dollar catch-up limit
under section 414(v)(2)(B)(i) exceeds the maximum permitted
contribution set forth in section 457(b)(3) (determined without regard
to section 457(e)(18)).
Under section 603(c) of the SECURE 2.0 Act, the amendments made by
section 603 of the SECURE 2.0 Act apply to taxable years beginning
after December 31, 2023.
III. Notice 2023-62
In August 2023, the Treasury Department and the IRS issued Notice
2023-62, 2023-37 IRB 817. Notice 2023-62 clarifies that, despite the
elimination of section 402(g)(1)(C) of the Code under section 603(b)(1)
of the SECURE 2.0 Act, applicable employer plans may, for taxable years
beginning after December 31, 2023, continue to permit catch-up eligible
participants to make elective deferrals that exceed the applicable
dollar amount under section 402(g)(1)(B) of the Code (or deferrals that
exceed the applicable dollar amount under section 457(e)(15)) if those
contributions in excess of the applicable dollar amount satisfy the
requirements for catch-up contributions under section 414(v). In
addition, pursuant to Notice 2023-62, the first two taxable years
beginning after December 31, 2023, are regarded as an administrative
transition period with respect to the Roth catch-up requirement. During
the administrative transition period, catch-up contributions made by a
participant who is subject to the Roth catch-up requirement will be
treated as satisfying the requirements of section 414(v)(7)(A), even if
the contributions are not designated Roth contributions.
Notice 2023-62 also summarizes anticipated guidance from the
Treasury Department and the IRS with respect to the implementation of
section 603 of the SECURE 2.0 Act as follows: (1) the Roth catch-up
requirement would not apply in the case of a catch-up eligible
participant who did not have FICA wages for the preceding calendar year
from the employer sponsoring the plan; (2) in the case of a catch-up
eligible participant who is subject to the Roth catch-up requirement, a
plan administrator and an employer would be permitted to treat an
election by the participant to make catch-up contributions on a pre-tax
basis as an election by the participant to make catch-up contributions
that are designated Roth contributions; and (3) a catch-up eligible
participant's FICA wages for the preceding calendar year from one
participating employer in an applicable employer plan that is
maintained by more than one employer (including a multiemployer plan)
would not be aggregated with the participant's FICA wages for the
preceding calendar year from another participating employer in the plan
for purposes of determining whether the participant's FICA wages for
that year exceeded the Roth catch-up wage threshold. The notice
requested comments with respect to the anticipated guidance summarized
in the notice, additional matters under consideration relating to a
plan without a qualified Roth contribution program, and, more
generally, the provisions of section 603 of the SECURE 2.0 Act.
[[Page 2648]]
Explanation of Provisions
I. Amendments to Regulations Under Sections 401(k) and 403(b)--Deemed
Roth Catch-Up Election
Section 414(v)(7)(A) of the Code provides that in the case of a
participant who is subject to the Roth catch-up requirement, section
414(v)(1) applies only if any catch-up contributions made by the
participant are designated Roth contributions made pursuant to the
participant's election. Notice 2023-62 requested comments on
anticipated future guidance expected to permit plan administrators and
employers to treat an election by a participant to make catch-up
contributions on a pre-tax basis as an election to make catch-up
contributions as designated Roth contributions if the participant is
subject to the Roth catch-up requirement. All comments received were in
favor of this approach.
Accordingly, proposed Sec. 1.401(k)-1(f)(5)(iii) would permit a
plan to provide, for taxable years beginning after December 31, 2023,
that a participant who is subject to the Roth catch-up requirement is
deemed to have irrevocably designated any catch-up contributions as
designated Roth contributions in accordance with the requirements of
Sec. 1.401(k)-1(f)(1)(i). Under the proposed regulation, a plan that
provides for such a deemed Roth catch-up election would be required, as
is the case for any other designated Roth contribution, to: (1) treat
catch-up contributions subject to the deemed Roth catch-up election as
not excludible from the participant's gross income, and (2) maintain
the catch-up contributions in a designated Roth account. A plan would
be permitted to provide for a deemed Roth catch-up election without
regard to whether it requires separate elections for elective deferrals
that are not catch-up contributions and for additional elective
deferrals that are catch-up contributions or uses a spillover
design.\4\ However, in accordance with section 414(v)(7)(D), the
application of a deemed Roth catch-up election to a participant would
be conditioned, under proposed Sec. 1.401(k)-1(f)(5)(iv), on the
participant having an effective opportunity (determined based on all of
the relevant facts and circumstances, in accordance with Sec.
1.401(k)-1(e)(2)(ii)) to make a new election that is different than the
deemed election. For example, under the proposed regulation, a plan
would need to permit a participant subject to a deemed Roth catch-up
election to elect to cease making additional elective deferrals.
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\4\ Under a spillover design, a participant who would attain age
50 by the end of the taxable year makes one election with respect to
elective deferrals for a plan year and, after the participant's
elective deferrals reach a Code or plan limitation on elective
deferrals that are not catch-up contributions, additional elective
deferrals automatically begin counting toward the applicable dollar
catch-up limit under section 414(v)(2).
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The proposed amendments to Sec. 1.403(b)-3(c)(1) would incorporate
proposed Sec. 1.401(k)-1(f)(5)(iii) and (iv), so that a section 403(b)
plan would be permitted to include a deemed Roth catch-up election,
subject to the requirement to provide a participant subject to a deemed
catch-up election with the effective opportunity to make a different
election. This amendment would be part of a broader incorporation of
all of Sec. 1.401(k)-1(f)(3) and (5) into the rules relating to
designated Roth contributions under section 403(b) plans; the
incorporation of Sec. 1.401(k)-1(f)(3), (f)(5)(i), and (f)(5)(ii) is
not a substantive legal change, as these provisions were previously
applicable with respect to section 403(b) plans.\5\
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\5\ This Notice of Proposed Rulemaking (NPRM) does not propose
to incorporate proposed Sec. 1.401(k)-1(f)(5)(iii) and (iv) into
the regulations relating to eligible governmental 457(b) plans
because those regulations do not currently provide for the inclusion
of a qualified Roth contribution program in an eligible governmental
457(b) plan. On June 22, 2016, proposed regulations relating to the
inclusion of a qualified Roth contribution program in an eligible
governmental 457(b) plan were published in the Federal Register (81
FR 40548) and those proposed regulations have not been finalized.
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II. Proposed Revisions to Sec. 1.414(v)-1
A. Overview
The proposed revisions and additions to Sec. 1.414(v)-1 would
mainly reflect changes made by sections 109 and 117 of the SECURE 2.0
Act. In particular, the revisions to Sec. 1.414(v)-1 would: (1)
reflect the increased applicable dollar catch-up limits permitted under
sections 109 and 117 of the SECURE 2.0 Act (along with updated cost-of-
living adjustments), and (2) clarify the application of the universal
availability requirement under Code section 414(v)(4) to an applicable
employer plan that permits certain catch-up eligible participants to
make catch-up contributions in an amount equal to the increased
applicable dollar catch-up limit for participants attaining age 60
through 63. In addition, a provision would be added to the general
rules under Sec. 1.414(v)-1(a) indicating that the rules relating to
the Roth catch-up requirement under section 414(v)(7) can be found in
proposed Sec. 1.414(v)-2.
B. Increased Applicable Dollar Catch-Up Limit During the Year of
Attainment of Age 60 Through 63 Under Section 109 of the SECURE 2.0 Act
Current Sec. 1.414(v)-1(c)(2)(i) sets forth the applicable dollar
catch-up limit that applies to all catch-up eligible participants in an
applicable employer plan that is not a SIMPLE plan. The proposed
regulations would retain that rule (other than the provisions
applicable to taxable years beginning in calendar years before 2006)
and would note the existence of a higher limit for individuals
attaining age 60 through 63 set forth in proposed Sec. 1.414(v)-
1(c)(2)(i)(B). Specifically, proposed Sec. 1.414(v)-1(c)(2)(i)(B) sets
forth the increased applicable dollar catch-up limit that would apply
for a taxable year beginning after 2024 with respect to a catch-up
eligible participant in an applicable employer plan other than a SIMPLE
plan who would attain age 60, 61, 62, or 63 on the participant's
birthday occurring during the taxable year. The increased applicable
dollar catch-up limit under proposed Sec. 1.414(v)-1(c)(2)(i)(B) is
150 percent of the applicable dollar catch-up limit that applies during
a taxable year beginning in 2024 (that is, $11,250, which is 150
percent of $7,500), adjusted for changes in the cost of living.
Similarly, current Sec. 1.414(v)-1(c)(2)(ii) sets forth the
applicable dollar catch-up limit that applies to all catch-up eligible
participants in a SIMPLE plan. The proposed regulations would retain
those provisions (other than the provisions applicable to taxable years
beginning in calendar years before 2006) and would note the existence
of a higher limit for individuals attaining age 60 through 63 set forth
in proposed Sec. 1.414(v)-1(c)(2)(ii)(B) (and a higher limit for
participants in certain SIMPLE plans set forth in proposed Sec.
1.414(v)-1(c)(2)(ii)(C)). Specifically, proposed Sec. 1.414(v)-
1(c)(2)(ii)(B) sets forth the increased applicable dollar catch-up
limit that would apply for a taxable year beginning after 2024, with
respect to a catch-up eligible participant in a SIMPLE plan who would
attain age 60, 61, 62, or 63 on the participant's birthday occurring
during the taxable year. The increased applicable dollar catch-up limit
under proposed Sec. 1.414(v)-1(c)(2)(ii)(B) is 150 percent of the
applicable dollar catch-up limit that applies during a taxable year
beginning in 2025 (that is, $5,250, which is 150 percent of $3,500),
adjusted for changes in the cost of living.
Current Sec. 1.414(v)-1(c)(2)(iii) provides for cost-of-living
adjustments to the applicable dollar catch-up limits that
[[Page 2649]]
apply under current Sec. 1.414(v)-1(c)(2)(i) and (ii). The proposed
regulations would retain that provision and would also set forth the
cost-of-living adjustments to the increased applicable dollar catch-up
limits for individuals attaining age 60 through 63.
C. Increased Applicable Dollar Catch-Up Limit for Certain SIMPLE Plans
Under Section 117 of the SECURE 2.0 Act
In accordance with section 117 of the SECURE 2.0 Act, proposed
Sec. 1.414(v)-1(c)(2)(ii)(C) would set forth an increased applicable
dollar catch-up limit that would apply for a taxable year beginning in
2024 under a SIMPLE plan that is sponsored by an eligible employer
described in Code section 408(p)(2)(E)(iv) and for which the increased
applicable dollar catch-up limit under section 414(v)(2)(B)(iii)
applies automatically or by election. The increased applicable dollar
catch-up limit is 110 percent of the applicable dollar catch-up limit
that applies during a taxable year beginning in 2024 (that is, $3,850,
which is 110 percent of $3,500), adjusted for changes in the cost of
living. For taxable years beginning after 2024, proposed Sec.
1.414(v)-1(c)(2)(iii)(C) would set forth the cost-of-living adjustments
to this increased applicable dollar catch-up limit.
