While plan sponsors now have the option to offer “super catch-up” contributions to their employees aged 60 to 63 under the SECURE 2.0 Act of 2022, many employers and participants still have questions when it comes to implementing and administering this plan provision.

Speakers at Wednesday’s PLANSPONSOR Roadmap: SECURE 2.0 Livestream Series discussed the details and challenges associated with the new super catch-up contributions, as well as the mandatory Roth catch-up provision for high earners, scheduled to take effect in 2026.

As of January 1, 2025, the maximum contribution that any employee can make via salary deferral is $23,500, and employees aged 50 and older can contribute an extra $7,500 in catch-ups, putting the contribution limit at $31,000. But starting this year, for employees between the ages of 60 to 63, the limit is $34,500. Once an employee turns 64, the limit reverts to the standard catch-up contribution level.

Communicating About Catch-Ups

Elizabeth Drake, a principal in Groom Law Group, explained that, despite some initial confusion, the super catch-up provision is optional for plan sponsors to offer.

Phil Sherman, a senior retirement plan consultant at Deschutes Investment Consulting, said he is already seeing high adoption of this provision among his plan sponsor clients. He said plan sponsors should work with their third-party administrator and recordkeeper to update plan documents sooner, rather than later, to reflect that super catch-ups are available in the plan.

Adelia Soremekun, senior director of total rewards at the Jackson Laboratory, said one of the challenges of enacting this provision is determining where employees are making the deduction. If they are deferring the money through an internal payroll system, like Workday or ADP, for example, the provider needs to allow employees aged 60 to 63 to contribute the higher amount in a way that is “easy and straightforward.”

“But then you get into the cross-platform issues when [employees are] making the election [on the] recordkeeper’s site, and it’s transferring into your [system],” Soremekun said. “Between payroll, your recordkeeper and your benefit system, there’s going to need to be a lot of coordination to make sure that you’re capturing the right limit for the right age.”

At the Jackson Laboratory, Soremekun said participants make elections through the plan’s recordkeeper, and the contribution is then transferred into the company’s system. She said the plan built an “age block” in its payroll system such that once an employee hits age 60, the benefits team will receive a report and make sure the employee receives the additional limit in the recordkeeper system, enabling the participant to utilize the higher contribution limit.

“We need to make sure we have an audit system on our side, because at the end of the day, we’re the plan sponsor,” Soremekun said.

She advised other plan sponsors to communicate with employees before making this change. Because the Jackson Laboratory did so, Soremekun said communication about the change was wrapped into the company’s open enrollment process, which took place last October and November. In January, the company sent a custom email to members of the affected age group to let them know they are eligible.

Sherman agreed it is a good idea to “over-communicate” on this topic.

“We’ve put together a variety of communication pieces, and we’ve encouraged our plan sponsors to do an internal census poll of employees that are in that age group,” he said. “We also suggested, as a best practice, [to] grab folks that are a couple years younger as well so that, in the in the hope of easing the burden of education down the road, we’re already communicating to these folks.”

Mandatory Roth Provision

As noted, plan sponsors have until January 2026 to ensure that all catch-up contributions made by higher-income participants—specifically those earning at least $145,000—be designated as Roth. But even though this effective date was extended by the IRS, preparation is still required to ensure that the contributes operate smoothly.

Groom’s Drake reminded attendees that in January, the IRS issued proposed regulations which “provide helpful guidance” on catch-up contributions, and the IRS is still requesting comments on the proposal. Drake added that if a plan does not currently have a Roth feature, it technically is not required to add one, but failing to add it could have consequences for participants.

“If you have employees who did earn over the $145,000 in the prior year, [if] they don’t have the ability to make Roth catch-up contributions, they are not allowed to make any catch-up contributions, so it will feel unfair to them,” Drake said.

Soremekun said the Jackson Laboratory is explaining to employees what a Roth account is and the benefits of having one.

“What we’re trying to do now with most of our communication is to highlight the benefits—the pros and cons—of having a Roth contribution so that by the time we get there, for those who will fall into that category, it doesn’t feel like [they are] being penalized,” Soremekun said.

She said some employees feel as though something is being taken away from them, as many had planned to contribute pre-tax and not pay taxes until distribution, whereas they will now need to pay taxes on the Roth contributions when the income is earned.

Sherman added that the Roth requirement is based on a participant’s prior year’s payroll information. If an employee is a new hire, and the company does not have their prior year’s payroll information, the Roth mandate does not apply to the individual in their first year of employment with the new company.

In addition, Drake said plans can have a “deemed Roth election,” which means that once employees start making the catch-up contributions, if they are subject to the rule, they do not need to affirmatively elect to make a Roth contribution, as it will happen automatically via plan design.

“The reason you might want to have this deemed Roth election in your plan is because that [also] allows you to take advantage of some of the new correction options that the IRS has made available,” Drake said.