IRS Announces an Administrative Transition Period for Section 603 of the SECURE 2.0 Act

On August 25, 2023, the IRS announced administrative transition period for new Roth catch up requirement; catch-up contributions still permitted after 2023 | Internal Revenue Service. If you have been following our blogs, webinar, or listened to our podcast, you will know that we have been waiting on guidance to complete our design, development, and testing for Section 603 originally effective January 1, 2024. While this notice did not answer all of our outstanding questions, it does announce a two-year administrative transition period for the requirement that certain catch-up contributions be designated as Roth contributions. Please remember, that this delay is ONLY for Section 603 and does not address the other 91 provisions of SECURE 2.0.

For those who are new to this conversation, SECURE 2.0 legislation with its 92 provisions was enacted in December 2022. Some of the legislation may require customers to make changes to their existing savings plans and offerings. Of the provisions, many do not affect the enrollment and collection of funds and do not require any enhancements or changes in the PeopleSoft Benefits product. But as an employer, you will need to understand how this overall law affects your plans. We suggest that you work with your legal staff and savings plan providers.

Guidance on Section 603 of the SECURE 2.0 Act with Respect to Catch Up Contributions (irs.gov), Notice 2023-62, does provide a few more details but states that it is not intended to be a comprehensive guide so we should expect more information from the IRS to come in the future. Some of the guidance mentioned in the notice anticipated for the future includes:

• Clarification about participants that do not have FICA wages
• Guidance if an employee must elect the Roth contribution
• Address aggregation of wages from other employers
• Clarification about plans that do not include a qualified Roth contribution program

The IRS invites comments and suggestions and are particularly interested in the items listed above. These comments must be made in writing on or before October 24, 2023. The Guidance on Section 603 above provides instructions on how to submit your comments. 

With this newly released information, Oracle/PeopleSoft is evaluating which enhancements will be delivered, when they will be delivered, and if they will be delivered in a PUM or as a PRP. We do have a bit of time to catch our breath and look at a more unified approach. Again, it is important to remember there is more to SECURE 2.0 than Section 603.

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