Essentials of the New Roth Catch-Up Contribution Rule

A key provision of the SECURE 2.0 Act is set to take effect in 2026, and it will change the way catch-up contributions work for certain employees. While the rule was originally scheduled for 2024, the IRS delayed implementation to give plan sponsors more time to adjust. Now, with 2026 fast approaching, it is time to prepare. This change affects employer-sponsored retirement plans like 401(k), 403(b), and 457(b) plans. For the first time, some employees will be required to make catch-up contributions on a Roth basis. For plan sponsors, that means reviewing plan features, evaluating systems, and communicating clearly with participants. To help clients, prospects, and others, WhippleWood CPAs has summarized the key details below.

Who is Affected?

The Roth requirement applies to employees who earn more than $145,000 in FICA wages from the plan sponsor in the prior calendar year. This threshold is adjusted annually for inflation. FICA wages generally include regular pay, bonuses, and other taxable compensation that is subject to Social Security and Medicare taxes. They do not include income like retirement plan distributions or tax-exempt benefits.

Only wages from the common-law employer sponsoring the plan are counted. Compensation from an affiliate that does not participate in the plan does not apply. This detail is important because it affects how employees are identified for Roth catch-up treatment in 2026.

Employees who fall below the $145,000 threshold are not affected. They can continue to choose between traditional and Roth catch-up contributions if both options are available in the plan.

What is Changing in 2026?

Starting in 2026, participants age 50 or older who meet the “high-earner” threshold of $145,000 must make any catch-up contributions to a designated Roth account. These contributions will be made on an after-tax basis and will grow tax-free, provided certain conditions are met.

If the plan does not offer a Roth option, high earners will no longer be allowed to make catch-up contributions. The plan sponsor is not required to add a Roth feature, but doing so may be necessary to support retirement readiness for higher-paid employees. There is no partial application of this rule. New hires and employees who earned less than $145,000 from the plan sponsor in the prior year are not subject to the Roth requirement.

What is Not Changing?

The annual catch-up contribution limit for participants aged 50 or older remains in place. For 2025, this amount is $7,500 (on top of the $23,500 limit) and may increase in future years based on inflation. Employees who are not subject to the Roth requirement can continue making catch-up contributions on a pre-tax or Roth basis, depending on what the plan allows. This Roth requirement only applies to employer-sponsored retirement plans. It does not apply to traditional or Roth IRAs. Individuals age 50 and over may still contribute an additional $1,000 to an IRA, regardless of income, subject to overall eligibility and income limits for Roth contributions.

Optional Super Catch-Up for Ages 60 to 63

Another change from SECURE 2.0 is already in effect. Beginning in 2025, participants age 60 to 63 may contribute more than the standard catch-up amount. This higher limit is the greater of $10,000 or 150% of the standard catch-up contribution. For 2025, that amounts to $11,250.

This feature is optional. Plans can choose whether to offer enhanced catch-up for this age group. If they do, the feature must be made available to all eligible participants.

Action Steps for Plan Sponsors

Now is the time to evaluate plan features and make any needed updates. Plans that do not currently offer Roth contributions may want to add this option to allow high earners to continue making catch-up contributions. Adding a Roth feature requires formal plan amendment and coordination with service providers.

Plan sponsors should also review payroll systems to ensure accurate tracking of FICA wages. This information will determine which employees are subject to the Roth requirement each year. New processes may be needed to flag eligible participants automatically. It is also important to update participant communications. Employees should understand what is changing, when it takes effect, and whether it applies to them. Coordination with recordkeepers and third-party administrators will help with the rollout. Finally, plan sponsors should review plan documents and work with plan advisors to confirm that language supports the Roth requirement and any optional features.

Contact Us

The Roth catch-up rule is a major change for retirement plans. While the changes only apply to a portion of employees, plan sponsors play a central role in making sure participants can continue saving without disruption. With 2026 just around the corner, planning will make a difference. If you have questions about the information outlined above or need assistance with another tax or accounting issue, WhippleWood CPAs can help. For additional information call 303-989-7600 or click here to contact us. We look forward to speaking with you soon.