Congressional leaders are poised to introduce legislation to correct glitches in the Secure 2.0 Act, including the inadvertent annulment of catch-up contributions for those age 60 and over, they said in a letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel yesterday.
Among the sections in Setting Up Every Community for Retirement Enhancement 2.0 Act flagged for fixes by lawmakers is Section 603, which is supposed to increase pretax catch-up contributions by 50% for individuals ages 60 through 63, but instead “eliminated the ability to make ANY pre-tax catch-up contributions,” the American Retirement Association, which discovered the glitch, said in a Twitter post. ARA blamed the snafu on a erroneously deleted paragraph.
While the law clearly intends to increase catch-up provisions for those nearing retirement, the plain language of the law doesn’t allow for this, ARA said.
Section 603 "might be read by some to disallow catch-up contributions (whether pre-tax or Roth) beginning in 2024. Congress did not intend to disallow catch-up contributions nor to modify how the catch-up contribution rules apply to employees who participate in plans of unrelated employers," House Ways and Means Committee Chairman Jason Smith, Ranking Member Richard Neal, Senate Committee on Finance Chairman Ron Wyden and Ranking Member Mike Crapo said in the letter.
Rather, Congress’s intent "was to require catch-up contributions for participants whose wages from the employer sponsoring the plan exceeded $145,000 for the preceding year to be made on a Roth basis and to permit other participants to make catch-up contributions on either a pre-tax or a Roth basis," the lawmakers noted.
Other Secure 2.0 provisions the lawmakers plan to amend include Section 107, dealing with an increase in the applicable age for required minimum distributions.
“Congress intended to increase the applicable age from age 72 to age 73, for individuals who turn 72 after December 31, 2022 and who turn 73 before January 1, 2033. The law also increases the applicable age from age 73 to age 75 for individuals who turn 73 after December 31, 2032. However, with respect to the increase from age 73 to age 75, the provision could be read to apply such increase to individuals who turn 74 (rather than 73) after December 31, 2032,” the lawmakers said.
Lawmakers said they also intend to fix a problem with Section 102 of SECURE 2.0, which is intended to increase the credit for small employer pension plan startup costs by allowing eligible employers to take a tax credit for a portion of employer contributions made to the plan.
“The provision could be read to subject the additional credit for employer contributions to the dollar limit that otherwise applies to the startup credit. However, Congress intended the new credit for employer contributions to be in addition to the startup credit otherwise available to the employer,” the lawmakers said.
There is expected to be broad bipartisan support for the legislation.