The Rosenbaum Law Firm P.C. Blog

If you thought catch-up contributions were settled territory, think again. The IRS has now issued final regulations under SECURE 2.0 that require, as of January 1, 2026, that catch-up contributions for certain higher-earning participants must be made on a Roth (after-tax) basis.

Here’s the bottom line: if a participant aged 50+ had FICA wages above $145,000 in the previous year (subject to indexing), any catch-up contributions they make must be designated Roth contributions. That changes the tax dynamics, the recordkeeping, and the communication burden for sponsors.

Key Implications for Plan Sponsors

1. System & Vendor Readiness

Your payroll, recordkeeping, and elections systems must be able to distinguish between catch-up contributions that must go Roth versus those that can remain pre-tax. That’s a nontrivial update.

2. Document & Plan Design Review

If your plan doesn’t currently allow Roth contributions, catch-up participants subject to the rule will be unable to make catch-up contributions. The regulations provide nondiscrimination relief in such cases — but you need to understand how it works and consider whether to amend your plan.

3. Communication Is Critical

Many participants will never have made Roth contributions in a retirement plan before. You must educate them about the tax tradeoffs — paying taxes now vs. potential tax-free distributions later — and help them recalibrate their deferral strategies.

4. Good-Faith Compliance

Window Even though the statutory requirement begins in 2026, the final regulations give sponsors leeway to rely on a “reasonable, good-faith interpretation” through the end of 2026. But that’s a bridge — not a long-term excuse.

The Rosenbaum Take

This is a move with real teeth. It forces a shift in how retirement saving is taxed for higher earners in their catch-up years. If you’re a plan sponsor who delays preparation, you risk scrambling — or worse, failing compliance.

Start working now with your legal, recordkeeper, and payroll teams. Update your plan documents, run mock elections, and communicate proactively. Because once 2026 hits, the era of pre-tax catch-up for high earners ends — whether your systems are ready or not.

If you thought catch-up contributions were settled territory, think again. The IRS has now issued final regulations under SECURE 2.0 that require, as of January 1, 2026, that catch-up contributions for certain higher-earning participants must be made on a Roth (after-tax) basis.

Here’s the bottom line: if a participant aged 50+ had FICA wages above $145,000 in the previous year (subject to indexing), any catch-up contributions they make must be designated Roth contributions. That changes the tax dynamics, the recordkeeping, and the communication burden for sponsors.

Key Implications for Plan Sponsors

1. System & Vendor Readiness

Your payroll, recordkeeping, and elections systems must be able to distinguish between catch-up contributions that must go Roth versus those that can remain pre-tax. That’s a nontrivial update.

2. Document & Plan Design Review

If your plan doesn’t currently allow Roth contributions, catch-up participants subject to the rule will be unable to make catch-up contributions. The regulations provide nondiscrimination relief in such cases — but you need to understand how it works and consider whether to amend your plan.

3. Communication Is Critical

Many participants will never have made Roth contributions in a retirement plan before. You must educate them about the tax tradeoffs — paying taxes now vs. potential tax-free distributions later — and help them recalibrate their deferral strategies.

4. Good-Faith Compliance

Window Even though the statutory requirement begins in 2026, the final regulations give sponsors leeway to rely on a “reasonable, good-faith interpretation” through the end of 2026. But that’s a bridge — not a long-term excuse.

The Rosenbaum Take

This is a move with real teeth. It forces a shift in how retirement saving is taxed for higher earners in their catch-up years. If you’re a plan sponsor who delays preparation, you risk scrambling — or worse, failing compliance.

Start working now with your legal, recordkeeper, and payroll teams. Update your plan documents, run mock elections, and communicate proactively. Because once 2026 hits, the era of pre-tax catch-up for high earners ends — whether your systems are ready or not.

Whenever I sit with a retirement plan committee, I can’t help but be reminded of my experiences with nonprofit boards — both as a member and as legal counsel. The dynamics are eerily similar. On paper, everyone is there for the same noble reason: to serve the greater good. In reality, people bring their own baggage to the table.

