Roth catch-up contribution provision delayed—but don’t wait to act
Affected plan sponsors are strongly encouraged to partner with Vanguard now and not wait to act. We recommend that plans add a Roth contribution feature to provide tax diversification for participants and help ensure compliance with the Roth catch-up provision by the 2026 effective date.
Regulators are expected to provide more guidance on this rule in the future. Look for updates from us along the way.
Long-term part-time employee eligibility begins
The long-term part-time (LTPT) employee eligibility provision will affect each plan differently. Plans that exclude part-time employees should consult with their ERISA counsel to determine how their plan will be affected. These plans can also consider treating part-time employees the same as full-time employees to avoid the need to comply with LTPT rules.
At a high level, there are two dates to be aware of:
- January 1, 2024: LTPT employees—part-time employees who worked at least 500 hours in each of three consecutive years—will be eligible to make elective deferrals to their 401(k) plan.
- January 1, 2025: The definition of LTPT employees is changed to part-time employees who worked at least 500 hours in each of two consecutive years. And coverage is expanded to include 403(b) plans.
LTPT employee eligibility for 2024 will be determined by tracking hours worked since January 1, 2021. Plan sponsors should be working with Vanguard to provide all the information needed to identify LTPT-eligible employees.
Roth dollars excluded from required minimum distributions
Beginning January 1, 2024, Roth dollars won’t be subject to a required minimum distribution (RMD), nor will Roth dollars be included when calculating RMD amounts. Plan sponsors don’t need to take any action. We’ll make sure that Roth sources are exempt from RMD calculations and that all participant materials and forms are updated accordingly.
We’re in communication with affected participants. Those who currently receive RMDs containing both Roth and non-Roth dollars were notified their RMDs will likely be lower beginning in 2024. And those with retirement plan balances that consist entirely of Roth dollars were informed their RMD payments will stop in 2024.