D. Different Applicable Dollar Catch-Up Limits and Universal
Availability
In accordance with the universal availability requirement in
section 414(v)(4), existing Sec. 1.414(v)-1(e)(1)(i) sets forth a
general rule that an applicable employer plan that offers catch-up
contributions and that is otherwise subject to section 401(a)(4)
(including a plan that is subject to section 401(a)(4) pursuant to
section 403(b)(12)) will not satisfy the requirements of section
401(a)(4) unless all catch-up eligible participants who participate
under any applicable employer plan maintained by the employer are
provided with an effective opportunity to make the same dollar amount
of catch-up contributions.
The Treasury Department and the IRS do not believe that a plan
should fail to satisfy the universal availability requirement merely
because the plan utilizes the increased limit for catch-up eligible
participants attaining age 60 through 63 that is permitted under the
Code pursuant to section 414(v)(2)(E). Thus, a new provision would be
added to Sec. 1.414(v)-1(e)(1) setting forth an exception to the
general rule in Sec. 1.414(v)-1(e)(1)(i) for a plan that permits each
catch-up eligible participant to make elective deferrals up to the
statutory maximum dollar amount of catch-up contributions permitted
with respect to the participant. Under this new exception, an
applicable employer plan would not fail to satisfy the requirements of
section 401(a)(4) merely because the plan allows catch-up eligible
participants who are subject to the increased applicable dollar catch-
up limit for participants attaining age 60 through 63 under section
414(v)(2)(E) to make catch-up contributions up to that increased limit,
while permitting other catch-up eligible participants to make catch-up
contributions only up to the applicable dollar catch-up limit that
applies generally under section 414(v)(2)(B)(i) or (ii), as
applicable.\6\
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\6\ The higher applicable dollar catch-up limit for participants
attaining age 60 through 63 may, but is not required to be, included
in an applicable employer plan. Thus, an applicable employer plan
may also be designed to limit the catch-up contributions for those
participants to the same applicable dollar catch-up limit that
applies for all other catch-up eligible participants.
---------------------------------------------------------------------------
Similarly, an applicable employer plan that covers employees in
both the United States and Puerto Rico would not fail to satisfy the
requirements of section 401(a)(4) merely because the plan allows catch-
up eligible participants whose catch-up contributions are subject to
the limit set forth in section 1081.01(d)(7) of the Puerto Rico
Internal Revenue Code of 2011 (13 L.P.R.A. section 30391(d)(7)), as
amended (Puerto Rico Code), to make catch-up contributions only up to
the amount of that limit.\7\ The Treasury Department and the IRS
request comments on the application of the limits in the case of an
employee who performs service for an employer both in Puerto Rico and
the United States in the same year.
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\7\ For taxable years beginning in 2024, the limit on catch-up
contributions that can be made by a participant who is eligible to
make catch-up contributions under the Puerto Rico Code is $1,500.
---------------------------------------------------------------------------
III. Proposed Sec. 1.414(v)-2
A. General Rules Relating to the Requirements of Section 414(v)(7)
1. Roth Catch-Up Requirement Under Section 414(v)(7)(A)
Proposed Sec. 1.414(v)-2(a) would set forth general rules relating
to the Roth catch-up requirement under section 414(v)(7)(A). Under
proposed Sec. 1.414(v)-2(a)(2), if a catch-up eligible participant in
an applicable employer plan had FICA wages for the preceding calendar
year from the employer sponsoring the plan (as defined in proposed
Sec. 1.414(v)-2(b)(3)) that exceeded $145,000, then section 414(v)(1)
would apply with respect to the participant's elective deferrals that
are catch-up contributions only if they are designated Roth
contributions (as defined in section 402A(c)(1)). Under proposed Sec.
1.414(v)-2(a)(3), the $145,000 Roth catch-up wage threshold would be
subject to cost-of-living adjustments, in accordance with section
414(v)(7)(E).\8\ Under proposed Sec. 1.414(v)-2(a)(4), the Roth catch-
up requirement would not apply to a participant in a SEP arrangement or
a SIMPLE IRA plan, in accordance with section 414(v)(7)(C).
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\8\ The Roth catch-up wage threshold of $145,000 would be
applied to a catch-up eligible participant's 2023 FICA wages to
determine whether the Roth catch-up requirement applies to the
participant's catch-up contributions made for 2024. In accordance
with Notice 2024-80, 2024-47 IRB 1120, the Roth catch-up wage
threshold that would be applied to a catch-up eligible participant's
2024 FICA wages to determine whether the Roth catch-up requirement
applies to the participant's catch-up contributions made for 2025
remains $145,000.
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Consistent with section 414(v)(7)(A) and the description of
anticipated guidance in Notice 2023-62, proposed Sec. 1.414(v)-2(a)(2)
would provide that a participant who did not have FICA wages exceeding
$145,000 (as adjusted) from the employer sponsoring the plan for the
preceding calendar year would not be subject to the Roth catch-up
requirement under the plan for the current year. Proposed Sec.
1.414(v)-2(a)(2) would define FICA wages by reference to the FICA taxes
imposed by sections 3101(a) and 3111(a), not sections 3101(b) and
3111(b), and notes that the wages are taken into account for this
purpose in the same year that they are taken into account for FICA tax
purposes. Accordingly, an individual who did not have any FICA wages
from the employer sponsoring the plan for the preceding calendar year
(for example, a partner who had only self-employment income; an
individual who had wages under section 3231(e) that are subject to
taxation under the Railroad Retirement Tax Act, codified at title 45,
chapter 9 of the United States Code, rather than FICA; or a State or
local government employee whose services were excluded from the
definition of employment under section 3121(b)(7) without regard to
section 3121(u)) would not be subject to the Roth catch-up requirement
under the plan in the current year. Similarly, an individual who
received cash compensation from the employer sponsoring the plan in the
preceding calendar year but nevertheless did not have any FICA wages
from the employer for that year (for example, because the compensation
was taxed in an earlier year pursuant to section 3121(v)(2)) would not
be subject to the Roth catch-up requirement under the plan in the
current year.
[[Page 2650]]
Further, proposed Sec. 1.414(v)-2 would not require that the Roth
catch-up wage threshold be prorated for the first year of hire. Thus, a
participant who worked for the employer sponsoring the plan for only
part of the preceding calendar year would be subject to the Roth catch-
up requirement in the current year only if the participant had wages
exceeding the full Roth catch-up wage threshold from the employer for
the preceding calendar year.
2. Availability of Roth Catch-Up Contributions Under Section
414(v)(7)(B)
Section 414(v)(7)(B) provides that, in the case of an applicable
employer plan with respect to which section 414(v)(7)(A) applies to any
participant for a plan year, section 414(v)(1) shall not apply to the
plan unless the plan provides that any catch-up eligible participant
may make catch-up contributions as designated Roth contributions. In
accordance with section 414(v)(7)(B), proposed Sec. 1.414(v)-
2(a)(5)(i) would provide that if any catch-up eligible participant who
is subject to the Roth catch-up requirement is permitted to make catch-
up contributions as designated Roth contributions under an applicable
employer plan for a plan year, then the plan would be required to allow
all other catch-up eligible participants to also make catch-up
contributions as designated Roth contributions for the plan year.\9\
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\9\ By contrast, if none of the participants who are subject to
the Roth catch-up requirement are permitted to make catch-up
contributions under a plan for a plan year (for example, if a plan
does not include a qualified Roth contribution program), then
section 414(v)(7)(A) would not be considered to apply to any catch-
up eligible participant in the plan for the plan year (and the
requirement of section 414(v)(7)(B) would not apply to the plan).
This interpretation of section 414(v)(7)(B) is consistent with the
Joint Committee on Taxation general explanation of the provision.
See JCS-1-23 (December 2023).
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Proposed Sec. 1.414(v)-2(a)(5)(ii) sets forth a rule that would
address the application of section 414(v)(7)(B) to a plan that is
subject to the qualification requirements of both section 401(a) and
section 1081.01 of the Puerto Rico Code (dual-qualified plan).\10\ If a
dual-qualified plan that covers both employees in the United States and
employees in Puerto Rico permits any catch-up eligible participant who
is subject to the Roth catch-up requirement to make catch-up
contributions as designated Roth contributions for a plan year, then,
in accordance with section 414(v)(7)(B), the plan is generally required
to permit all catch-up eligible participants to make catch-up
contributions as designated Roth contributions for the plan year. The
Puerto Rico Code does not provide for designated Roth contributions,
but it does allow plans to offer the opportunity to make after-tax
contributions. Accordingly, in the case of a dual-qualified plan that
permits Roth catch-up contributions for participants in the United
States, proposed Sec. 1.414(v)-2(a)(5)(ii) would treat the
requirements of section 414(v)(7)(B) as satisfied with respect to a
catch-up eligible participant who is subject to section 1081.01 of the
Puerto Rico Code if the plan permits the participant to make catch-up
contributions as after-tax contributions within the meaning of section
1081.01(a)(15) of the Puerto Rico Code.
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\10\ For purposes of this NPRM, a dual-qualified plan includes a
plan for which an election under section 1022(i)(2) of the Employee
Retirement Income Security Act of 1974 (Pub. L. 93-406, 88 Stat.
829), as amended (ERISA), has been made.
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B. Rules of Operation for Implementing the Roth Catch-Up Requirement
1. Designated Roth Contributions That Are Treated as Catch-Up
Contributions for Purposes of the Roth Catch-Up Requirement
The Treasury Department and the IRS received comments in response
to Notice 2023-62 requesting clarification that designated Roth
contributions made at any point within a year may be counted towards
satisfaction of the Roth catch-up requirement, even if the designated
Roth contributions are made earlier than the contributions that are
determined to be catch-up contributions (that is, before the
participant is considered to have reached an applicable limit on
elective deferrals for the year).
In general, under existing Sec. 1.414(v)-1(b)(2)(i)(A) and (c)(3),
the amount of a participant's elective deferrals in excess of an
applicable limit is determined as of the end of a plan year (or
limitation year, in the case of the section 415(c) limit) by comparing
the participant's total elective deferrals for the plan year (or total
annual additions for the limitation year) with the applicable limit for
the plan year (or limitation year). However, under Sec. 1.414(v)-
1(c)(3), in the case of an applicable limit that is applied on the
basis of a year other than the plan year or limitation year (for
example, the calendar-year limit on elective deferrals under section
401(a)(30)), the determination of whether elective deferrals are
treated as catch-up contributions is made at the time they are
deferred. Thus, if the timing rule in Sec. 1.414(v)-1(c)(3) that
applies for purposes of determining whether an elective deferral is a
catch-up contribution also applies for purposes of determining whether
a designated Roth contribution is a catch-up contribution that
satisfies the Roth catch-up requirement, then, in the case of elective
deferrals that are catch-up contributions because they exceed a
calendar-year limit (such as the section 401(a)(30) limit), only
elective deferrals that are made after reaching that limit would be
taken into account in satisfying the Roth catch-up requirement.
Commenters suggested that limiting the designated Roth
contributions that may be taken into account in satisfying the Roth
catch-up requirement in this manner is not an appropriate approach. For
example, a commenter noted that if this approach is used, then a catch-
up eligible participant who would like to make elective deferrals for a
calendar year in an amount equal to the sum of the section 401(a)(30)
limit on elective deferrals and the applicable dollar catch-up limit
would be required to make the elective deferrals as designated Roth
contributions during the latter part of the year (or after the section
401(a)(30) limit is reached). This would be required even if the
participant would prefer to have designated Roth contributions made
throughout the year or even if the participant had already frontloaded
the designated Roth contributions by making elective deferrals in an
amount equal to the applicable dollar catch-up limit as designated Roth
contributions during the earlier part of the year.