Most committee members genuinely want to do right by the participants. They volunteer their time, they review reports, they ask questions, and they take the fiduciary role seriously. These are the people you want in the room — the ones who understand that overseeing a retirement plan isn’t glamorous, but it’s critically important to the lives of employees who are counting on those benefits when they retire.

But then, there are the others. You know them. They join the committee because they like the sound of a title, or because they see it as a platform for power inside the organization. Sometimes they use meetings to grandstand, or to score points with leadership. The problem is, fiduciary duty is not about ego. It’s about loyalty, prudence, and putting participant interests ahead of your own. When personal agendas creep into the room, the committee loses focus — and participants can pay the price.

As an ERISA attorney, I’ve seen how messy things get when committees don’t function properly. Distractions multiply, critical questions don’t get asked, and decisions are made for the wrong reasons. That’s when plan sponsors end up in lawsuits, or on the wrong side of a DOL investigation.

The lesson? Make sure your retirement plan committee is populated with people who understand the responsibility and want to be there for the right reasons. Give them training. Keep minutes. Have clear policies. And don’t be afraid to rotate out members who treat it like a vanity project.

Serving on a retirement plan committee isn’t about prestige. It’s about stewardship. At the end of the day, it’s not your ego that’s at stake — it’s the financial future of every employee who relies on the plan.

Good news — the Senate has confirmed Daniel Aronowitz as Assistant Secretary of Labor, giving him the reins at the Employee Benefits Security Administration (EBSA). After a protracted seven-month wait, the confirmation vote (51–47) places the fiduciary world squarely in a moment of potential reset.

What He Pledged — And What to Watch

Aronowitz’s agenda, as he laid it out during the confirmation hearings and in public statements, suggests an aggressive pivot in EBSA’s posture. Some of his key objectives:

· Enforcement reform. He has vowed to end open-ended investigations and streamline fiduciary enforcement, making it more predictable and less litigation-driven.

· Regulatory clarity. He wants clearer rules so plan sponsors can act with confidence — minimizing regulatory ambiguity and chilling effects.

· Pro-ESOP tilt. Aronowitz has openly criticized what he sees as DOL’s anti-ESOP bias. He pledged to “end the war on ESOPs” and resist overzealous attacks on valuation professionals.

· Restoring fiduciary discretion. He frames one core principle as shifting decisions back to fiduciaries (not bureaucrats or plaintiffs’ lawyers), consistent with his view of how ERISA was intended

Why This Matters for You (As an Advisor, Sponsor, or Fiduciary)

· The regulatory environment is about to shift. Compliance strategies based on the “status quo” may be obsolete — sooner than later.

· Cases long stuck in limbo under aggressive enforcement periods may see fresh life, or new scrutiny under different priorities.

· Those managing ESOPs, or dealing with fiduciary liability and valuation risk, should especially keep their eyes on proposed DOL rulemaking.

· Documentation, process, and defensibility will remain vital — even more so when the ground rules may be redrawn.

This confirmation isn’t just a personnel change. It signals the possibility of a new guard at EBSA — one with a distinctly different philosophy than what we’ve seen in recent years. How much of this vision becomes reality depends on statute, courts, and the political environment. But for now, we have a new leader with ambitious goals. Stay tuned — things may move quickly.

The clock is ticking. Starting January 1, 2026, the world of catch-up contributions changes in a big way. Thanks to SECURE 2.0 and the IRS’s final regulations, higher-earning participants who want to make catch-up contributions will only be able to do so on a Roth (after-tax) basis.

For plan providers — whether you’re a TPA, advisor, payroll vendor, or recordkeeper — this isn’t just another technical tweak. It’s a sweeping operational shift. Let’s break it down.

What’s Changing

Beginning in 2026, if a participant earned more than $145,000 in FICA wages from the plan sponsor in the prior year (indexed for inflation), any catch-up contributions they make must be Roth. No more pre-tax catch-up for that group.

Participants under the threshold can still choose pre-tax or Roth for catch-up. But the burden on providers is identifying which employees are in which bucket — and making sure systems handle the difference without error.

The Operational Pressure Points

1. Identifying Who’s Impacted

Payroll systems must flag which participants cross the $145,000 wage threshold each year and communicate that to recordkeepers. That determination has to be timely and accurate.

