Continuing our 2025 Regulatory Update series, we turn to the IRS. This year’s guidance brings both clarity and complexity, especially around SECURE 2.0 provisions and catch-up contributions for high earners.
The IRS has issued several important updates this year, particularly around the implementation of SECURE 2.0. One of the most significant changes is the requirement that catch-up contributions for participants earning more than $145,000 must be made on a Roth (after-tax) basis. While this rule technically took effect January 1, 2024, the IRS granted an extension to January 1, 2026, to give plan sponsors and recordkeepers time to update systems and processes. Notably, governmental plans may face additional delays due to unique administrative challenges.
Another area of focus is the “super catch-up” provision, allowing participants aged 60–63 to contribute up to $11,250 in 2025—well above the standard catch-up limit. The IRS clarified that this provision is optional, alleviating concerns for sponsors worried about tracking eligibility and contribution limits.
SECURE 2.0 also introduced several optional provisions, such as penalty-free withdrawals for emergency expenses, terminal illness, or domestic abuse. While these features offer valuable flexibility for participants, many sponsors are taking a wait-and-see approach due to administrative complexity and uncertainty about employee demand. The increase in the involuntary cash-out limit from $5,000 to $7,000 has been more widely adopted, as it requires minimal changes for plans already forcing out small balances.
Finally, 403(b) plan sponsors using pre-approved documents must adopt updated Cycle 2 documents by December 31, 2026. Staying on top of these deadlines is critical to maintaining compliance and avoiding costly errors.
IRS guidance continues to shape plan administration and participant options. Proactive compliance is key as deadlines approach and optional provisions evolve.
For a deeper dive, download our full 2025 Regulatory Update.
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