To address commenters' concerns, provide maximum flexibility for
participants, and alleviate administrative burdens, proposed Sec.
1.414(v)-2(b)(1) would take into account designated Roth contributions
that are made prior to an applicable limit being reached for purposes
of determining whether the Roth catch-up requirement is satisfied.
Under proposed Sec. 1.414(v)-2(b)(1), an elective deferral that is
determined to be a catch-up contribution at the time of contribution
under the timing rules in Sec. 1.414(v)-1(c)(3) (for example, on
account of exceeding the section 401(a)(30) limit) would be required to
be made as a designated Roth contribution by a participant who is
subject to the Roth catch-up requirement only to the extent the
participant has not previously made elective deferrals as designated
Roth contributions during the calendar year or taxable year equal to
the applicable dollar catch-up limit. Thus, if a catch-up eligible
participant's total elective deferrals that are designated Roth
contributions over the course of a
[[Page 2651]]
calendar year or taxable year equal or exceed the total elective
deferrals that are determined to be catch-up contributions, then the
participant would satisfy the Roth catch-up requirement.\11\
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\11\ This is also the case with respect to elective deferrals
that are determined to be catch-up contributions because the plan
would fail the actual deferral percentage (ADP) test under section
401(k)(3) if it did not correct under section 401(k)(8). The
determination of elective deferrals that are catch-up contributions
because they are in excess of this ADP limit in Sec. 1.414(v)-
1(b)(1)(iii) occurs in the plan year following the plan year for
which the elective deferrals are made.
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2. Plans That Do Not Include a Qualified Roth Contribution Program
In accordance with section 402A(a), an applicable employer plan
may, but is not required to, include a qualified Roth contribution
program within the meaning of section 402A(b). However, in the case of
a catch-up eligible participant who is subject to the Roth catch-up
requirement, section 414(v)(1) applies only if any catch-up
contributions made by the participant are designated Roth
contributions. Therefore, if an applicable employer plan does not
include a qualified Roth contribution program, then a participant who
is subject to the Roth catch-up requirement would be prohibited from
making catch-up contributions under the plan.
The proposed regulations would not require an applicable employer
plan to include a qualified Roth contribution program. Thus, under the
proposed regulations, an applicable employer plan that does not have a
qualified Roth contribution program would be allowed to permit catch-up
eligible participants who are not subject to the Roth catch-up
requirement to make catch-up contributions even though catch-up
eligible participants who are subject to the Roth catch-up requirement
would not be permitted to make catch-up contributions.
However, the universal availability requirement under existing
Sec. 1.414(v)-1(e) provides that an applicable employer plan will be
treated as failing to meet the nondiscrimination requirements under
section 401(a)(4) with respect to benefits, rights, and features unless
all catch-up eligible participants under the plan are provided with an
effective opportunity to make the same dollar amount of catch-up
contributions. Proposed Sec. 1.414(v)-1(e)(1)(iii) would add a rule
providing that an applicable employer plan would not violate the
universal availability requirement merely because the plan permits each
catch-up eligible participant to make elective deferrals up to the
maximum dollar amount of catch-up contributions permitted under
applicable law with respect to that participant. If a plan does not
include a qualified Roth contribution program, then the maximum dollar
amount of catch-up contributions permitted based on applicable law with
respect to a catch-up eligible participant in the plan who is subject
to the Roth catch-up requirement is $0. Proposed Sec. 1.414(v)-2(b)(2)
would address this situation by providing that an applicable employer
plan that does not include a qualified Roth contribution program does
not fail to satisfy the universal availability requirement merely
because the plan (or another applicable employer plan maintained by the
employer that does not include a qualified Roth contribution program)
does not permit catch-up eligible participants who are subject to the
Roth catch-up requirement to make catch-up contributions.
Generally, under Sec. 1.414(v)-1(d)(4), an applicable employer
plan does not violate Sec. 1.401(a)(4)-4 merely because the group of
employees for whom catch-up contributions are currently available is
not a group of employees that would satisfy the minimum coverage
requirements of section 410(b). Under the proposed regulations, Sec.
1.414(v)-1(d)(4) would not apply to an applicable employer plan that
does not include a qualified Roth contribution program and permits only
catch-up eligible participants who are not subject to the Roth catch-up
requirement to make catch-up contributions. The reason the proposed
regulations would provide that Sec. 1.414(v)-1(d)(4) does not apply to
such a plan is that not all catch-up eligible employees under the plan
will be able to make catch-up contributions.
Because the Roth catch-up wage threshold is slightly lower than the
wage threshold used in the definition of highly compensated employee
(HCE) under section 414(q)(1)(B), some non-HCEs may be subject to the
Roth catch-up requirement.\12\ Thus, if a plan that does not include a
qualified Roth contribution program prohibits catch-up eligible
participants who are subject to the Roth catch-up requirement from
making catch-up contributions, while permitting other catch-up eligible
participants to make catch-up contributions, then the outcome of the
nondiscrimination test with respect to the availability of catch-up
contributions performed under Sec. 1.401(a)(4)-4 may be affected.
Accordingly, proposed Sec. 1.414(v)-2(b)(2) would permit such a plan
to also preclude one or more catch-up eligible participants who are
HCEs and who are not subject to the Roth catch-up requirement (for
example, because they did not receive FICA wages for the preceding
year) from making catch-up contributions if doing so facilitates
satisfaction of Sec. 1.401(a)(4)-4 with respect to the availability of
catch-up contributions.
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\12\ This is particularly true if an employer makes the top-paid
group election under section 414(q)(1)(B)(ii).
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3. Determination of Employer Sponsoring the Plan
The determination as to whether the Roth catch-up requirement
applies to a catch-up eligible participant is based on the amount of
the participant's FICA wages for the preceding year ``from the employer
sponsoring the plan,'' but that phrase is not defined in section
414(v)(7). For purposes of determining an individual's FICA wages, the
term ``employer'' generally means the person for whom the individual
performs service as an employee under the common law standards that
apply under Sec. 31.3121(d)-1(c). Thus, for purposes of determining
the individual's FICA wages, the term ``employer'' generally refers
solely to an individual's common law employer.\13\ Because the phrase
``from the employer sponsoring the plan'' modifies the reference to
FICA wages in section 414(v)(7)(A), the determination of whether the
Roth catch-up requirement applies to a participant would generally
follow the FICA rules and be based on the FICA wages from the
participant's common law employer.
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\13\ In general, FICA wages are determined separately by related
employers. See Sec. 31.3121(a)(1)-(a)(3) (``If during a calendar
year the employee receives remuneration from more than one employer,
the annual wage limitation does not apply to the aggregate
remuneration received from all of such employers, but instead
applies to the remuneration received during such calendar year from
each employer.''). See also Sec. 31.3121(s)-1(a) (``For purposes of
section . . . 3121(a)(1), except as otherwise provided . . . , when
two or more related corporations concurrently employ the same
individual and compensate that individual . . . , each of the
corporations is considered to have paid only the remuneration it
actually disburses to that individual.'').
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Thus, proposed Sec. 1.414(v)-2(b)(3) would provide that, with
respect to each catch-up eligible participant who is subject to the
Roth catch-up requirement, the term ``employer sponsoring the plan''
only refers to the participant's common law employer contributing to
the plan.\14\ Under the
[[Page 2652]]
proposed regulation, the ``employer sponsoring the plan'' would not
include other entities that are treated as a single employer with a
catch-up eligible participant's common law employer under section
414(b), (c), (m), or (o). For example, if there are multiple employers
participating in a plan that are treated as a single employer under the
controlled group rules, each of the participating employers that is a
common law employer would be a separate employer sponsoring the plan.
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\14\ This rule applies even if responsibilities under chapter 21
of the Code are imposed on a third party, such as a section 3401(d)
statutory employer, a section 3504 agent, a section 3121(s) common
paymaster, a section 3511 certified PEO, or a section 3512 motion
picture project employer.
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Similarly, in the context of catch-up contributions made to a
multiple employer plan or multiemployer plan by a catch-up eligible
participant subject to the Roth catch-up requirement, the ``employer
sponsoring the plan'' means the participant's common law employer that
is the source of the participant's FICA wages and contributions to the
plan. Some commenters have suggested that the Roth catch-up requirement
does not apply to a multiemployer plan because section 3(16)(B) of
ERISA defines the ``plan sponsor'' of a multiemployer plan as the joint
board of trustees rather than the contributing employers. Under the
interpretation of section 414(v)(7)(A) suggested by the commenters, the
employer that is the source of the employee's FICA wages would be a
signatory of the collective bargaining agreement pursuant to which the
employer's employees participate in the multiemployer plan and a
contributor to that plan, but would not be the ``employer sponsoring
the plan'' for purposes of section 414(v)(7)(A).\15\ The Treasury
Department and the IRS do not agree that this is a reasonable
interpretation of section 414(v)(7)(A) because ERISA is a separate
statute from the Code and does not include any provisions that directly
apply, or are even parallel, to the Code's catch-up contribution rules.
Rather, in the context of the Roth catch-up requirement, the ``employer
sponsoring the plan'' is the common law employer that is the source of
the participant's FICA wages and contributions to the multiemployer
plan.
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\15\ This would not be the case with respect to an employee of
the joint board of trustees who participates in the plan. In that
case, the joint board of trustees would be both the ``sponsor''
within the meaning of section 3(16)(B) of ERISA and the common law
employer.
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The Treasury Department and the IRS understand from comments
received that multiemployer plans and other plans maintained pursuant
to a collective bargaining agreement would benefit from an extended
applicability date for the Roth catch-up requirement so that the terms
of any applicable collective bargaining agreement can be conformed to
that requirement. In response to these comments, proposed Sec.
1.414(v)-2(e)(2)(ii) would provide that proposed Sec. 1.414(v)-2 does
not apply to a plan maintained pursuant to one or more collective
bargaining agreements until the first taxable year beginning more than
6 months after the date that final regulations adding Sec. 1.414(v)-2
to the Code of Federal Regulations are issued, or, if later, the first
taxable year beginning after the date on which the last collective
bargaining agreement related to the plan that is in effect on December
31, 2025, terminates (determined without regard to any extension of
those collective bargaining agreements).
4. Plans With More Than One Employer Sponsoring the Plan
Consistent with the treatment of the term ``employer sponsoring the
plan'' as referring to a catch-up eligible participant's common law
employer without aggregation with other employers under section 414(b),
(c), (m), or (o), proposed Sec. 1.414(v)-2(b)(4) would apply the Roth
catch-up requirement on the basis of FICA wages (if any) for the
preceding calendar year solely from a participant's common law employer
without aggregating those wages with the FICA wages from other
employers, including employers that participate in the same plan or
employers that are treated as a single employer together with the
common law employer under section 414(b), (c), (m), or (o). Thus, a
catch-up eligible participant who had FICA wages exceeding $145,000 (as
adjusted) in the preceding calendar year from any employer other than
the employer sponsoring the plan (as defined with respect to the
participant in accordance with proposed Sec. 1.414(v)-2(b)(3)) would
not be subject to the Roth catch-up requirement under the plan in the
current year if the participant did not also have more than $145,000
(as adjusted) of FICA wages for the preceding year from the employer
sponsoring the plan. This is consistent with the description of
anticipated guidance that was included in Notice 2023-62.
