When Requirement Applies

Different requirements apply to plans that use deemed Roth elections and plans that have separate elections.

For plans using deemed Roth elections, the final regulations provide two methods for determining when the deemed Roth election will be implemented:

• When pre-tax salary deferrals reach the salary deferral dollar limit. Because catch-up contributions are made after a participant reaches the salary deferral dollar limit, a plan can count designated Roth contributions made at any point during the year toward the Roth catch-up requirement even if the designated Roth contributions are made before the participant reaches the salary deferral dollar limit, i.e., before the participant’s salary deferrals are made as catch-up contributions. Thus, a participant subject to the Roth catch-up contribution requirement who makes pre-tax salary deferrals during a year that do not exceed the salary deferral dollar limit might not need to have catch-up contributions deemed to be Roth catch-up contributions instead of pre-tax catch-up contributions.
• When pre-tax and Roth salary deferrals reach the salary deferral dollar limit. This method, added to the final regulations in response to comments, allows a plan to apply the deemed election when a participant’s total salary deferrals reach the salary deferral dollar limit regardless of whether a portion of the salary deferrals were made as Roth contributions. The plan must permit a participant to make a new election that is different from the deemed election, which can allow such a participant to make additional pre-tax catch-up deferrals, taking into account the designated Roth contributions made earlier in the year, if they are less than the salary deferral dollar limit.

For plans using separate elections, i.e., that do not continue salary deferrals that exceed the salary deferral dollar limit and require participants to make a separate catch-up contribution election, a plan may apply a separate-election deemed Roth catch-up election to a participant’s salary deferrals that the participant elects to treat as catch-up contributions, including separate election plans that make catch-up contributions concurrent with salary deferral contributions. The plan must permit a participant to make a new election different from the deemed election.

One comment suggested that a plan should be permitted to require that all participants’ catch-up contributions be made as designated Roth contributions to avoid the administrative complexity. The final regulations do not include such a rule because, as the IRS explains, participants must be permitted to make pre-tax salary deferrals in order to designate pre-tax salary deferrals as designated Roth contributions.

Thus, participants who are not subject to the Roth catch-up contribution requirement would be unable to make pre-tax catch-up contributions as is required under the Code. However, a plan sponsor could remove a catch-up contribution provision from a plan.

Coordination with Other Rules

The IRS also explained how the final regulations relate to other catch-up contribution rules:

• Super catch-up contributions made by participants who attain age 60 to 63 during a calendar year are subject to the Roth catch-up contribution requirement.
• Special 15-year catch-up contributions to 403(b) plans are not subject to the Roth catch-up contribution requirement. If a participant is eligible to make special 15-year 403(b) plan catch-up contributions and age 50 catch-up contributions, the special 15-year 403(b) plan catch-up contributions may be pre-tax, and any age 50 catch-up contributions would be subject to the Roth catch-up contribution requirement.
• Special catch-up contributions to 457(b) plans during the last three years prior to retirement age are not subject to the Roth catch-up contribution requirement. If a participant is eligible to make special pre-retirement 457(b) plan catch-up contributions and age 50 catch-up contributions, the special pre-retirement 457(b) plan catch-up contributions may be pre-tax, and any age 50 catch-up contributions would be subject to the Roth catch-up contribution requirement.
• For dual qualified plans, i.e., plans that are qualified under both the Internal Revenue Code and the Puerto Rico Code, the final regulations treat the Roth catch-up contribution requirement for participants subject to the Puerto Rico Code as satisfied for taxable years that begin before the effective date of any future amendment to the Puerto Rico Code that provides for designated Roth contributions.

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