Final Regulations issued in September of 2025 have confirmed a new upcoming requirement under the SECURE 2.0 Act.
Under this provision, employees who earned more than $150,000 in 2025 FICA wages (found in box 3 of form W-2) and are ages 50 or older (or who will turn 50 prior to December 31, 2026) will be required to make any catch-up contributions as Roth (after-tax) contributions starting on January 1, 2026.
- Note: This provisional requirement affects 401(k), 403(b) and governmental 457(b) plans. Sole proprietors, partners in a partnership, SIMPLE IRA, SEP IRA and other 457(b) plans are not affected by this new requirement.
Catch-up contributions for these eligible individuals should be automatically designated as Roth unless the participant elects to opt-out of catch-up contributions and only contribute up to the base IRC Section 402(g) limit (e.g., $24,500 in 2026). Payroll personnel, payroll companies, and recordkeepers are in the process of updating or have updated their systems to accommodate this new provision.
What does this mean?
- Effective January 1, 2026, employee deferrals can be designated as pre-tax contributions until the IRC Section 402(g) employee deferral contribution limit (e.g., $24,500 in 2026) is reached.
- All contributions in excess of this IRS contribution limit will be allocated as “catch-up contributions." In the case of highly-paid Individuals (HPIs) who are age 50 or older (or will turn 50 during the calendar year), their catch-up contributions will be made as a Roth catch-up contribution in accordance with the SECURE 2.0 Act.
What can you do as the advisor for your client?
- This is a great talking point and value add to discuss with your clients to make sure they are aware of this new mandatory provision. Encourage them to work with their own company plan administrator to ensure that a process is in place if their intent is to make catch-up contributions to their 401(k) plan.
For Internal Use Only