2. Handling Elections

Many plans use a “spillover” method: once a participant hits the elective deferral limit, additional amounts automatically go into catch-up. Under the new rule, those spillovers must switch to Roth if the participant is over the wage threshold. That requires systems to flip designations automatically.

3. Tracking Contributions Separately

Providers need clean separation between pre-tax and Roth contributions. Mixing them and trying to fix it later won’t cut it. Precision on the front end prevents compliance messes on the back end.

4. Correcting Errors

Mistakes will happen. If a high earner’s catch-up goes in as pre-tax, there are only two ways out: either reclassify through payroll before year-end, or process as an in-plan Roth conversion with appropriate reporting. Both methods are operational headaches. Providers should plan now for which correction path they’ll use.

5. Communication & Education

Many participants in this category have never contributed to Roth in a plan before. They need to understand the tax implications: pay taxes now, enjoy tax-free qualified withdrawals later. Providers have to arm sponsors with clear, simple education materials to get ahead of confusion.

The Rosenbaum Take

This is a regulation with real bite. For plan providers, it’s not enough to just “wait and see.” You’ll need to work closely with payroll, recordkeeping, and plan sponsors to ensure processes are aligned before 2026.

The risk isn’t just compliance failure. It’s the chaos that comes when participants get the wrong tax treatment, or when contributions have to be clawed back and reclassified after year-end. That’s when angry calls come in — and that’s when sponsors start looking for new providers.

My advice is simple: don’t wait. Test your systems now. Run mock scenarios. Draft your communication templates. Help your clients amend plan documents if Roth isn’t currently an option. The providers who are proactive will win trust. Those who lag will lose credibility.

The era of Roth-only catch-up for high earners is almost here. Providers who prepare early won’t just survive it — they’ll turn it into an opportunity to prove their value.

The latest chapter in the wave of forfeiture reallocation lawsuits comes from Armenta v. WillScot / Mobile Mini. The good news: most of the claims were dismissed. The caution: one prudence claim survived, and the court gave the plaintiff a chance to amend.

What Happened

The lawsuit challenged how plan forfeitures were used, arguing they should have been applied first to pay administrative expenses instead of reducing employer contributions. The court dismissed most counts, noting the plan document gave discretion by saying forfeitures “may” be used for admin costs — not “must.” Claims of disloyalty and prohibited transactions didn’t stick.

But one claim remains: whether fiduciaries acted prudently in their process. The court is allowing the plaintiff to try again, focusing on how decisions were made rather than what outcome occurred.

Why It Matters

This case reflects a broader pattern. Many forfeiture suits are getting tossed, but courts are open to claims that target the decision-making process. Judges aren’t as interested in second-guessing outcomes as they are in whether fiduciaries engaged in a thoughtful, documented process.

Lessons for Fiduciaries and Plan Sponsors

· Plan language matters. Words like “may” versus “must” can be the difference between discretion and liability. Review your documents and know what flexibility you have.

· Process is everything. Keep records of how decisions are made around forfeitures. Meeting minutes, comparisons, and documented alternatives can make or break a case.

· Dismissal isn’t final. Plaintiffs often get another chance, as here. Even when claims are weak, expect persistence.

· Be proactive. Don’t wait for a lawsuit to review your forfeiture provisions and fiduciary practices. A little preparation now is cheaper than defense later.

Bottom Line

The court’s ruling is encouraging for fiduciaries — most of the claims didn’t stick. But the fact that a prudence claim survived is a reminder: outcomes matter less than process. If you’re making discretionary decisions about forfeitures, make sure the “paper trail” shows a prudent, deliberate process.

The Investment Company Institute reports that U.S. retirement assets bounced back in Q2 2025, setting record highs. That’s good news — but it’s also a reminder to stay sharp.

What’s driving the climb?

· Market appreciation lifted balances.

· Steady employee/employer contributions added fuel.

· Rollovers and consolidations continue to funnel money into IRAs and DC plans.

The caveats:

· These gains are fragile — one market downturn and the “record” headline disappears.

· Disparities remain: high-balance accounts capture most of the upside.

