Learn how SECURE 2.0 Section 603 affects 401(k) catch-up contributions in Bob, and what needs to be configured for eligible employees.
Starting with SECURE 2.0 Section 603, employees who meet specific eligibility requirements must make catch-up contributions as Roth (post-tax) contributions instead of pre-tax contributions.
An employee is considered eligible when:
- They are age 50 or older by the end of the tax year
- Their plan supports catch-up contributions
- Their prior-year W-2 Box 3 (FICA) wages exceeded $150,000 with the same employer
For eligible employees:
- Catch-up contributions must be Roth contributions
- Pre-tax catch-up contributions are not allowed
- Only the standard 401(k) deferral limit can remain pre-tax
Before you begin make sure the following are configured:
- A Roth 401(k) deduction is available
- Eligible employees are enrolled in Roth contributions when required
- Your plan type is identified as either:
- Deemed/automatic
- Manual
- Guideline integration customers
- If you use the Guideline integration, Section 603 eligibility handling and Roth catch-up contribution setup are managed within the Guideline setup flow.
This includes:
- Eligibility classification
- Roth deduction setup
- Deemed versus manual plan handling
- Missing prior-year wage collection when required
- How deemed and manual plans work
- Deemed or automatic plans
- For deemed plans, catch-up contributions automatically convert to Roth after the employee reaches the standard annual contribution limit.
For this process to work correctly:
Employers must notify HiBob Support which employees should be treated as Section 603 eligible, a Roth 401(k) deduction must exist within the plan, and the Roth deduction must already be assigned to the employee in US Payroll before the employee reaches the standard annual contribution limit.
Once these requirements are met, catch-up contributions should automatically continue as Roth contributions after the standard annual contribution limit is reached.
If an employee’s Section 603 eligibility is not identified correctly, catch-up contributions will not process as expected and standard 401(k) deductions will stop once the standard annual limit is reached.
Manual plans
For manual plans, catch-up contributions do not automatically convert to Roth after the employee reaches the standard annual contribution limit.
This means:
The employee must still be identified as Section 603 eligible, a Roth 401(k) deduction must exist and be assigned to the employee,
and employers are responsible for monitoring employees approaching annual contribution limits and manually updating contribution elections as needed.
If Roth contributions are not configured appropriately before the standard limit is reached, payroll deductions may stop or catch-up contributions may not process correctly.
New hire handling
New hires are generally treated as not eligible by default because eligibility is based on prior-year wages with the same employer.
An exception may apply if the employee previously earned more than $150,000 with the same employer during the prior year (rehire).
Review the following before payroll processing:
- Eligible employees are identified correctly
- Roth contribution options are configured
- Employees who require Roth catch-up contributions are enrolled properly with your provider and within HiBob
- Your plan type is confirmed
- HiBob CX is notified when an employee should be classified as a Section 603 high earner
As a temporary process, customers must notify HiBob CX when an employee is identified as a high earner or when they no longer meet the threshold, based on prior-year wages, in a subsequent year. This functionality is prioritized for a future release, which will integrate the process into the product UI for direct, self-service management.
If eligibility is not configured correctly, contributions may stop unexpectedly or catch-up contribution handling may not work as expected.
Note: In accordance with HiBob's terms, this content is not to be taken as tax, legal, benefits, financial, or HR advice. Since rules and regulations change over time and can vary by location, consult a lawyer or HR expert for specific guidance.