Secure 2.0 catch-up Roth 401K

[xpy1999]

Does anyone know if the "$145,000 in wages" counted as after the regular 401K contribution or before the regular 401K contribution?

"Starting in 2024, individuals that make over $145,000 in wages will no longer be able to make pre-tax catch-up contributions to their employer-sponsored retirement plan. Instead, they will be forced to make catch-up contributions in Roth dollars which means that they will no longer receive a tax deduction for those contributions.

Even though this change will not take effect until 2024, your wage for 2023 may determine whether or not you will qualify to make pre-tax catch-up contributions in the 2024 tax year. In addition, high wage earners may implement tax strategies in 2023, knowing that they are going to lose this sizable tax deduction in the 2024 tax year. "

https://www.greenbushfinancial.com/all- ... cure-act-2

[Alan S.]

Does anyone know if the "$145,000 in wages" counted as after the regular 401K contribution or before the regular 401K contribution?

"Starting in 2024, individuals that make over $145,000 in wages will no longer be able to make pre-tax catch-up contributions to their employer-sponsored retirement plan. Instead, they will be forced to make catch-up contributions in Roth dollars which means that they will no longer receive a tax deduction for those contributions.

Even though this change will not take effect until 2024, your wage for 2023 may determine whether or not you will qualify to make pre-tax catch-up contributions in the 2024 tax year. In addition, high wage earners may implement tax strategies in 2023, knowing that they are going to lose this sizable tax deduction in the 2024 tax year. "

https://www.greenbushfinancial.com/all- ... cure-act-2

Sec 603 of Secure 2.0 states the wage definition for purposes of the 145k limit is that of Sec 3121(a).
3121(a) states that deferrals to various retirement plans such as a 401k, 403b, 457b, or SImple IRA are not included wages. Roth 401k contributions are included in wages, therefore if you contribute more to the Roth 401k instead of pre tax, your wage income will be higher and that will increase the chances of your matching contributions also being Roth.

[xpy1999]

Thanks a lot, so in essence it is box 1 of W2.

[Walkure]

Does anyone know if the "$145,000 in wages" counted as after the regular 401K contribution or before the regular 401K contribution?

"Starting in 2024, individuals that make over $145,000 in wages will no longer be able to make pre-tax catch-up contributions to their employer-sponsored retirement plan. Instead, they will be forced to make catch-up contributions in Roth dollars which means that they will no longer receive a tax deduction for those contributions.

Even though this change will not take effect until 2024, your wage for 2023 may determine whether or not you will qualify to make pre-tax catch-up contributions in the 2024 tax year. In addition, high wage earners may implement tax strategies in 2023, knowing that they are going to lose this sizable tax deduction in the 2024 tax year. "

https://www.greenbushfinancial.com/all- ... cure-act-2

Sec 603 of Secure 2.0 states the wage definition for purposes of the 145k limit is that of Sec 3121(a).
3121(a) states that deferrals to various retirement plans such as a 401k, 403b, 457b, or SImple IRA are not included wages. Roth 401k contributions are included in wages, therefore if you contribute more to the Roth 401k instead of pre tax, your wage income will be higher and that will increase the chances of your matching contributions also being Roth.

Is the catch-up itself a "deferral" for the purposes of Sec 3121(a)?
Consider two employees, Bob and Rob, both age 50. All amounts in 2022 dollars.

In 2023, Bob makes $167,501, and he defers the standard employee contribution of $22,500 to his pretax 401(k), but voluntarily puts his $7,500 catch-up in the Roth 401(k). His 2023 W-2 box 1 after deferral is now $145,001, so he must put his future catch-up in the Roth 401(k) in 2024, and all subsequent years unless his gross income declines.

In 2023, Rob makes $174,999, and he defers the standard employee contribution of $22,500 plus $7,500 catch-up, all to pretax. His 2023 W-2 box 1 is now $144,999, and he can continue to contribute both his standard and catch-up contributions to pretax in 2024 and every year going forward as long as his gross stays steady.

Are these both correct?

Alternate scenario???
In 2023, Rob makes $174,999, and he defers the standard employee contribution of $22,500 plus $7,500 catch-up, all to pretax. However, his plan allows him to immediately do an in-service conversion of $7,500 to the Roth 401(k). This conversion is taxable income in 2023, but not deemed "wage income" and so does not appear on his 2023 W-2 box 1, which still shows $144,999, and he can continue to contribute both his standard and catch-up contributions to pretax in 2024 and every year going forward as long as his gross stays steady.

Is that correct?

As an aside, here's a fun little technical glitch: https://www.napa-net.org/news-info/dail ... %99s-graff

[hamhocs]

If it really is Box 1, having HSA contributions taken out through direct deposit vs making them outside could make a difference for some people (me)

[biker2035]

I am wondering if this new Act allows the match I get into my 401K, can I direct those funds to my workplace Roth 401k instead? Currently contribute to the 401k, but in the past contributed to the Roth 401k.

[Artsdoctor]

I am wondering if this new Act allows the match I get into my 401K, can I direct those funds to my workplace Roth 401k instead? Currently contribute to the 401k, but in the past contributed to the Roth 401k.

As I understand it, matches can now occur in your 401k and your Roth 401k. What is new is that your employer can contribute to the Roth 401k (in the past, no).

[Eagle33]

I am wondering if this new Act allows the match I get into my 401K, can I direct those funds to my workplace Roth 401k instead? Currently contribute to the 401k, but in the past contributed to the Roth 401k.

Starting in 2024, not 2023.