Plan sponsors and recordkeepers let out a collective sigh of relief when the Roth catch-up contribution requirement under SECURE 2.0 was delayed until 2026. And for good reason\u2014this rule, though well-intentioned, brings with it a level of administrative complexity that even seasoned ERISA professionals wince at.<\/p>\n
Let\u2019s start with the basics. The requirement applies only to employees earning more than $145,000 (indexed) in FICA wages, not partners or self-employed individuals. That $145,000 threshold? It\u2019s not a number retirement plans are used to tracking. Many plans don\u2019t even offer Roth at all, and suddenly they\u2019re being asked to flip a switch they don\u2019t have installed.<\/p>\n
The IRS tried to help with proposed regulations, but in classic IRS fashion, the guidance added as many questions as it answered. This isn\u2019t plug-and-play. It\u2019s overhaul-and-pray.<\/p>\n
So, what should plan sponsors be thinking about now, not in 2026?<\/p>\n
\u00b7 Do you need to add a Roth feature? If your plan doesn\u2019t offer Roth, affected employees can\u2019t make any catch-up contributions. That\u2019s not a good look. But simply requiring Roth for everyone isn\u2019t allowed, either. So, you\u2019ll have to track who\u2019s subject to the rule anyway.<\/p>\n
\u00b7 Will you use deemed Roth elections? Plans can default high earners into Roth catch-up without needing a separate election\u2014but participants must be able to opt out. If you go this route, you can fix some mistakes with in-plan conversions instead of refunds.<\/p>\n
\u00b7 Tracking Wages and Employer Type Matters. Only FICA wages from the employee\u2019s common law employer that participates in the plan count. So, if you\u2019re in a controlled group or a multiple employer plan, the math gets tricky.<\/p>\n
\u00b7 Payroll Coordination is Key. Your payroll provider and recordkeeper will need to communicate like never before. The feeds must be aligned, and there\u2019s zero room for error here.<\/p>\n
\u00b7 Watch for Traps. New hires aren\u2019t subject to the rule their first year. There\u2019s no proration for partial-year employees. And plan sponsors need systems that flag when associates become partners since the rule doesn\u2019t apply to self-employed individuals.<\/p>\n
\u00b7 Correction Procedures Matter. You\u2019ve got options, like converting mistaken pre-tax contributions to Roth before W-2s are issued or using in-plan rollovers. EACAs (early withdrawal features) also help by offering a wider correction window.<\/p>\n
In short, 2026 may feel far away, but the work starts now. SECURE 2.0\u2019s Roth catch-up requirement isn\u2019t going anywhere, and like most things in the 401(k) world, if you wait too long to prepare, you\u2019ll pay for it later.<\/p>\n
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