· Leakage from loans, withdrawals, and fees still eats away at growth.

· Regulatory shifts can quickly change the rules of the game.

What plan sponsors and advisors should do now:

· Stress-test for flat or down markets.

· Tailor communications by participant segment.

· Reinforce value and transparency on fees.

· Tighten controls around leakage.

· Stay on top of regulatory changes.

The record is a checkpoint, not a finish line. Success in retirement planning is measured in outcomes, not headlines.

If you want to stay out of DOL trouble, here’s what I’d tell you over a drink,no legalese, just practical advice.

1. Cybersecurity is a fiduciary issue. The DOL is digging deep into cybersecurity practices, going well past HIPAA compliance. Having an “IT policy” on the shelf won’t cut it. Auditors will want to see meeting minutes, risk assessments, device policies, and even how you handle portable devices and payroll data.

2. Vet and tighten your vendor contracts now. Review your agreements with vendors and recordkeepers (especially those handling participant data or payroll info). Make sure the contracts require strong data security standards, reporting on cyber incidents, encryption, and notifications. And yes—make sure the vendors can’t wiggle out of liability when things go sideways.

3. Look for documentation, not just policies. It’s easy to write a cybersecurity plan, less easy to prove you executed it. The DOL will ask for audit reports, risk assessments, training logs, breach investigations, and communications about security protocols. If you don’t have documented follow-through, you’re vulnerable.

4. Train your people, and document that training. Cybersecurity training isn’t just a “nice to have.” It’s expected. Keep records: who was trained, when, by whom, and what materials were used. The DOL is looking for that chain of evidence.

5. Check your insurance, and insist on cyber coverage. Cyber-insurance isn’t just for tech companies. Review your policies now—what do they cover? Do they address social engineering, phishing, identity theft, or data breaches? What are the limits? Have you made claims before? The DOL might ask.

6. Bring cybersecurity into your plan oversight meetings. Just like you review investment performance or vendor contracts periodically, cybersecurity should be a recurring agenda item for your plan committee. If you treat it as an afterthought, you’ll have trouble explaining your oversight in a DOL audit.

Final Word: Cybersecurity isn’t just an IT problem, it’s an ERISA oversight issue. If you don’t treat participant data protections, vendor security, and breach preparedness as fiduciary responsibilities, don’t be surprised when a DOL audit rips your plan apart. Better to prepare before the audit letters hit.

When it comes to retirement plan regulations, the only constant is change—and the Roth catch-up requirement under SECURE 2.0 has been a rollercoaster. The IRS and Treasury finally issued their final regulations, and plan sponsors can breathe, somewhat, knowing that the mandatory Roth catch-up for high-income participants aged 50 and up won’t kick in until taxable years beginning after December 31, 2026. That delay is a gift, considering how chaotic this provision could have been if it went live as originally scheduled in 2024.

What’s clear is that the agencies listened to industry pushback. The final rules offer flexibility, such as allowing administrators to use prior-year wages from certain common-law employers to determine who’s subject to the rule. They also addressed correction mechanics, Roth election defaults, Puerto Rico plan coverage, and even gave government plans and collectively bargained plans extra breathing room. NAGDCA’s lobbying didn’t go unheard.

The bottom line? This isn’t an indefinite reprieve. Employers can adopt the requirement early, but they’ll need a “reasonable, good faith interpretation” of the statute. Notice 2023-62’s transition relief still ends December 31, 2025. By 2027, the Roth catch-up mandate will be reality, and plan sponsors, TPAs, and advisors should spend the next two years building systems, updating payroll feeds, and educating participants.

Because in my experience, nothing angers a 50-year-old high earner more than finding out their “extra” savings aren’t going in the way they expected. And nothing angers the IRS more than noncompliance.

If you’re a plan sponsor, here’s what I’d tell you about the growing conversation around cryptocurrency in retirement plans.

1. Risks Are Real — and Fiduciary Responsibility Wins

Cryptocurrency might seem sexy or edgy, but from a fiduciary standpoint, it’s a minefield. Lack of regulation, market volatility, operational risk, and custody and valuation challenges all pose problems. Fiduciaries can’t simply shrug and hope “the millennials” want crypto. ERISA standards demand prudent due diligence and proper process.

