We are updating participant deferral election forms and the online experience to apply the “deemed” election approach based on recently published IRS final regulations. Under this approach, employee contributions for participants subject to the Roth catch-up requirement will be treated as after-tax Roth contributions once their pretax contributions reach a plan limit, unless they elect at the time a limit is reached to stop contributions.
This approach eliminates the need for a plan to obtain a participant’s affirmative election before switching their deferrals from pretax to Roth for catch-up purposes.
Action required: Coordination with your payroll provider is essential. Engage with your payroll provider as soon as possible to ensure they are prepared to change an impacted participant’s pretax deferrals to Roth when the participant’s pretax deferrals reach a limit. This coordination is especially important because we understand that some payroll providers may apply the “deemed” election only after a participant’s combined (pretax plus Roth) contributions reach a plan limit.
We are updating participant deferral election forms and the online experience to communicate that participants subject to the Roth catch-up requirement cannot make any catch-up contributions and that their elective deferral contributions will stop when a plan limit is reached.
Action required: Coordination with your payroll provider is essential. Engage with your payroll provider as soon as possible to ensure they are prepared to stop pretax deferrals for impacted participants when a limit is reached.
Note: If your plan does not permit Roth contributions, participants subject to the requirement cannot make any catch-up contributions. Plan sponsors should consider adding a Roth contribution so that all participants have the ability to make catch-up contributions. If you would like to add a Roth contribution to your plan, contact us at (877) 872-5159.
Participants will need to understand how the new rule may impact their catch-up contributions. We are updating deferral election forms to include language to inform new and existing employees without an active deferral election about the new rule. But for participants with active deferral elections, you need to provide advance notice to inform them of the changes. To support you, we've created the following sample communications you can use:
Action required: Adjust the sample notice above to reflect your plan details and provide it to participants with active deferral elections.
We are introducing a new data element (FICA prior year indicator) on our system that must be provided annually by the plan sponsor to identify which participants are subject to the Roth catch-up requirement. The indicator will drive participant messaging, payroll warnings and reports with relevant data to assist with contribution processing and identifying any participants that may require corrections.
Action required: The indicator must be submitted annually after compensation has been finalized for the applicable year (after the last payroll of the 2025 calendar year and preferably before the first 2026 payroll). We will provide a reminder later this year.
Two methods are available to submit the indicator:
Please refer to this FAQ for additional information. Thank you for your attention to this important matter and the opportunity to serve you.