C. Treatment of Pre-Tax Catch-Up Contributions That Are Required To Be
Designated Roth Contributions Under Section 414(v)(7)
1. Correcting a Violation of the Section 414(v)(7) Roth Catch-Up
Requirement
Section 414(v)(7)(A) provides that section 414(v)(1) applies to
catch-up contributions made by a participant who is subject to the Roth
catch-up requirement only if the catch-up contributions are designated
Roth contributions. If a participant who is subject to the Roth catch-
up requirement makes a pre-tax elective deferral in excess of an
applicable limit, then section 414(v)(1) will not apply to that
elective deferral and the plan will fail to be qualified unless the
plan corrects the failure. A plan is permitted to correct this type of
error by distributing the additional elective deferrals that are not
catch-up contributions under section 414(v)(1) from the plan in
accordance with a permitted correction method specific to the limit on
elective deferrals that the additional elective deferrals exceeded (for
example, the correction method in Sec. 1.402(g)-1(e) for elective
deferrals that exceeded the section 401(a)(30) limit, the correction
method in section 6.06(1) and (2) of Revenue Procedure 2021-30, 2021-31
IRB 172, for elective deferrals that resulted in the participant's
annual additions exceeding the section 415(c) limit, or the correction
method in Sec. 1.401(k)-2(b)(2) or Appendix B, section 2.01, of
Revenue Procedure 2021-30 for elective deferrals that exceeded the ADP
limit).
In response to Notice 2023-62, the Treasury Department and the IRS
received several comments requesting guidance that would permit a pre-
tax elective deferral that exceeds an applicable limit to be treated as
a designated Roth contribution in order to satisfy the Roth catch-up
requirement (as an alternative to distribution of these elective
deferrals from the plan). Commenters requested this guidance with
respect to elective deferrals that were intended to be catch-up
contributions at the time amounts were contributed (because the
contributions exceeded plan or statutory limits) but which were not
made as Roth contributions because of an error. Commenters also raised
specific concerns relating to elective deferrals that are catch-up
contributions because they exceed the ADP limit. This concern arises
because the determination of whether an elective deferral exceeds the
ADP limit (and, therefore, could be a catch-up contribution) cannot be
made until after the close of the plan year (that is, after the
elective deferral is made).
The Treasury Department and the IRS agree that a correction
procedure by which a plan can correct a section 414(v)(7) failure (that
is, a failure to satisfy the Roth catch-up requirement), other than
through distribution from the plan of elective deferrals in excess of
an
[[Page 2653]]
applicable limit which fail to comply with section 414(v)(7)(A), is
warranted. Thus, proposed Sec. 1.414(v)-2(c) would set forth
additional permissible methods and related rules for correcting a pre-
tax elective deferral that exceeds an applicable limit in order to
comply with the Roth catch-up requirement, which are discussed in the
next section of this Explanation of Provisions.\16\
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\16\ Commenters also suggested that a plan be permitted to avoid
having to correct section 414(v)(7) failures by requiring that all
catch-up contributions be made as designated Roth contributions. The
Treasury Department and the IRS have considered that suggestion and
concluded that, for a participant who is not subject to the Roth
catch-up requirement, allowing a plan design that requires all
participants' catch-up contributions to be designated Roth
contributions would be inconsistent with the language of section
402A(b)(1), which provides that a designated Roth contribution must
be elected by an employee ``in lieu of all or a portion of elective
deferrals the employee is otherwise eligible to make.''
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2. Additional Permissible Correction Methods for Elective Deferrals
That Exceed an Applicable Limit
Proposed Sec. 1.414(v)-2(c)(2) sets forth two new methods that a
plan would be permitted to use to correct a failure of the Roth catch-
up requirement as it applies to elective deferrals that exceed an
applicable limit. Under proposed Sec. 1.414(v)-2(c)(2)(i), a plan
would be permitted to provide for either correction method but, with
respect to a plan year, the plan would be required to apply the same
correction method for all participants with elective deferrals in
excess of the same applicable limit.
a. Form W-2 Correction Method
Under the correction method set forth in proposed Sec. 1.414(v)-
2(c)(2)(ii), a plan would be permitted to correct a participant's pre-
tax catch-up contribution that was required to be a designated Roth
contribution by transferring the elective deferral (adjusted for
allocable gain or loss) from the participant's pre-tax account to the
participant's designated Roth account and reporting the contribution
(not adjusted for allocable gain or loss) as a designated Roth
contribution on the participant's Form W-2 (Wage and Tax Statement) for
the year of the deferral (that is, reporting the contribution as if it
had been correctly made as a designated Roth contribution). Under this
correction method, the contribution (not adjusted for allocable gain or
loss) would be includible in the participant's gross income for the
year of the deferral as if the contribution had been correctly made as
a designated Roth contribution. However, this method would not be
permitted to be used if the participant's Form W-2 for that year has
already been filed or furnished to the participant.\17\
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\17\ This method would generally not be available with respect
to an elective deferral that is a catch-up contribution because it
exceeds the ADP limit under a plan with a calendar year plan year.
This is because a participant's Form W-2 for a year is generally
filed and furnished to the participant prior to determination of any
catch-up contributions made by the participant because the elective
deferrals exceed the ADP limit for such a plan year.
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b. In-Plan Roth Rollover Correction Method
Under proposed Sec. 1.414(v)-2(c)(2)(iii), a plan would be
permitted to correct a participant's pre-tax catch-up contribution that
was required to be a designated Roth contribution through an in-plan
Roth rollover in accordance with section 402A(c)(4)(E). Under this
method, a plan would directly roll over the elective deferral (adjusted
for allocable gain or loss) from the participant's pre-tax account to
the participant's designated Roth account and report the amount of the
in-plan Roth rollover on Form 1099-R (Distributions From Pensions,
Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance
Contracts, etc.) for the year of rollover. The provisions of Notice
2010-84, 2010-51 IRB 872, and Notice 2013-74, 2013-52 IRB 819, would
generally apply to an in-plan Roth rollover used to correct a section
414(v)(7) failure. Thus, the amount directly rolled over to the
participant's designated Roth account would be the same as the amount
reported on Form 1099-R, and the contribution (adjusted for allocable
gain or loss) would be includible in the participant's gross income for
the year of the rollover.
3. General Correction Requirements and Deadlines To Correct
a. Prerequisite To Correct Certain Section 414(v)(7) Failures Under the
New Correction Methods
Under proposed Sec. 1.414(v)-2(c)(3)(i), a plan would be eligible
to use a new correction method with respect to pre-tax elective
deferrals that exceed a statutory limit described in Sec. 1.414(v)-
1(b)(1)(i) (such as contributions that exceed the section 401(a)(30)
limit or that result in the participant's annual additions exceeding
the section 415(c) limit) only if the plan sponsor or plan
administrator has in place practices and procedures designed to result
in compliance with section 414(v)(7) at the time an elective deferral
is made.\18\ A plan would not meet this requirement unless the plan
provides for a deemed Roth catch-up election in accordance with
proposed Sec. 1.401(k)-1(f)(5)(iii) and (iv). Under the deemed Roth
catch-up election approach, if a participant who is subject to the Roth
catch-up requirement has made pre-tax elective deferrals for a calendar
year that equal the section 401(a)(30) limit for the taxable year that
begins in the calendar year, then subsequent elective deferrals made by
the participant in the calendar year would automatically be made as
designated Roth contributions, even if the participant has not made an
affirmative election to make catch-up contributions as designated Roth
contributions. Similarly, if such a participant has made pre-tax
elective deferrals for a limitation year that result in the
participant's annual additions for the limitation year exceeding the
section 415(c) limit, then subsequent elective deferrals made by the
participant in the limitation year would automatically be made as
designated Roth contributions.
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\18\ A plan would not be required under proposed Sec. 1.414(v)-
2(c)(3)(i) to have such practices and procedures in place in order
to correct a pre-tax catch-up contribution that is a catch-up
contribution because it exceeds an employer-provided limit as
described in Sec. 1.414(v)-1(b)(1)(ii). A plan would also not be
required to have such practices and procedures in place in order to
correct a pre-tax elective deferral that is a catch-up contribution
because it exceeds the ADP limit as described in Sec. 1.414(v)-
1(b)(1)(iii). This is because these elective deferrals are not
determined to be catch-up contributions under Sec. 1.414(v)-1(c)(3)
until the last day of the plan year of deferral or in the following
plan year.
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If a plan does not provide for a deemed Roth catch-up election and
the plan accepts a pre-tax elective deferral that would be a catch-up
contribution on account of exceeding a statutory limit described in
Sec. 1.414(v)-1(b)(1)(i) and the elective deferral is required to be a
designated Roth contribution in accordance with the Roth catch-up
requirement, then the plan would not be eligible to use a correction
method described in Sec. 1.414(v)-2(c)(2) and, therefore, would have
to use an otherwise-applicable correction method to distribute the
elective deferral (for example, the correction method in Sec.
1.402(g)-1(e) relating to an elective deferral that exceeds the section
401(a)(30) limit).\19\
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\19\ In the case of a plan that does not provide for a deemed
Roth catch-up election, if the plan provides that it will not accept
an elective deferral that exceeds an applicable limit on elective
deferrals unless the elective deferral is a catch-up contribution,
then the plan may be designed to automatically stop elective
deferrals for a catch-up eligible participant who is subject to the
Roth catch-up requirement after the participant's elective deferrals
reach an applicable limit (unless the participant has designated the
additional elective deferrals as Roth contributions).
---------------------------------------------------------------------------
A plan would not fail to meet the requirement to have in place
practices and procedures that are designed to result in compliance with
the Roth
[[Page 2654]]
catch-up requirement at the time an elective deferral is made merely
because the plan determines the applicability of the Roth catch-up
requirement to a participant solely on the basis of the participant's
FICA wages from the employer sponsoring the plan for the preceding
calendar year as reported on a timely-filed Form W-2 with respect to
the participant. However, if the amount of a participant's FICA wages
for the preceding calendar year that is timely reported on a Form W-2
is later determined to be incorrect, a plan would have to correct any
pre-tax catch-up contributions that should have been designated Roth
contributions on the basis of the adjusted FICA wages for the preceding
calendar year.\20\
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\20\ The Treasury Department and the IRS invite comments on
whether there are scenarios in which it would not be appropriate to
require correction of pre-tax catch-up contributions that are
required to be designated Roth contributions on the basis of a
subsequent determination that the amount of FICA wages reported on
the Form W-2 was incorrect.
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b. Deadline To Correct Section 414(v)(7) Failures
Proposed Sec. 1.414(v)-2(c)(3)(iii) provides the deadlines that
would apply for correction of a pre-tax catch-up contribution under the
new correction methods for a section 414(v)(7) failure. Under the
proposed regulation, the deadline to correct a section 414(v)(7)
failure would depend on which limit is the basis for the pre-tax
elective deferral being designated a catch-up contribution.\21\
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\21\ If the applicable deadline for a new correction method
under the proposed regulations is not satisfied, then a section
414(v)(7) failure would need to be corrected by a distribution from
the plan in accordance with the correction principles set forth in
section 6 of Revenue Procedure 2021-30.
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If the elective deferral is a catch-up contribution because it
exceeds the section 401(a)(30) limit on elective deferrals, then Sec.