Takeaway for sponsors: just because crypto is “on the menu” doesn’t mean you have to serve it. Or worse, force-feed it.

2. The Regulatory Weather Is Unsettled

Back in 2022, the Department of Labor issued a stern warning—telling plan fiduciaries to “exercise extreme care” before offering crypto in retirement plans. That guidance was later rescinded, shifting DOL’s position to a more neutral stance. But “neutral” does not mean “endorsing,” and it certainly doesn’t eliminate fiduciary risk.

The regulatory pendulum might swing again. If you’re thinking about crypto, keep your eyes on upcoming guidance and potential litigation issues.

Takeaway for sponsors: don’t assume the current hands-off posture means risk has evaporated, far from it.

3. Operational Complexity Can Be Overlooked, at Great Cost

Crypto doesn’t behave like a mutual fund or a bond. It raises real questions around:

· Custody: Who holds the asset, who controls the keys, and what happens if private keys are lost?

· Valuation: How do you price it on your plan books?

· Liquidity: Can participants get out when they need to?

· Recordkeeping, fees, and fund structuring: How do investment flows get tracked, reported, audited, and reconciled for ERISA compliance?

These aren’t trivial details, they’re everyday plan administration issues that can become fiduciary nightmares if mishandled. If your provider can’t show you how they’re solving these issues—don’t go there.

4. Education, Communication, and Participant Experience Are Key

Crypto is not a vanilla investment. Most people don’t understand blockchain, wallets, private keys, or volatility cycles. Participant understanding is a major concern.

It’s not enough to add a “crypto option” and assume participants will read a disclosure notice. Plan sponsors must educate and communicate clearly, especially about:

· upside and downside

· the speculative nature of crypto

· volatility and drawdowns

· the risk that participants could lose everything, especially if they get into crypto late in their saving timeline

Lesson: crypto isn’t just another TDF or large-cap equity fund with a shiny label. Treat it like a foreign language when you roll it out.

5. If You Do Consider It — Think Small, Wrapped, and Optional

If, after all that, you still think crypto deserves a place in your retirement lineup, here are a few guardrails to consider:

· Limit exposure. Don’t let crypto become a major part of the core default investment lineup. Treat it as a niche or optional exposure, not a central building block.

· Wrap it in a fund or managed product. Some sponsors may offer crypto exposure via target-date or multi-asset funds, or through professionally managed vehicles, rather than giving participants direct access to raw crypto.

· Use education and opt-in. If crypto is offered, make it opt-in, with clear participant disclosures, not a default or core menu item. Let participants choose it, don’t force it.

· Update your Investment Policy Statement (IPS). If crypto is being evaluated, your IPS needs to explicitly address it: how it will be evaluated, how performance will be monitored, how fund providers will be vetted, and how liquidity and risk assessments are built into the oversight process.

6. But Here’s the Bigger Picture: Crypto Is a Distraction from What Really Moves the Needle

Crypto is sexy, crypto is headline-grabbing, and crypto makes for great marketing speeches. But if you are a sponsor who hasn’t nailed your auto-enrollment design, your match formula, your participant communication strategy, or your low-cost qualified default investment alternative, then crypto is a distraction. Participants don’t save less because there’s no Bitcoin—they save less because they aren’t engaged, don’t understand what to do, or don’t get a match. They don’t retire because they don’t save, not because they didn’t have crypto.

Crypto may be “the next frontier.” But retirement savings failure today isn’t about missing the next frontier, it’s about not winning the frontier we’re already on.

Final Word

Crypto in retirement plans comes with real opportunity, but even more real risk. As plan sponsors, your job isn’t to chase every shiny new investment trend. It’s to build durable, well-designed, financially secure retirement plans, and to safeguard participants’ savings for decades—not for a spectacular crypto rally.

If you’re thinking about crypto, do your homework. Document your process. Ask hard questions. Don’t assume regulatory neutrality means risk is gone. And above all, ask yourself: Would I rather be the sponsor who led participants into a crypto windfall, or the sponsor who led participants through a crypto meltdown and into a lawsuit?