The availability of the Safe 2.0 Act requiring folks incomes greater than $145,000 in annual FICA wages to direct any retirement plan catch-up contributions to Roth-style accounts is more likely to have an effect on solely a small proportion of the saver inhabitants.

Nonetheless, the Roth requirement might be probably disruptive for employers and extremely compensated employees when it will definitely kicks in.

That is in keeping with an evaluation printed in March by the Worker Profit Analysis Institute. The topline discovering exhibits that, of all of the members ages 50 or older incomes greater than $145,000, solely 21% made contributions of greater than $19,500 to their retirement plan in 2021 — which means they might have discovered themselves topic to the Roth requirement.

As EBRI’s report explains, these members make up a small share of all members, however roughly one-half of all plans can be affected by this Roth requirement. As of 2021, the catch-up contribution restrict was $6,500, and with inflation, this has climbed to $7,500.

Though the dataset used to research the high-income Roth catch-up rule contains solely public retirement plans run by colleges, governments and different such establishments, the conclusions might be anticipated to carry within the non-public sector.

In actual fact, the results of the all-Roth catch-up requirement for prime earners could also be much more widespread within the non-public sector, given the historic (and widening) pay hole that has lengthy existed between private and non-private work.

“Whereas the share of public-sector members affected by this obligatory provision is comparatively low, the share of the public-sector plan sponsors within the database impacted is far larger at 55%, as these members are dispersed throughout many plans,” the authors clarify.

“In different phrases, one in each two plan sponsors could also be required to make plan administration adjustments because of this provision,” they be aware.

Extra Key Findings, Particulars

Along with quantifying the variety of folks and employers probably to be affected by this rule — which has been delayed till 2026 underneath IRS steerage — the EBRI researchers additionally regarded on the retirement plan balances of this older, higher-earning group.

The outcomes present a large spectrum of financial savings ranges, suggesting a various diploma of dedication to office retirement financial savings among the many group.

Particularly, amongst these older than 50 making greater than $145,000 as of 2021, some 32% of employees had account balances of $200,000 or much less.

One other 25% carried balances between $200,000 and $400,000; 16% carried balances between $400,001 and $600,000; 11% carried balances between $600,001 and $800,000; 7% carried balances between $801,000 and $1 million; and 9% carried balances over $1 million.