1.414(v)-2(c)(3)(iii)(A) would provide that the deadline to complete
the corrective steps under proposed Sec. 1.414(v)-2(c)(2) is April 15
of the calendar year following the calendar year for which the elective
deferral was made. This is consistent with the deadline that applies
for correcting excess deferrals above the section 401(a)(30) limit by
distribution under Sec. 1.402(g)-1(e).
If the elective deferral is a catch-up contribution because it
results in the participant's annual additions for a limitation year
exceeding the section 415(c) limit, then Sec. 1.414(v)-2(c)(3)(iii)(B)
would provide that the deadline to complete the corrective steps under
proposed Sec. 1.414(v)-2(c)(2) is the deadline that applies under
Sec. 1.415(c)-1(b)(6) for allocating amounts to the limitation year
for which the elective deferral was made.
Under proposed Sec. 1.414(v)-2(c)(3)(iii)(C), the deadline to
correct a pre-tax catch-up contribution that exceeds the ADP limit
under the new correction methods would be the date that is 2\1/2\
months (6 months, in the case of plans that include an eligible
automatic contribution arrangement within the meaning of section
414(w)) after the close of the plan year for which the excess
contribution was made. This is consistent with the deadline under Sec.
1.401(k)-2(b)(5) for distributing excess contributions above the ADP
limit in order to avoid a 10 percent excise tax on the excess
contributions. Under the proposed regulations, this would also be the
deadline to correct a pre-tax catch-up contribution that is a catch-up
contribution because it exceeds an employer-provided limit (because the
determination of catch-up contributions, which are disregarded for
purposes of the ADP test, needs to be made before the performance of
the ADP test).
Proposed Applicability Date
The amendments to Sec. 1.414(v)-1 are proposed to apply with
respect to contributions in taxable years that begin more than 6 months
after the date that final regulations amending Sec. 1.414(v)-1 are
issued. However, the proposed regulations would permit a taxpayer to
elect to apply: (1) proposed Sec. 1.414(v)-1(c)(2)(ii)(C) and
(c)(2)(iii)(C) (relating to the higher catch-up limit for certain
newly-established SIMPLE plans) with respect to taxable years beginning
after December 31, 2023, and (2) proposed Sec. 1.414(v)-1(c)(2)(i)(B),
(c)(2)(ii)(B), and (c)(2)(iii)(B) (relating to the higher catch-up
limit applicable during the taxable year of attainment of age 60
through 63) with respect to taxable years beginning after December 31,
2024.
For a plan that is not maintained pursuant to a collective
bargaining agreement, proposed Sec. 1.414(v)-2 and the proposed
amendments to Sec. Sec. 1.401(k)-1 and 1.403(b)-3 are proposed to
apply with respect to contributions in taxable years beginning more
than 6 months after the date that final regulations adding Sec.
1.414(v)-2 to the Code of Federal Regulations are issued. For a plan
that is maintained pursuant to one or more collective bargaining
agreements, proposed Sec. 1.414(v)-2 and the proposed amendments to
Sec. Sec. 1.401(k)-1 and 1.403(b)-3 are proposed to apply with respect
to contributions in taxable years beginning after the later of the
first taxable year described in the preceding sentence, or the first
taxable year that begins after the date on which the last collective
bargaining agreement related to the plan that is in effect on December
31, 2025, terminates (determined without regard to any extension of
those agreements). However, under the proposed regulations, a plan
would be permitted to apply Sec. 1.414(v)-2 and the amendments to
Sec. Sec. 1.401(k)-1 and 1.403(b)-3 with respect to contributions in
taxable years beginning after December 31, 2023.
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of Agreement, Review of Treasury
Regulations under Executive Order 12866 (June 9, 2023), tax regulatory
actions issued by the IRS are not subject to the requirements of
section 6 of Executive Order 12866, as amended. Therefore, a regulatory
impact assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) requires
that a Federal agency obtain the approval of the Office of Management
and Budget (OMB) before collecting information from the public, whether
such collection of information is mandatory, voluntary, or required to
obtain or retain a benefit. A Federal agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless the collection of information displays a valid
control number.
These proposed regulations contain reporting requirements,
contained in Sec. 1.414(v)-2(c), that relate to corrections of pre-tax
elective deferrals that are catch-up contributions subject to the
requirement under section 414(v)(7)(A) of the Code to be designated
Roth contributions. These collections of information generally would be
used by the IRS for tax compliance purposes and may involve submission
of a Form 1099-R to the IRS. This form and its associated burden are
approved by the OMB under 1545-0119. The proposed regulation is not
changing the reporting procedures already established for this form.
The proposed regulations also contain a recordkeeping requirement
that plan administrators maintain written practices and procedures
designed to result in real-time compliance with certain requirements of
section 414(v)(7)(A). These recordkeeping requirements are expected to
be usual and customary business practices that would impose no
additional burden on respondents. Therefore, the recordkeeping
requirement would not
[[Page 2655]]
require OMB approval under 5 CFR 1320.3(b)(2).
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that these proposed regulations will not have a
significant economic impact on a substantial number of small entities.
These proposed regulations would affect individuals and businesses,
some of which may be small entities.
Even if a substantial number of small entities would be affected,
the economic impact of these proposed regulations is not expected to be
significant. As discussed in the Paperwork Reduction Act section of
this preamble, these proposed regulations may involve reporting and
ordinary recordkeeping but are not expected to result in an increase in
estimated burden. Any additional recordkeeping or administrative costs
resulting from the changes relating to catch-up contributions that
apply to certain section 401(k) plans, 403(b) plans, and eligible
governmental 457(b) plans sponsored by small entities are consistent
with existing procedures and are not expected to be significant.
Therefore, a regulatory flexibility analysis under the Regulatory
Flexibility Act is not required.
The Treasury Department and the IRS invite comments on the impacts
these proposed regulations may have on small entities. Pursuant to
section 7805(f) of the Code, these proposed regulations will be
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small businesses.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits and take certain
other actions before issuing a final rule that includes any Federal
mandate that may result in expenditures in any one year by a State,
local, or Tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. The proposed regulations do not propose any rule that would
include any Federal mandate that may result in expenditures by State,
local, or Tribal governments, or by the private sector, in excess of
that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule either
imposes substantial, direct compliance costs on State and local
governments, and is not required by statute, or preempts State law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive order. The proposed regulations do not
propose rules that would have federalism implications, impose
substantial direct compliance costs on State and local governments, or
preempt State law within the meaning of the Executive order.
Comments and Public Hearing
Before these proposed regulations and proposed amendments to the
regulations are adopted as final regulations, consideration will be
given to comments regarding the notice of proposed rulemaking that are
submitted timely to the IRS as prescribed in the preamble under the
ADDRESSES section. The Treasury Department and the IRS request comments
on all aspects of the proposed regulations. All comments will be made
available at www.regulations.gov. Once submitted to the Federal
eRulemaking Portal, comments cannot be edited or withdrawn.
A public hearing has been scheduled for April 7, 2025, beginning at
10 a.m. EST in the Auditorium of the Internal Revenue Building, 1111
Constitution Avenue NW, Washington, DC. Due to building security
procedures, visitors must enter at the Constitution Avenue entrance. In
addition, all visitors must present photo identification to enter the
building. Because of access restrictions, visitors will not be admitted
beyond the immediate entrance area more than 30 minutes before the
hearing starts. Participants may alternatively attend the public
hearing by telephone.
The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who
wish to present oral comments must submit an outline of the topics to
be addressed and the time to be devoted to each topic by March 14, 2025
as prescribed in the preamble under the DATES section. A period of 10
minutes will be allocated to each person for making comments. An agenda
showing the scheduling of the speakers will be prepared after the
deadline for receiving outlines has passed. Copies of the agenda will
be available free of charge at the hearing. If no outline of the topics
to be discussed at the hearing is received by March 14, 2025, the
public hearing will be cancelled. If the public hearing is cancelled, a
notice of cancellation of the public hearing will be published in the
Federal Register.
Individuals who want to testify in person at the public hearing
must send an email to [email protected] to have your name added to
the building access list. The subject line of the email must contain
the regulation number REG-101268-24 and the language TESTIFY In Person.
For example, the subject line may say: Request to TESTIFY In Person at
Hearing for REG-101268-24.
Individuals who want to testify by telephone at the public hearing
must send an email to [email protected] to receive the telephone
number and access code for the hearing. The subject line of the email
must contain the regulation number REG-101268-24 and the language
TESTIFY Telephonically. For example, the subject line may say: Request
to TESTIFY Telephonically at Hearing for REG-101268-24.
Individuals who want to attend the public hearing in person without
testifying must also send an email to [email protected] to have
your name added to the building access list. The subject line of the
email must contain the regulation number REG-101268-24 and the language
ATTEND In Person. For example, the subject line may say: Request to
ATTEND Hearing In Person for REG-101268-24. Requests to attend the
public hearing must be received by 5 p.m. EST on April 3, 2025.
Individuals who want to attend the public hearing by telephone
without testifying must also send an email to [email protected] to
receive the telephone number and access code for the hearing. The
subject line of the email must contain the regulation number REG-
101268-24 and the language ATTEND Hearing Telephonically. For example,
the subject line may say: Request to ATTEND Hearing Telephonically for
REG-101268-24. Requests to attend the public hearing must be received
by 5 p.m. EST on April 3, 2025.
Hearings will be made accessible to people with disabilities. To
request special assistance during the hearing, please contact the
Publications and Regulations Branch of the Office of Associate Chief
Counsel (Procedure and Administration) by sending an email to
[email protected] (preferred) or by telephone at (202) 317-6901
(not a toll-free number) by April 2, 2025.
Statement of Availability of IRS Documents
IRS Revenue Procedures, Revenue Rulings notices, and other guidance
cited in this document are published in the Internal Revenue Bulletin
(or Cumulative Bulletin) and are available from the Superintendent of
Documents, U.S. Government Publishing Office, Washington, DC 20402, or
by visiting the IRS website at https://www.irs.gov.
[[Page 2656]]
Drafting Information
The principal authors of these proposed regulations are Jessica S.
Weinberger and Jason E. Levine, of the Office of the Associate Chief
Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes
(EEE)). However, other personnel from the Treasury Department and the
IRS participated in the development of the proposed regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, the Treasury Department and the IRS propose to amend
26 CFR part 1 as follows:
PART 1-INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by adding
entries, in numerical order, for Sec. Sec. 1.401(k)-1 and 1.414(v)-2
to read in part, as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.401(k)-1 also issued under 26 U.S.C. 401(m)(9).
* * * * *
Section 1.414(v)-2 also issued under 26 U.S.C. 414(v)(7)(D).
* * * * *
0
Par. 2. Section 1.401(k)-1 is amended by adding paragraphs (f)(5)(iii)
and (iv) to read as follows:
Sec. 1.401(k)-1 Certain cash or deferred arrangements.
* * * * *
(f) * * *
(5) * * *
(iii) Deemed Roth catch-up contribution elections. For taxable
years beginning after December 31, 2023, a plan that satisfies the
requirements of paragraph (f)(5)(iv) of this section may provide that
an employee who is subject to the requirement under section 414(v)(7)
to make any catch-up contributions as designated Roth contributions is
deemed to have irrevocably designated any elective deferrals that are
catch-up contributions as designated Roth contributions in accordance
with paragraph (f)(1)(i) of this section. In such a case, the elective
deferrals must be--
(A) Treated by the employer as not excludible from the employee's
gross income, in accordance with paragraph (f)(2) of this section; and
(B) Maintained by the plan in a separate account, in accordance
with paragraph (f)(3) of this section.
