Updated November 14, 2025

NOTE: In Notice 2023-62, published on Aug 25, 2023, the IRS delayed the effective date of this requirement to 2026. Final regulations published September 16, 2025 are effective in 2027. Until 2027, employers must operate using a reasonable, good faith interpretation of the law.

SECURE 2.0 introduced two significant changes to employee catch-up contributions: one requires catch-ups made by high-earning individuals to be Roth (after-tax), and the other increases catch-up amounts for individuals aged 60-63.

Background

Retirement plans that permit employees to save (defer) a portion of their current earnings for retirement, such as a 401(k) plan or a 403(b) plan, often include a feature allowing employees aged 50 or older to contribute an additional amount, called a catch-up contribution. The annual amount, $8,000 in 2026¹, is in addition to the maximum deferral limit set for the tax year, $24,500 in 2026. Before SECURE 2.0, if a plan allowed, catch-up amounts could be made with pre-tax dollars, Roth (after-tax dollars), or both.

Starting January 1, 2026²

Employees with FICA wages exceeding $150,000 (adjusted annually for inflation) in the preceding calendar year must contribute their catch-up contributions on a Roth basis. Impacted employees will be referred to here as Highly Paid Individuals. The rules to identify Highly Paid Individuals are more complex than they may first seem. Read these important FAQs for the details.

Since this is a mandatory provision, employers will need to take a few proactive steps before January 1, 2026:

1. Review plan document:
   • If a plan does not allow catch-up contributions, these rules will not impact the plan. 
   • If a plan allows catch-up but not Roth contributions, Highly Paid Individuals must be identified because they may not make catch-up contributions³. 
   • If a plan allows both catch-up and Roth contributions, Highly Paid Individuals must be identified because any catch-up contribution they make must be Roth⁴.
   • A plan may be amended to add or remove catch-up or Roth contributions prospectively, so employers need to determine the ideal path forward and ensure their plan documents reflect that path.  Employers seeking administrative ease by removing catch-up contributions should consider how this will affect employer-provided benefits like a match.
2. Coordinate with payroll and plan’s investment platform providers:
   • Employers must confirm with their payroll departments and/or payroll providers that their systems are timely updated to reflect the new rules effective on January 1, 2026.  Employers should ask whether payroll will require elections be made in a specific manner to be processed correctly.  The SPARK Institute, Inc’s “Industry Best Practices & Procedures for Roth Catch-Up Contributions” suggests the following questions as plan sponsors engage with their payroll providers:
     • Can your system identify employees whose prior year FICA wages exceeded $150,000 (adjusted annually for inflation)?
     • Can you send a list of these employees to us by the first payroll each year?
     • Will you automatically switch those employees’ pre-tax catch-up contributions to Roth once they reach the IRS limit? Will you be tracking the limit on a pre-tax or combined basis?
     • Will your system automatically go back to the employee’s original election (i.e., the one that was in effect at the time of the switch, provided that no subsequent elections were made) on January 1 each year?
   • Updated employee deferral elections will need to be transmitted to payroll for timely implementation.
   • Confirm with the plan’s investment platform provider that their systems are also properly set up to track the catch-up deferrals and Roth amounts. Some investment platforms will ask employers to identify Highly Paid Individuals so their systems can monitor the catch-up contributions made and flag potential problems.
   • Monitor withholdings.  Especially during 2026, review payroll reports and plan records regularly to ensure Highly Paid Individuals have not contributed pre-tax catch-up amounts.
3. Identify impacted employees and communicate the rule change:
   • Employers need to identify Highly Paid Individuals and inform them about the change in catch-up rules. 
   • Deferral election forms/materials need to include an explanation of the new rules, and how to opt out of an employer’s deemed Roth catch-up election approach (if applicable).

Let Pinnacle Plan Design Help

Consultants at Pinnacle Plan Design are actively monitoring new guidance concerning SECURE 2.0. This represents our understanding of the laws at this time.  Additional guidance will provide additional clarity.  If you have any questions about the rules changing catch-up contributions in your retirement plan, don’t hesitate to contact us at (520) 618-1305.

The content of this page is for general information only. While it is believed to be accurate and reliable as of the posting date, it may be subject to change as additional guidance becomes available. It is not intended to provide investment, tax, or legal advice. For advice regarding your specific circumstances, please seek services of an appropriate independent legal, tax, or investment professional.

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1. Click here to view current contribution limits ↩︎
2. SECURE 2.0 made the new provision effective for taxable years beginning in 2024; January 1, 2024 for most individuals. The administrative transition period announced by the IRS in Notice 2023-62 extended the deadline for implementation of the new catch-up rule from 2024 to 2026. In January 2025, IRS issued proposed regulations. On September 16, 2025 IRS published final regulations, effective January 1, 2027 (with some exceptions for unions),  addressing some of the practical challenges this provision created. Until 2027, employers must operate using a reasonable, good faith interpretation of the law. ↩︎
3. Some employers may wish to add/restrict Roth contributions only to catch-up contributions (for all participants – both Highly Paid Individuals and not).  While this is possible, employers should consider the added administrative complexity of communicating such a provision to staff and ensure their payroll companies and investment platform providers can operationally accommodate this design. To facilitate satisfaction of 1.401(a)(4)-4 with respect to the availability of catch-up contributions when the plan allows catch-up but not Roth, an amendment to the plan to preclude Highly Compensated Employees from making catch-up contributions may be advisable. ↩︎
4. Employers should consider adopting a ‘deemed Roth catch-up election approach’ to maximize options for correcting pre-tax catch-ups made by Highly Paid Individuals to Roth. ↩︎