Inadvertent error in SECURE 2.0 legislation prevents 401(k) catch-up contributions

As lawmakers rushed to pass the massive retirement savings legislation known as SECURE 2.0, they inadvertently deleted a paragraph that throws into question the ability of participants in 401(k) plans to make catch-up contributions.

The technical drafting error was identified by the American Retirement Association, which has alerted the Treasury Department and the Joint Committee on Taxation.

"It was a simple mistake," said Will Hansen, chief government affairs officer at the American Retirement Association, adding that it's not uncommon to have "some errors" when drafting major pieces of legislation, such as the 350-page SECURE 2.0 bill.

"I think we're just glad that we caught this error early in the year," he said.

The intention of SECURE 2.0 was to require that catch-up contributions in workplace retirement plans be Roth contributions except for individuals earning less than $145,000, who would be allowed to make pretax contributions. By inadvertently deleting a subparagraph in Section 603 of the legislation, lawmakers eliminated the ability for anyone to make any catch-up contributions, whether Roth or pretax, beginning in 2024.

Mr. Hansen anticipates that a statutory fix will be needed to ensure that individuals can make catch-up contributions next year.

"It's a technical correction," said Kent Mason, a partner at Davis & Harman who noted that enacted legislation generally needs technical fixes.

"I think there were amazingly few glitches in such a long bill," he said. "The Hill is aware of it, and I feel confident that they will take care of it in a timely way."