(iv) Election for employees subject to section 414(v)(7)(A). A plan
satisfies the requirements of this paragraph (f)(5)(iv) only if it
provides to an employee who is described in paragraph (f)(5)(iii) of
this section an effective opportunity (as determined under paragraph
(e)(2)(ii) of this section) to make a new election that is different
than the deemed election described in paragraph (f)(5)(iii) of this
section.
* * * * *
0
Par. 3. Section 1.403(b)-3 is amended in paragraph (c)(1) by:
0
a. Removing the reference ``Sec. 1.401(k)-1(f)(1) and (2)'' and
adding, in its place, the reference ``Sec. 1.401(k)-1(f)(1), (2), (3),
and (5)'';
0
b. Adding the language ``(or is deemed to be so irrevocably designated
in accordance with Sec. 1.401(k)-1(f)(5)(iii))'' immediately following
the language ``otherwise eligible to make under the plan''; and
0
c. Removing the language ``(within the meaning of Sec. 1.401(k)-
1(f)(2))'' and adding, in its place, the language ``(within the meaning
of Sec. 1.401(k)-1(f)(3))''.
0
Par. 4. Section 1.414(v)-1 is amended by:
0
a. In the last sentence of paragraph (a)(1), removing the language
``this section and Sec. 1.402(g)-2'' and adding, in its place, the
language ``this section, and Sec. Sec. 1.414(v)-2 and 1.402(g)-2'';
0
b. Adding paragraph (a)(4);
0
c. Revising and republishing paragraph (c)(2);
0
d. Adding paragraph (e)(1)(iii); and
0
e. Revising and republishing paragraph (i).
The additions and revisions read as follows:
Sec. 1.414(v)-1 Catch-up contributions.
(a) * * *
(4) Catch-up contributions must be designated Roth contributions
for certain participants. For provisions relating to the requirement
under section 414(v)(7) that catch-up contributions made by certain
catch-up eligible participants must be designated Roth contributions,
see Sec. 1.414(v)-2.
* * * * *
(c) * * *
(2) Applicable dollar catch-up limit--(i) Plans other than SIMPLE
Plans--(A) In general. Except as provided in paragraph (c)(2)(i)(B) of
this section, the applicable dollar catch-up limit that applies under
an applicable employer plan, other than a SIMPLE 401(k) plan described
in section 401(k)(11) or a SIMPLE IRA plan described in section 408(p),
for a taxable year is $5,000, as adjusted for changes in the cost of
living under paragraph (c)(2)(iii)(A) of this section.
(B) Higher limit applicable during the taxable year of attainment
of age 60 through 63. For a taxable year beginning after 2024, with
respect to a catch-up eligible participant who would attain age 60, 61,
62, or 63 during the taxable year, the applicable dollar catch-up limit
for the taxable year under an applicable employer plan described in
paragraph (c)(2)(i)(A) of this section is $11,250 (which is 150 percent
of the applicable dollar catch-up limit described in paragraph
(c)(2)(i)(A) of this section for a taxable year beginning in 2024), as
adjusted for changes in the cost of living under paragraph
(c)(2)(iii)(B) of this section.
(ii) SIMPLE plans--(A) In general. Except as provided in paragraph
(c)(2)(ii)(B) or (C) of this section, the applicable dollar catch-up
limit that applies under a SIMPLE 401(k) plan described in section
401(k)(11) or a SIMPLE IRA plan described in section 408(p) for a
taxable year is $2,500, as adjusted for changes in the cost of living
under paragraph (c)(2)(iii)(A) of this section.
(B) Higher limit applicable during the taxable year of attainment
of age 60 through 63. For a taxable year beginning after 2024, with
respect to a catch-up eligible participant who would attain age 60, 61,
62, or 63 during the taxable year, the applicable dollar catch-up limit
for the taxable year under an applicable employer plan described in
paragraph (c)(2)(ii)(A) of this section is $5,250 (which is 150 percent
of the applicable dollar catch-up limit under paragraph (c)(2)(ii)(A)
of this section for a taxable year beginning in 2025), as adjusted for
changes in the cost of living under paragraph (c)(2)(iii)(B) of this
section.
(C) Higher limit for certain SIMPLE plans. For a taxable year
beginning after 2023, the applicable dollar catch-up limit under an
applicable employer plan described in paragraph (c)(2)(ii)(A) of this
section that is maintained by an eligible employer meeting the
requirements in section 408(p)(2)(E)(iv) is $3,850 (which is 110
percent of the applicable dollar catch-up limit in effect under
paragraph (c)(2)(ii)(A) of this section for a taxable year beginning in
2024), as adjusted for changes in the cost of living under paragraph
(c)(2)(iii)(C) of this section. The preceding sentence applies with
respect to a taxable year only if the taxable year begins in a calendar
year for which the eligible employer is described in section
408(p)(2)(E)(i)(I) or makes the election described in section
408(p)(2)(E)(i)(II).
[[Page 2657]]
(iii) Cost-of-living adjustments--(A) In general. For a taxable
year beginning after 2006, the applicable dollar catch-up limit under
paragraph (c)(2)(i)(A) or (c)(2)(ii)(A) of this section (whichever
applies to the plan) is the initial amount ($5,000 or $2,500,
respectively), increased for changes in the cost of living. The
increase is made at the same time and in the same manner as adjustments
under section 415(d), except that the base period is the calendar
quarter beginning July 1, 2005, and any increase that is not a multiple
of $500 is rounded to the next lower multiple of $500.
(B) Adjustments to higher limit applicable during the taxable year
of attainment of age 60 through 63. For a taxable year beginning after
2025, the applicable dollar catch-up limit under paragraph (c)(2)(i)(B)
or (c)(2)(ii)(B) of this section (whichever applies to the plan) is the
initial amount ($11,250 in the case of paragraph (c)(2)(i)(B) of this
section and $5,250 in the case of paragraph (c)(2)(ii)(B) of this
section), increased for changes in the cost of living. The increase is
made at the same time and in the same manner as adjustments under
section 415(d), except that the base period is the calendar quarter
beginning July 1, 2024, and any increase that is not a multiple of $500
is rounded to the next lower multiple of $500.
(C) Adjustments to higher limit for certain SIMPLE plans. For a
taxable year beginning after 2024, the applicable dollar catch-up limit
under paragraph (c)(2)(ii)(C) of this section is the initial amount
($3,850), increased for changes in the cost of living. The increase is
made at the same time and in the same manner as adjustments under
section 415(d), except that the base period is the calendar quarter
beginning July 1, 2023, and any increase that is not a multiple of $500
is rounded to the next lower multiple of $500.
* * * * *
(e) * * *
(1) * * *
(iii) Plans providing the statutory maximum catch-up contributions.
An applicable employer plan does not fail to satisfy the universal
availability requirement of this paragraph (e) merely because of
differences among catch-up eligible participants as to the dollar
amount of catch-up contributions they are permitted to make, provided
that each catch-up eligible participant who participates under any
applicable employer plan maintained by the employer is provided with an
effective opportunity to make the maximum amount of catch-up
contributions permitted for that participant under section 414(v) or,
if applicable, section 1081.01(d)(7) of the Puerto Rico Internal
Revenue Code of 2011 (13 L.P.R.A. section 30391(d)(7)), as amended. For
example, an applicable employer plan does not fail to satisfy the
universal availability requirement of this paragraph (e) merely because
the plan permits catch-up eligible participants who would attain age
60, 61, 62, or 63 during a taxable year to make catch-up contributions
up to the increased applicable dollar catch-up limit in section
414(v)(2)(E) while only permitting other catch-up eligible participants
to make catch-up contributions up to the applicable dollar catch-up
limit in section 414(v)(2)(B) without regard to section 414(v)(2)(E).
* * * * *
(i) Applicability dates--(1) In general. Except as described in
paragraph (i)(2) of this section or Sec. 1.414(v)-2(e), section 414(v)
applies to contributions in taxable years beginning on or after January
1, 2002. Except as provided in paragraph (i)(2) of this section,
paragraphs (a) through (h) of this section apply to contributions in
taxable years beginning on or after January 1, 2004.
(2) Increases in applicable dollar catch-up limit under section
414(v)(2)--(i) Higher limit during the taxable year of attainment of
age 60 through 63. The amendments to section 414(v)(2) made by section
109 of Division T of the Consolidated Appropriations Act, 2023, Public
Law 117-328, 136 Stat. 4459 (2022), known as the SECURE 2.0 Act of 2022
(SECURE 2.0 Act) to provide for a higher applicable dollar catch-up
limit for individuals who attain age 60, 61, 62, or 63 during the
taxable year apply to contributions in taxable years beginning after
December 31, 2024. Paragraphs (c)(2)(i)(B), (c)(2)(ii)(B), and
(c)(2)(iii)(B) of this section apply to contributions in taxable years
beginning after [DATE SIX MONTHS AFTER DATE OF PUBLICATION OF FINAL
RULE] (or, at the election of the taxpayer, taxable years beginning
after December 31, 2024). Except as provided in paragraph (i)(2)(ii) of
this section, for taxable years beginning on or before December 31,
2024, the applicable dollar catch-up limit is determined under Sec.
1.414(v)-1(c)(2) as it appeared in the April 1, 2024, edition of 26 CFR
part 1.
(ii) Higher limit for certain SIMPLE plans. The amendments to
section 414(v)(2) made by section 117 of the SECURE 2.0 Act to provide
for a higher applicable dollar catch-up limit for certain SIMPLE plans
apply to contributions in taxable years beginning after December 31,
2023. Paragraphs (c)(2)(ii)(C) and (c)(2)(iii)(C) of this section apply
to contributions in taxable years beginning after [DATE SIX MONTHS
AFTER DATE OF PUBLICATION OF FINAL RULE] (or, at the election of the
taxpayer, taxable years beginning after December 31, 2023). For taxable
years beginning on or before December 31, 2023, the applicable dollar
catch-up limit for a SIMPLE 401(k) plan described in section 401(k)(11)
or a SIMPLE IRA plan described in section 408(p) is determined under
Sec. 1.414(v)-1(c)(2)(ii) as it appeared in the April 1, 2024, edition
of 26 CFR part 1.
0
Par. 5. Section 1.414(v)-2 is added to read as follows:
Sec. 1.414(v)-2 Catch-up contributions required to be designated Roth
contributions under section 414(v)(7).
(a) Section 414(v)(7) Roth catch-up contribution requirement--(1)
Organization of this section. Paragraphs (a)(2) through (5) of this
section provide general rules relating to the requirements of section
414(v)(7). Paragraph (b) of this section provides certain rules of
operation for implementing the requirements of section 414(v)(7)
addressed in this paragraph (a). Paragraph (c) of this section provides
rules relating to the treatment of pre-tax catch-up contributions that
were required to be designated Roth contributions under section
414(v)(7). Paragraph (d) of this section provides examples illustrating
the application of the rules of this section. Paragraph (e) of this
section sets forth the statutory and regulatory effective dates
relating to the section 414(v)(7) Roth catch-up requirement.
