Contribution Limit Question
Hello,
In 2026, anyone making $145k+ per year must make catch-up contributions to a Roth source in a 401k.
In the event that someone makes their catch-ups to a pretax source and ends up making too much money to do so:
- Do we know yet what the remedy for this will be?
- Would this likely get identified during plan testing?
- Will contributions need to be returned to the participant? Or can they get shifted over to the Roth source?
Thank you.
Permalink Submitted by Alan - IRA critic on Thu, 2024-11-14 13:55
The Regs have not been issued yet.
The proposed 145k limit uses prior year W-2 income to determine the following year Roth catch up requirement, therefore the Roth catchup requirement will be known at the start of the applicable tax year.
If the catchups are still made in error to the pre tax account, they likely would have to be corrected and restated as Roth. If this was not done in the current year, the plan would probably have to issue a 1099R to correct the match to taxable income.