Why Was DC-Roth Income Limit Part of 2025 Notice, When It Is Not Effective Until 2026?

Q: I was recently reviewing IRS Notice 2024-80, which announced the indexed retirement plan limits for 2025. I was confused, since the indexed compensation threshold for determining whether an individual’s catch-up contributions to a 401(k), 403(b) or governmental 457(b) plan must be Roth was listed in this notice as remaining as $145,000. Isn’t this limit effective in 2026? If so, why is it listed in a notice outlining 2025 limits?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Indeed, the new mandatory Roth catch-up provision under the SECURE 2.0 Act of 2022 is not effective until 2026. The reason the IRS published an indexed amount for 2025, even though the new provision is not yet effective, has to do with Internal Revenue Code Section 414(v)(7)(E), which reads as follows:

(E) Cost of living adjustment

“In the case of a year beginning after December 31, 2024, the Secretary shall adjust annually the $145,000 amount in subparagraph (A) for increases in the cost-of-living at the same time and in the same manner as adjustments under 415(d); except that the base period taken into account shall be the calendar quarter beginning July 1, 2023, and any increase under this subparagraph which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000.”

This Code Section was not updated to reflect the delayed effective date of the new mandatory Roth catch-up provision set out in Notice 2023-62. You may recall that, prior to this Notice, the mandatory catch-up provision was scheduled to be effective in 2024. Thus, Code Section 414(v)(7)(E) requires that the limit be indexed beginning in 2025, even though the mandatory Roth catch-up provision is not yet effective.

Note that the 2025 indexed limit, which applied to prior-year, or 2024, compensation, remained at $145,000. But this amount could increase due to indexing once the new provision takes effect in 2026.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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