SECURE 2.0 Error Would Prohibit 401(k) Catch-up Contributions

A technical glitch in the massive retirement access bill Congress passed late last year would prohibit older workers from making catch-up 401(k) contributions in 2024 unless lawmakers or the IRS fix it this year.

Part of the SECURE 2.0 Act (Pub.L. 117–328) legislation President Joe Biden signed into law in December was intended to require the contributions workers nearing retirement make to their accounts to be post-tax Roth deferrals. The elimination of a key paragraph in the bill during the drafting process inadvertently eliminated catch-up contributions entirely.

That error, first spotted by counsel at the American Retirement Association, can be reversed by a technical correction in Congress or by guidance from the IRS. The process for technical corrections on the Hill has already begun, and the ARA brought the catch-up contribution issue to the Joint Committee on Taxation and the Treasury Department. It’s still unclear whether the error requires legislative or regulatory input.

The Treasury Department is aware of and is closely examining the issue, according to an agency spokesperson.

Regulators or lawmakers have about a year to correct the error before the SECURE 2.0 Act provision becomes effective as written in 2024.