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.<\/p>\n
Here\u2019s 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.<\/p>\n
Key Implications for Plan Sponsors<\/strong><\/p>\n 1. System & Vendor Readiness <\/strong><\/p>\n 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\u2019s a nontrivial update.<\/p>\n 2. Document & Plan Design Review<\/strong><\/p>\n If your plan doesn\u2019t 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 \u2014 but you need to understand how it works and consider whether to amend your plan.<\/p>\n 3. Communication Is Critical <\/strong><\/p>\n Many participants will never have made Roth contributions in a retirement plan before. You must educate them about the tax tradeoffs \u2014 paying taxes now vs. potential tax-free distributions later \u2014 and help them recalibrate their deferral strategies.<\/p>\n 4. Good-Faith Compliance <\/strong><\/p>\n Window Even though the statutory requirement begins in 2026, the final regulations give sponsors leeway to rely on a \u201creasonable, good-faith interpretation\u201d through the end of 2026. But that\u2019s a bridge \u2014 not a long-term excuse.<\/p>\n The Rosenbaum Take<\/strong><\/p>\n 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\u2019re a plan sponsor who delays preparation, you risk scrambling \u2014 or worse, failing compliance.<\/p>\n 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 \u2014 whether your systems are ready or not.<\/p>\n <\/span><\/p>","protected":false},"excerpt":{"rendered":" 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 … Continue reading