To the relief of many plan sponsors and employers, the IRS last week announced an administrative transition period that extends until 2026 the new requirement that any catch-up contributions made by higher-income participants in 401(k) and similar retirement plans must be designated as after-tax Roth contributions. The agency also clarified that plan participants who are age 50 or older can continue to make catch-up contributions after 2023, regardless of income.

The extension will help taxpayers smoothly adjust to the new Roth catch-up requirement, and it is designed to facilitate an orderly transition for compliance with that requirement, the IRS said.

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