With a Jan. 1 deadline approaching for a controversial provision of the SECURE 2.0 law, most sponsors are either unsure they can comply in time or are still working with their record keepers to comply, according to a survey by the Plan Sponsor Council of America.
SECURE 2.0 requires catch-up contributions to be Roth contributions for participants earning $145,000 or more per year — a provision that many industry members complain will be an administrative headache. They have asked the Treasury Department and IRS to delay implementation two years beyond the law's Jan. 1 deadline. Currently, participants who are 50 and older can have their catch-up provisions subject to the traditional tax basis or the Roth tax basis subject to a plan's rules.
The PSCA survey of 132 sponsors found that 9.8% said they were unsure they could meet the deadline, while 56.8% were "still trying to work out the details" with their providers.
Some 22% of respondents are ready to comply. Another 11.4% are making changes and will be ready by the deadline.
"The primary concern is the ability of the payroll provider and recordkeeper to have the technology in place to implement in time," said a Wednesday report describing the survey results. "Several plan sponsors are working on a manual process as a backup plan in case the automatic processes are not in place in time so that they can continue providing catch-up contributions to participants."
Here is a sampling of respondents' comments:
- "I would prefer a delay since our payroll provider seems to be struggling with it."
- "It appears that this is yet another complicated provision in which we will not be able to apply a systemic solution and will have to manage manually."
- "My provider won't even work on it until they get answers to their questions in the form of guidance."
- "This provision seems like it has administrative nightmare written all over it! I am unclear as to the benefit to anyone of this provision."
- "The IRS needs to provide more details for us to be able to find a fix and test before we have to notify participants that the change is coming."