```

[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comments cannot be edited or withdrawn.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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \12\ This is particularly true if an employer makes the top-paid 
group election under section 414(q)(1)(B)(ii).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.''
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 http://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
```