(2) Roth catch-up contribution requirement in general. For a
taxable year beginning on or after January 1, 2024, if, for the
calendar year preceding the calendar year in which the taxable year
begins, a catch-up eligible participant in an applicable employer plan
had wages (as defined in section 3121(a) for purposes of the taxes
imposed by sections 3101(a) and 3111(a), for the year the wages are
required to be taken into account for purposes of chapter 21 of the
Code) from the employer sponsoring the plan (as determined under
paragraph (b)(3) of this section) that exceeded the applicable Roth
catch-up wage threshold, then Sec. 1.414(v)-1(a)(1) applies only if
that participant's catch-up contributions (as described in Sec.
1.414(v)-1(a)(1)) under the plan are designated Roth contributions (as
defined in section 402A(c)(1)). The Roth catch-up wage threshold that
applies for
[[Page 2658]]
a calendar year is $145,000, as adjusted for changes in the cost of
living under paragraph (a)(3) of this section.
(3) Cost-of-living adjustment. For a calendar year beginning after
December 31, 2024, the applicable Roth catch-up wage threshold in
paragraph (a)(2) of this section is the initial amount ($145,000),
increased for changes in the cost of living. The increase is made at
the same time and in the same manner as adjustments under section
415(d), except that the base period is the calendar quarter beginning
July 1, 2023, and any increase that is not a multiple of $5,000 is
rounded to the next lower multiple of $5,000.
(4) Certain plans not subject to section 414(v)(7). Paragraph
(a)(2) of this section does not apply to a plan described in section
408(k) or (p).
(5) Availability of designated Roth catch-up contributions--(i) In
general. Except as provided in paragraph (a)(5)(ii) of this section,
if, under an applicable employer plan, any catch-up eligible
participant who is subject to the Roth catch-up requirement under
paragraph (a)(2) of this section is permitted to make catch-up
contributions as designated Roth contributions for a plan year, then
all catch-up eligible participants in the plan must be permitted to
make catch-up contributions as designated Roth contributions for the
plan year.
(ii) Special rule for participants subject to the Puerto Rico Code.
In the case of a catch-up eligible participant who is subject to the
Roth catch-up requirement under paragraph (a)(2) of this section and is
subject to section 1081.01 of the Puerto Rico Internal Revenue Code of
2011 (13 L.P.R.A. section 30391), as amended (Puerto Rico Code),
paragraph (a)(5)(i) of this section is treated as satisfied if, under
the applicable employer plan, that participant is permitted to make
catch-up contributions as after-tax contributions within the meaning of
section 1081.01(a)(15) of the Puerto Rico Code.
(b) Rules of operation--(1) Determination of catch-up contributions
subject to section 414(v)(7) Roth requirement. For a participant who is
subject to the Roth catch-up requirement under paragraph (a)(2) of this
section for a plan year, an elective deferral that, in accordance with
Sec. 1.414(v)-1(c)(3), is treated as a catch-up contribution at the
time of deferral (for example, an elective deferral that is a catch-up
contribution because it exceeds the section 401(a)(30) limit on
elective deferrals) is required to be a designated Roth contribution
only to the extent the participant has not previously made elective
deferrals that are designated Roth contributions during the calendar
year or taxable year equal to the applicable dollar catch-up limit
under Sec. 1.414(v)-1(c)(2). Thus, for example, if a participant who
is subject to the Roth catch-up requirement under paragraph (a)(2) of
this section has already made elective deferrals that are designated
Roth contributions during the calendar year that equal or exceed the
applicable dollar catch-up limit at the time the participant's elective
deferrals reach the section 401(a)(30) limit on elective deferrals,
section 414(v)(7) would not require the participant's subsequent
elective deferrals for the calendar year to be designated Roth
contributions even though they are treated as catch-up contributions
under Sec. 1.414(v)-1(c)(3).
(2) Treatment of plans without qualified Roth contribution
programs--(i) In general. For purposes of Sec. 1.414(v)-1(e)(1)(iii),
if an applicable employer plan does not include a qualified Roth
contribution program (within the meaning of section 402A(b)), then, for
a catch-up eligible participant who is subject to the Roth catch-up
requirement under paragraph (a)(2) of this section, the maximum amount
of catch-up contributions permitted under section 414(v) is $0. Such a
plan does not fail to satisfy the universal availability requirement of
Sec. 1.414(v)-1(e) merely because the plan (or another applicable
employer plan maintained by the employer that does not include a
qualified Roth contribution program) does not permit catch-up
contributions for participants who are subject to the Roth catch-up
requirement under paragraph (a)(2) of this section.
(ii) Application of nondiscrimination requirements. If an
applicable employer plan is described in paragraph (b)(2)(i) of this
section, then Sec. 1.414(v)-1(d)(4) does not apply to the plan. As a
result, a plan that has one or more highly compensated employees (as
defined in section 414(q)) who are not subject to the Roth catch-up
requirement under paragraph (a)(2) may need to preclude one or more of
those highly compensated employees from making catch-up contributions
to facilitate satisfaction of Sec. 1.401(a)(4)-4 with respect to the
availability of catch-up contributions. In such a case, the plan is not
treated as failing to satisfy the universal availability requirement of
Sec. 1.414(v)-1(e) merely because of that preclusion.
(3) Determination of employer sponsoring the plan. For purposes of
determining the employer sponsoring the plan with respect to a catch-up
eligible participant, the employer is the participant's common law
employer. Thus, for purposes of this section, the employer sponsoring
the plan does not include other entities that are treated as a single
employer with a catch-up eligible participant's common law employer
under section 414(b), (c), (m), or (o).
(4) Plans with more than one employer sponsoring the plan. If an
applicable employer plan has more than one employer sponsoring the plan
(that is, the plan is sponsored by multiple employers that are
aggregated under section 414(b), (c), (m), or (o), or is a multiple
employer plan or a multiemployer plan), a catch-up eligible
participant's wages for the preceding calendar year from one employer
sponsoring the plan are not aggregated with the wages from another
employer sponsoring the plan for purposes of determining whether the
participant's wages for the preceding calendar year exceeded the
applicable Roth catch-up wage threshold in paragraph (a)(2) of this
section. Furthermore, even if a catch-up eligible participant's wages
for the preceding calendar year from one employer sponsoring the plan
exceeded the applicable Roth catch-up wage threshold in paragraph
(a)(2) of this section, elective deferrals made from the participant's
compensation from another employer sponsoring the plan that are catch-
up contributions would not be required to be designated Roth
contributions unless the participant's wages for the preceding calendar
year from that other employer also exceeded that wage threshold.
(c) Treatment of pre-tax catch-up contributions that are required
to be designated Roth contributions--(1) General rule. Subject to
paragraph (c)(3) of this section, a pre-tax elective deferral in excess
of an applicable limit described in Sec. 1.414(v)-1(b)(1) that, in
accordance with paragraph (a)(2) of this section, is a catch-up
contribution only if it is a designated Roth contribution does not
cause an applicable employer plan to fail to satisfy any requirement of
the Internal Revenue Code if the failure to be a designated Roth
contribution is corrected in accordance with paragraph (c)(2) of this
section.
(2) Correction of section 414(v)(7) failures--(i) In general. For
purposes of this paragraph (c), if an elective deferral that exceeds a
statutory limit, employer-provided limit, or ADP limit (as such terms
are defined in Sec. 1.414(v)-1(b)(1)) fails to be a catch-up
contribution under section 414(v)(1) because the elective deferral is
not a designated Roth contribution, then the failure to satisfy section
414(v)(7) is referred to as a ``section 414(v)(7) failure'' and may be
[[Page 2659]]
corrected in accordance with this paragraph (c)(2). A plan may provide
for either of the correction methods described in paragraphs (c)(2)(ii)
and (iii) of this section, but with respect to a plan year, the plan
must apply the same correction method for all participants with
elective deferrals in excess of the same applicable limit.
(ii) Permitted correction on Form W-2. A plan may correct a section
414(v)(7) failure by transferring the catch-up contribution (adjusted
for earnings and losses) from the participant's pre-tax account to the
participant's designated Roth account and reporting the contribution
(not adjusted for earnings and losses) as an elective deferral that is
a designated Roth contribution on the participant's Form W-2 (Wage and
Tax Statement) for the year in which the elective deferral was
originally excluded from the participant's gross income. However, this
correction method may be used only if the participant's Form W-2 for
that year has not been filed or furnished to the participant.
(iii) Permitted correction by in-plan Roth rollover. As an
alternative to the correction method permitted under paragraph
(c)(2)(ii) of this section, a plan may correct a section 414(v)(7)
failure by directly rolling over the catch-up contribution (adjusted
for earnings and losses) from the participant's pre-tax account to the
participant's designated Roth account, in accordance with section
402A(c)(4)(E), and reporting the amount of the in-plan Roth rollover on
Form 1099-R (Distributions from Pensions, Annuities, Retirement or
Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) for the year of
the rollover.
(3) General correction requirements--(i) Practices and procedures.
For a plan to be eligible to use either of the correction methods
described under paragraph (c)(2) of this section with respect to an
elective deferral that is a catch-up contribution because it exceeds a
statutory limit described in Sec. 1.414(v)-1(b)(1)(i), the plan
sponsor or plan administrator must have in place practices and
procedures designed to result in compliance with section 414(v)(7) at
the time the elective deferral is made. As part of these practices and
procedures, the plan must provide that the elective deferrals of a
participant who is subject to the Roth catch-up requirement under
paragraph (a)(2) of this section, but who has not made an affirmative
election to make catch-up contributions as designated Roth
contributions nor made designated Roth contributions equal to the
applicable dollar catch-up limit earlier in a calendar year, are
automatically treated as designated Roth contributions after the
participant's pre-tax elective deferrals made during the calendar year
equal the section 401(a)(30) limit on elective deferrals for the
taxable year that begins in the calendar year. Similarly, the elective
deferrals of such a participant who has not made an affirmative
election to make catch-up contributions as designated Roth
contributions nor made designated Roth contributions equal to the
applicable dollar catch-up limit earlier in the limitation year must be
automatically treated as designated Roth contributions after the
participant's pre-tax elective deferrals result in the participant's
annual additions for the limitation year exceeding the section 415(c)
limit for the limitation year.
(ii) Reliance on Form W-2. A plan sponsor or plan administrator
does not fail to have in place practices and procedures in accordance
with paragraph (c)(3)(i) of this section merely because a plan
determines the applicability of the section 414(v)(7)(A) Roth catch-up
requirement to a participant on the basis of a timely-filed Form W-2
with respect to the participant.
(iii) Deadlines for corrections of section 414(v)(7) failures under
paragraph (c)(2) of this section--(A) Elective deferrals in excess of a
statutory limit. If the section 414(v)(7) failure arises with respect
to an elective deferral that is a catch-up contribution because it
exceeds the section 401(a)(30) limit on elective deferrals, the
deadline to complete all corrective steps required under paragraph
(c)(2) of this section in order to avoid a qualification failure is
April 15 of the calendar year following the calendar year for which the
elective deferral was made. If the section 414(v)(7) failure arises
with respect to an elective deferral that is a catch-up contribution
because it results in the participant's annual additions for the
limitation year exceeding the section 415(c) limit, the deadline to
complete the corrective steps required under paragraph (c)(2) of this
section in order to avoid a qualification failure is the deadline that
applies under Sec. 1.415(c)-1(b)(6) for allocating amounts to the
limitation year for which the elective deferral was made.
