More HH Legal Updates

Houston Harbaugh is a full service law firm headquartered in Pittsburgh and serving Pennsylvania, West Virginia and Ohio. This collection of blogs further highlights the firms capabilities in several practice areas.

Effective Date of Requirement that 401(k)/403(b) Catch-up Contributions of Higher-paid Employees be After-tax Roth Contributions Delayed to 2026

In a prior bulletin, we discussed the requirement that 401(k) and 403(b) catch-up contributions by higher-paid employees (those with FICA wages in excess of $145,000) be made on an after-tax Roth basis, in lieu of a traditional pre-tax basis, effective for 2024 and subsequent years.  This requirement was imposed by the “SECURE 2.0” law enacted in December 2022. 

In recent months, 401(k)/403(b) industry groups such as the American Retirement Association had been lobbying the IRS for a delay in the effective date of this provision.  Reasons for the request for the delay included (a) the need for guidance from the IRS on the nuances involved in the application of the requirement, and (b) the time required to update payroll and plan recordkeeping systems to accommodate the requirement.

In response to these pleas, the IRS issued Notice 2023-62 (the “Notice”) on August 25, 2023.  The Notice provides for an “administrative transition period” during which all employees, regardless of income level, will be permitted to continue to make 401(k)/403(b) catch-up contributions on a traditional pre-tax basis.  The transition period runs through the end of 2025, delaying the effective date of the requirement to January 1, 2026

In the Notice, the IRS also indicated its intent to issue further guidance to assist plan sponsors and their service provides with the implementation of the requirement.  Preliminary descriptions of expected guidance mentioned in the Notice include the following:

  1. Plan participants who did not have FICA wages from the plan sponsor in the prior year (e.g., individuals such as partners in a partnership receiving only self-employment income) will not be subject to the requirement.    
  2. Employers with plan participants subject to the requirement (those with FICA wages over $145,000) will be permitted to treat 401(k)/403(b) catch-up contribution elections by the participants as elections to make after-tax Roth contributions; separate Roth contribution elections will not necessarily be required.

We will continue to update plan sponsors as additional guidance becomes available.  In the meantime, employers and 401(k)/403(b) service providers can take comfort in the fact that existing plan operations in this area can continue for two more years.

In anticipation of the requirement becoming effective January 1, 2024, some employers that maintained plans without the Roth contribution feature have already amended their plans and taken other steps to add the Roth feature effective January 1, 2024.  While such plans could be further amended to postpone addition of the Roth feature until 2026, we expect that the preferred approach will be to implement the Roth feature as scheduled for 2024, as it is eventually going to be needed, and employees may appreciate availability of the Roth feature prior to the effective date of the requirement involving catch-up contributions in any event.

Please contact Gary Gunnett at (412) 288-2210 or with any questions on any of the above.

About Us

Trusted and Cost-Effective Business Law, Business Litigation and Estate Planning Attorneys and Counselors; Building Client Confidence™ with Businesses and Individuals Since 1975

Our firm offers individualized solutions and the highest quality, client-driven and cost effective legal services. Houston Harbaugh, P.C., is a well-known law firm in Pittsburgh, serving Pennsylvania, West Virginia and Ohio. Our diverse practice areas include Business Law, Business Litigation, Estate and Succession Planning, Intellectual Property Litigation and Prosecution, Employment and Labor, Employee Benefits, Oil and Gas, Landowner and Property Dispute Counseling and Litigation, Health Care, Environmental, Real Estate, Construction, Complex Tort and Catastrophic Injury Litigation, Insurance coverage and Bad Faith Law, Mediation, Arbitration and Special Master appointment work. As one of the 20 largest law firms in Pittsburgh, our lawyers serve clients on a regional and national basis.

We regularly represent regional, national and international insurance carriers in defense, insurance coverage, unfair trade practices and bad faith matters, and we issue opinions letters and coverage analyses for insurers. We defend designers, manufacturers and sellers in pharmaceutical, products and medical products liability matters and we litigate and try cases involving catastrophic injuries, industrial accidents, toxic torts, professional, engineering and architectural negligence, and agent and broker claims and lawsuits.

Why Houston Harbaugh, P.C.? The Answer Is Clear.

We are accomplished litigators with a strong track record of success in the courtroom and in jury trials. We design and manage business transactions, succession planning, banking and regulatory issues. Our firm has regularly been featured in the U.S. News “Best Lawyers”® rankings of Pittsburgh’s “Best Law Firms.” Our attorneys are also regularly nominated as “Best Lawyers” in this publication. In addition, many of our attorneys are consistently recognized in the annual national Super Lawyers peer review rankings, and our corporate practice has been selected as the winner of The Legal Intelligencer’s Best Law Firm Corporate Practices contest for the Midsize Firm category. Our property and landowner counseling and litigation practice in Oil and Gas and Real Estate is ranked at the top on a regional basis. We help clients to apply for, prosecute, audit, manage and protect intellectual property rights in patent, trademark, copyright and trade secrets. We are admitted to the USPTO and have experience in the TTAB. Some of our firm’s shareholders are Adjunct Professors of Law at the Duquesne University School of Law in litigation and intellectual property courses.

Helping You Achieve Your Goals For Over 40 Years

Since our inception as a health care practice in 1975, our attorneys have represented clients in state and federal courts in Pennsylvania, West Virginia, Ohio and throughout the nation. We have grown into a multi-disciplinary practice with the ability to handle complex business transactional and litigation matters. We counsel on estate and succession planning and on trust and guardianship matters. We have a strong employment and labor practice. We represent clients in trade secret counseling and federal Defend Trade Secret Act (DTSA) counseling and litigation. Our DTSALaw® practice group is well versed in this federal body of trade secret law. We counsel, draft, litigate and defend claims involving employment non-compete, restrictive covenants, non-disclosure agreements and breach of contract matters. We service clients in the collection of debts and in bankruptcy creditor matters. Houston Harbaugh litigates in Orphans and Probate courts for matters involving estates and trusts. We also provide mediation and arbitration services to parties involved in litigation and our lawyers are currently serving as court appointed special masters in the Federal Courts.

Contact us and Learn How We Can Help You and Your Business

For more information on how we can help you, call our Pittsburgh office at 412-281-5060. You can also reach us online.

DTSALaw®; Business Litigation; PSMN®; and PSMNLaw® are federally registered trademarks of Houston Harbaugh, P.C. and this website is copyright protected. All rights Reserved to Houston Harbaugh, P.C.. Building Client Confidence™.