Can A Church 403(b) Plan Require Employees to Use Roth Catch-Ups?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

Q: We are a large denominational church that sponsors a 403(b) plan for our member churches, but there is no centralized payroll system. Thus, it would be impossible for us to administer the new $145,000 rule for Roth catch-up deferrals under the SECURE 2.0 Act of 2022, since we have no idea what churches pay their individual employees. Instead, could we simply require that ALL employees utilize Roth for their catch-up elections?

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

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

A: Section 603 of the SECURE 2.0 Act amends Internal Revenue Code Section 414(v) to provide that any eligible participant earning more than $145,000 in prior-year wages from the employer sponsoring the plan who wishes to make catch-up contributions must elect Roth for such contributions, beginning in 2024. While there is no clear authority explicitly providing that a plan sponsor may require that all catch-up contributions be Roth, even for those making $145,000 or less in the prior year, plan sponsors generally have flexibility in plan design absent a prohibition. Therefore, pending additional guidance, it may be reasonable to add such a requirement to your plan.

Having said that, there is an exception that might limit the number of individuals you must identify as earning more than $145,000. Self-employed clergy do not need to be included at present, because individuals who do not have W-2 wages related to their employment will seemingly be able to continue to make traditional pre-tax catch-up contributions, even if their income from self-employment is greater than $145,000, due to the way the provision is currently written. However, it is possible this loophole could be closed via further Congressional action.

Finally, the future of catch-up contributions in general was questioned by some erroneous language in SECURE 2.0. Though we expect this potential error to be corrected or clarified by Congress (or through future guidance), you should check PLANSPONSOR periodically for future developments in this regard.

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.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.