Employer Update

The SECURE 2.0 Act, passed late last year, builds on recent changes to federal rules around how people can save and withdraw money from retirement accounts.

One provision pertains to how age-based catch-up contributions (also known as 50+ Catch-Up) are taxed. Retirement plan participants who earned $145,000 or more in the previous year now must make 50+ Catch-Up contributions to after-tax Roth accounts.

Many plan sponsors, including VRS, and a variety of impacted trade organizations have petitioned regulatory authorities to provide additional guidance and an extended implementation period.

If an extension is not granted, participants in the Commonwealth of Virginia 457 Plan will not be able to use the 50+ Catch-Up provision in 2024.

Participants nearing retirement may still be eligible to use the Standard Catch-Up provision. They also may wish to speak with a financial advisor about other available options, such as an IRA, to make up the difference in retirement savings. (Traditional IRAs may later be rolled into the Commonwealth of Virginia 457 Plan.)

Employers that offer the Commonwealth of Virginia 457 Plan should refer to the July 27 email from VRS for more details.