May 5, 2025 – Updated February 20, 2026 for 2026 Limits and Final Regulations | 4-5 Minute Read
In addition to expanding catch-up contributions limits for some savers, SECURE 2.0 also introduced a significant rule for plan catch-up contributions for higher-earning employees. Catch-up contributions allow those who are closer to retirement (age 50 and up) to “catch-up” on retirement saving, as many do not save as much earlier in their careers. Beginning January 1, 2026, employees who will attain age 50 by year-end who earned $150,000 or more in prior-year FICA (wages subject to Social Security taxes) will be required to make those catch-up contributions on a Roth (after-tax) basis. For example, 2025 wages would be considered for 2026 applicability. Those earning below this threshold in the previous year, will still have the option to make their catch-up contributions on a Pre-Tax, or if allowed by the plan, a Roth Basis.
When it Becomes Effective
While this provision was originally slated to take effect in 2024, the IRS delayed this requirement to begin on January 1, 2026 via Notice 2023-62. This delay has been described as a two-year “administrative transition period,” allowing plan sponsors, payroll providers, and recordkeepers to make the necessary changes in their systems to accommodate this provision. The requirement for higher earners to contribute their catch-up contributions on a Roth basis applies to 401(k), 403(b), and governmental 457 plans.
How it Works
The $150,000 threshold will be indexed for inflation in future years. For 2026, the applicable prior-year wage threshold is $150,000 based on 2025 wages. It is based on FICA wages (Box 3 on the W-2) in the previous calendar year. While this generally is an employer-specific requirement (if an employee receives income from another employer, these amounts do not have to be combined), the final regulations permit certain aggregation approaches in controlled-group/common-paymaster situations, depending on the plan’s terms and payroll reporting structure. The plan document must allow for Roth contributions in order for these higher earners to make their contributions on a Roth basis. If the document does not allow for Roth, these employees will not be able to make catch-up contributions, or the document will need to be amended. Further, the IRS has provided guidance in its final regulations that a plan sponsor cannot require that all employees over 50 make catch-up contributions on a Roth basis to ease administration.
Other Considerations
Participants who have no FICA wages from the employer sponsoring the plan in the prior year are not subject to the mandatory Roth catch-up requirement. This includes people such as:
-
Partners or owners whose income from the business is self-employment income only and is not reported as FICA wages on a W-2, and
-
Some government workers or other employees whose compensation is not subject to Social Security (e.g., certain public sector wages not taxable for FICA).
We recommend communicating ahead of time to your higher-earning participants who will be affected by the change. You will want to explain that due to this SECURE 2.0 provision, their catch-up contributions in 2026 will need to be made on a Roth basis (granted that your plan allows for Roth contributions). If your plan does not allow for Roth contributions, you will need to explain to these participants that they will not be able to make catch-up contributions for the year.
If your plan does allow for these Roth catch-up contributions, you will want to ensure that your payroll procedures will identify those who are affected by the requirement, withholds their catch-up contributions on a Roth basis, and that these contributions are deposited to the correct Roth source at the recordkeeper.
As a reminder, 2026 contribution limits for 401(k), 403(b), and 457 plans are $24,500 for elective deferrals, and $8,000 for catch-up contributions. Another provision of SECURE 2.0 is that those who are 60, 61, 62, or 63 at any time in 2026 will be able to defer an additional $11,250, as discussed in our article “SECURE 2.0: Expanded Catch-Up Contributions for 60-63 Year Olds Starting in 2025.” These expanded catch-up contributions will need to be made on a Roth basis for those who fall under the Roth Catch-Up requirement. You can always find the most up to date contributions limits here.
What Happens If A Plan Does Not Comply in 2026?
If a plan allows pre-tax catch-up contributions for a participant who should have been subject to the Roth requirement:
-
it is an operational compliance error,
-
payroll reporting (including Form W-2) may need to be corrected, and
-
the plan may need to correct the issue under IRS correction principles.
The IRS has stated that plans may rely on a reasonable, good-faith interpretation of the law for taxable years beginning before 2027, but the statutory requirement itself applies for taxable years beginning after December 31, 2025 (January 1, 2026 for calendar-year plans).
Benefits² Administrators clients: If you have questions about required catch-up contributions in your plan, we encourage you to reach out to your dedicated Retirement Analyst. They can help you determine if your plan document will need to be amended to allow for Roth contributions and identify which employees will be affected. They can help you better understand the difference between Roth and Pre-Tax contributions and how these contributions are calculated.
For non-clients or plan advisors seeking guidance: Feel free to contact Leslie Wood (lwood@benefits2llc.com) for additional information and support. Leslie can provide an overview of the SECURE 2.0 required Roth catch-up contributions provision, if a plan document needs to be amended for Roth to allow for these contributions, or additional strategies for increased retirement savings.
Whether you are a current client or not, our goal at Benefits² Administrators is to ensure every plan sponsor has the knowledge and support to remain compliant and help participants succeed in saving for retirement.
JP Perryman, QKA
Jeremiah “JP” Perryman, QKA is the Compliance and Operations Manager at Benefits² Administrators. He has more than 15 years of experience working with qualified retirement plans.