(B) Elective deferrals in excess of an employer-provided limit. If
the section 414(v)(7) failure arises with respect to an elective
deferral that is a catch-up contribution because it exceeds an
employer-provided limit as described in Sec. 1.414(v)-1(b)(1)(ii), the
deadline to complete the corrective steps required under paragraph
(c)(2) of this section in order to avoid a qualification failure is the
date that is 2\1/2\ months (6 months, in the case of an applicable
employer plan that includes an eligible automatic contribution
arrangement within the meaning of section 414(w)) after the close of
the plan year for which the catch-up contribution was made.
(C) Elective deferrals in excess of the ADP limit. If the section
414(v)(7) failure arises with respect to an elective deferral that is a
catch-up contribution because it exceeds the ADP limit, the deadline to
complete the corrective steps required under paragraph (c)(2) of this
section in order to avoid a qualification failure is the date that is
2\1/2\ months (6 months, in the case of an applicable employer plan
that includes an eligible automatic contribution arrangement within the
meaning of section 414(w)) after the close of the plan year for which
the excess contribution was made.
(d) Examples. The following examples illustrate the application of
this section. For purposes of these examples, assume that the
participant's elective deferrals under all plans of the employer do not
exceed the participant's section 415(c)(3) compensation, the
participant's annual additions for a limitation year do not exceed the
section 415(c) limit, the taxable year of the participant is the
calendar year, the plan includes a qualified Roth contribution program,
and the plan year is the calendar year (except as specifically
provided). Assume further that this section applies to contributions in
taxable years beginning in 2026, the section 401(a)(30) limit on
elective deferrals for 2026 is $24,000, the applicable dollar catch-up
limit for 2026 that is applicable to each participant in the examples
is $8,000, and the Roth catch-up wage threshold to be applied to 2025
FICA wages for determining applicability of the Roth catch-up
requirement under section 414(v)(7)(A) for a plan year beginning in
2026 is $150,000.
(1) Example 1: Application of Roth catch-up wage threshold--(A)
Facts. In January 2025, Participant A became an employee of an
accounting firm that is structured as a partnership. Through October
2025, A had $151,000 of FICA wages from the accounting firm. In
November 2025, Participant A became a partner in the accounting firm,
and, for 2025, Participant A had a $30,000 distributive share of
partnership income from the accounting firm, all of which was self-
employment income. Participant A is a partner with the accounting firm
for all of 2026.
(B) Analysis. Although Participant A is a partner with the
accounting firm for the last two months of 2025 and for all
[[Page 2660]]
of 2026 (and thus has self-employment income rather than FICA wages for
that period), Participant A had more than $150,000 in FICA wages from
the accounting firm for 2025. Thus, Participant A is subject to section
414(v)(7)(A) for 2026, and if Participant A makes elective deferrals in
excess of an applicable limit for 2026 under a plan sponsored by the
accounting firm, those elective deferrals must be designated Roth
contributions.
(2) Example 2: Application of Roth catch-up wage threshold--(A)
Facts. The facts are the same as in paragraph (d)(1) of this section
(Example 1), except that Participant A became a partner of the
accounting firm in May 2025, and had FICA wages from the firm of
$60,000 before becoming partner. In addition, for 2025, Participant A
had a $150,000 distributive share of partnership income from the
accounting firm, all of which was self-employment income.
(B) Analysis. Although Participant A had total compensation of
$210,000 for the services Participant A performed for the accounting
firm in 2025, only $60,000 of that amount were FICA wages. Because
Participant A did not have more than $150,000 of FICA wages from the
accounting firm for 2025, any elective deferrals in excess of an
applicable limit that Participant A makes for 2026 under a plan
sponsored by the accounting firm are not required to be designated Roth
contributions.
(3) Example 3: Application of section 414(v)(7)(B) to a plan with a
plan year other than the calendar year--(A) Facts. Participant B
participates in an applicable employer plan sponsored by Employer E.
The plan year begins on July 1 and ends on June 30. Participant B had
$155,000 in wages within the meaning of section 3121(a) from Employer E
for calendar year 2025, and is a catch-up eligible participant for
calendar year 2026. For the plan year beginning July 1, 2026, and
ending June 30, 2027, the plan allows all catch-up eligible
participants to make catch-up contributions and requires that any
elective deferrals in excess of an applicable limit made by catch-up
eligible participants who are subject to the requirements of section
414(v)(7)(A) be designated Roth contributions.
(B) Analysis. Because Participant B's FICA wages from Employer E
for calendar year 2025 exceeded $150,000, Participant B is subject to
the requirements of section 414(v)(7)(A) for the first half of the plan
year beginning July 1, 2026, and any catch-up contributions that
Participant B makes under the plan during that period must be
designated Roth contributions. Because Participant B is permitted to
make catch-up contributions that are designated Roth contributions
under the plan for the plan year beginning July 1, 2026 (after
Participant B reaches an applicable limit (as defined in Sec.
1.414(v)-1(b)(1)), all catch-up eligible participants under the plan
must be permitted to make catch-up contributions that are designated
Roth contributions for the plan year.
(4) Example 4: Plans with more than one employer sponsoring the
plan--(A) Facts. Employer F and Employer G are members of a controlled
group of corporations within the meaning of section 414(b). Participant
C was hired by Employer F on January 1, 2025, and remained employed by
Employer F through October 31, 2025. Effective November 1, 2025,
Participant C transferred to Employer G and was employed by Employer G
for the remainder of 2025. Participant C is employed by Employer G for
all of 2026, the year in which Participant C attains age 55. Employer F
reported $155,000 of FICA wages on a Form W-2 for Participant C for
2025. Employer G reported $35,000 of FICA wages on a Form W-2 for
Participant C for 2025. Employers F and G are participating employers
in a section 401(k) plan, Plan P. Participant C becomes eligible to
participate in Plan P on January 1, 2026, and all of Participant C's
elective deferrals for 2026 are made from compensation paid by Employer
G.
(B) Analysis. Employers F and G are common law employers of
Participant C during different portions of 2025, and, under paragraph
(b)(3) of this section, they are both employers sponsoring the plan.
Because Participant C's FICA wages from Employer G in 2025 did not
exceed $150,000, Participant C is not subject to the requirements of
section 414(v)(7)(A) with respect to elective deferrals that are made
from compensation paid by Employer G in 2026. Accordingly, Participant
C is not required to designate any catch-up contributions made for 2026
under Plan P as designated Roth contributions. This is the case even
though Participant C had wages from Employer F (an employer sponsoring
the plan) that exceeded $150,000 for 2025.
(5) Example 5: Correction of section 414(v)(7) failure--(A) Facts.
Participant D, who attains age 55 in 2026, participates in a section
401(k) plan, Plan Q, sponsored by Employer H. Plan Q does not limit
elective deferrals except as necessary to comply with sections
401(a)(30) and 415(c). Plan Q does not provide catch-up eligible
participants with a separate election for elective deferrals that are
in excess of the section 401(a)(30) limit and provides that such a
participant is permitted to defer amounts in excess of the section
401(a)(30) limit on elective deferrals up to the applicable dollar
catch-up limit for the year. For 2025, Participant D had $151,000 in
wages (within the meaning of section 3121(a)) from Employer H. For
2026, Participant D elects to defer $1,250 into Participant D's account
in Plan Q for each of 24 pay periods. Employer H has in place practices
and procedures that are designed to prevent section 414(v)(7) failures
and to result in compliance with the section 414(v)(7) Roth catch-up
requirement at the time an elective deferral is made, and Plan Q
provides for a deemed Roth catch-up election as described in paragraph
(c)(3)(i) of this section. Nonetheless, Employer H discovers that all
of Participant D's elective deferrals under Plan Q during 2026 (a total
of $30,000) were pre-tax elective deferrals.
(B) Analysis. Because Participant D had over $150,000 in wages from
Employer H for 2025, under section 414(v)(7)(A), Participant D's catch-
up contributions under Plan Q for 2026 (that is, the elective deferrals
that exceed the section 401(a)(30) limit) are required to be designated
Roth contributions. Thus, $6,000 of Participant D's elective deferrals
for 2026 (that is, the elective deferrals in excess of the section
401(a)(30) limit of $24,000) are required to be designated Roth
contributions. To keep these contributions in the plan, Employer H must
correct the section 414(v)(7) failure with respect to $6,000 of
Participant D's pre-tax elective deferrals for 2026, using one of the
methods set forth under paragraph (c)(2) of this section, by April 15,
2027 (the deadline under paragraph (c)(3)(iii)(A) of this section).
(6) Example 6: Designated Roth contributions that can satisfy the
section 414(v)(7) Roth catch-up requirement--(A) Facts. The facts are
the same as in paragraph (d)(5) of this section (Example 5), except
that the first $5,000 of the $30,000 total elective deferrals
Participant D makes for 2026 are designated Roth contributions. (Thus,
during each of the first 4 pay periods in 2026, Participant D makes
$1,250 of elective deferrals that are designated Roth contributions,
and then subsequently makes $25,000 in pre-tax elective deferrals
ratably over the remaining 20 pay periods.) Participant D reaches the
section 401(a)(30) limit on elective deferrals during the twentieth pay
period of 2026 and does not make any designated Roth contributions
after reaching the section 401(a)(30) limit on elective deferrals in
2026.
[[Page 2661]]
(B) Analysis. In accordance with paragraph (b)(1) of this section,
the $5,000 in elective deferrals that are designated Roth contributions
that Participant D made at the beginning of 2026 can be taken into
account for purposes of satisfying Participant D's Roth catch-up
requirement under section 414(v)(7). Thus, the portion of Participant
D's pre-tax elective deferrals that are required to be corrected is
$1,000 ($6,000 of elective deferrals that are in excess of the section
401(a)(30) limit, minus $5,000 of elective deferrals that were made as
designated Roth contributions within the taxable year), and Employer H
must correct the section 414(v)(7) failure with respect to only $1,000
of Participant D's pre-tax elective deferrals. To keep the $1,000 in
the plan, Employer H must correct the section 414(v)(7) failure using
one of the methods set forth under paragraph (c)(2) of this section, by
April 15, 2027 (the deadline under paragraph (c)(3)(iii)(A) of this
section).
(e) Applicability dates--(1) Statutory applicability date. Section
414(v)(7) applies to contributions in taxable years beginning after
December 31, 2023.
(2) Regulatory applicability dates--(i) General rule. Except as
provided in paragraphs (e)(2)(ii) and (iii) of this section, this
section applies to contributions in taxable years beginning after [DATE
SIX MONTHS AFTER DATE OF PUBLICATION OF FINAL RULE].
(ii) Collectively bargained plans. In the case of an applicable
employer plan maintained pursuant to one or more collective bargaining
agreements, paragraphs (a) through (d) of this section shall not apply
until the first taxable year described in paragraph (e)(2)(i) of this
section, or, if later, the first taxable year beginning after the date
on which the last collective bargaining agreement related to the plan
that is in effect on December 31, 2025, terminates (determined without
regard to any extension to those agreements).
(iii) Early implementation permitted. A plan is permitted to apply
the rules of this section to contributions in any taxable year
beginning after December 31, 2023.
Douglas W. O'Donnell,
Deputy Commissioner.
[FR Doc. 2025-00350 Filed 1-10-25; 8:45 am]
BILLING CODE 4830-01-P