Mandatory Roth Catch-Up Contributions 2026: Employer and CPA Action Guide

SECURE 2.0 §603, now taking effect for plan years beginning on or after January 1, 2026, requires that employees aged 50 or older who earned more than $150,000 in FICA wages from the same employer in the preceding calendar year must designate all catch-up contributions as Roth (after-tax). Pre-tax catch-up contributions are no longer permitted for this group — and plans that do not offer a Roth option cannot accept any catch-up contributions from high earners at all, not even pre-tax ones. The rule has been in the regulatory pipeline since 2022, but Treasury and IRS finalized implementing regulations in 2025, confirming the $150,000 threshold, the measurement mechanics, and the plan amendment timeline. CPAs advising employer clients with employees in the 50+ age range and significant compensation need to take action now.

Why This Matters

A plan that is not compliant on January 1, 2026 will either: (a) prohibit catch-up contributions entirely for affected participants, costing high-earning employees $8,000 or more in annual tax-advantaged savings; or (b) accept pre-tax catch-up contributions that are no longer permitted, creating a plan qualification failure requiring EPCRS correction. Neither outcome is acceptable for clients who expect their retirement plans to work correctly.

The 2026 compliance window also coincides with the enhanced catch-up contribution limit for participants aged 60–63 under SECURE 2.0 §109 — the "super catch-up" of $11,250 for 401(k) plans in 2026. For a high-earning employee turning 61 in 2026, the entire $11,250 enhanced catch-up must be Roth if they earned over $150,000 in 2025. These two provisions interact, and the payroll and recordkeeping burden on employers and TPAs has increased accordingly.

Prerequisites

• Identify which of the employer's retirement plans are subject to catch-up contributions: 401(k), 403(b), SIMPLE IRA, governmental 457(b). (Note: SIMPLE IRA catch-up contributions are also subject to the Roth requirement for high earners.)
• Confirm the plan year start date. Calendar-year plans are already subject to the rule as of January 1, 2026. Non-calendar-year plans should confirm their next plan year start date.
• Gather 2025 W-2 data for all employees eligible for catch-up contributions (those who will be age 50 or older during the 2026 plan year).

Step 1: Determine Which Employees Are "High Earners" for 2026

A participant is a high earner for 2026 if they received more than $150,000 in FICA wages from the same employer in 2025 (IRC §402(g)(1)(C), as amended; final Treasury regulations issued 2025). FICA wages for this purpose are the wages reported in Box 3 (Social Security wages) of the 2025 Form W-2 — not Box 1 (total wages), which includes non-FICA compensation such as certain deferred compensation and fringe benefits.

Key mechanics:

• Same employer rule: Only wages from the employer maintaining the plan count. If a controlled group of companies employs the participant, the plan document controls whether wages from other group members are aggregated. Most plan documents do not automatically aggregate; the document must be reviewed.
• Threshold is fixed per year, indexed for inflation: The $150,000 threshold for 2026 is derived from the $145,000 base amount in the statute (IRC §402(g)(1)(C)) indexed to the 2026 calendar year. The IRS confirms the applicable threshold annually via Revenue Procedure before the plan year begins.
• Catch-up eligibility still requires age 50+: The Roth mandate applies only to participants who are eligible for catch-up contributions in the first place — those who will turn 50 or older during the 2026 plan year.

Action: Pull the 2025 W-2 data, filter for employees who will be 50+ in 2026, and identify those with Box 3 wages exceeding $150,000. This is the list of participants for whom all 2026 catch-up contributions must be designated as Roth.

Step 2: Audit the Plan Document for Roth Contribution Capability

A plan cannot implement Roth catch-up contributions if it does not currently offer Roth contributions at all. Before January 1, 2026, confirm whether the plan document includes:

• A Roth elective deferral feature (designated Roth contributions under IRC §402A)
• Roth contribution election mechanics in the enrollment and change-in-deferral process
• Roth account tracking in the recordkeeping system (Roth contributions must be maintained in a separate account, and the plan must track basis for tax-free distribution purposes)

If the plan does not currently offer Roth contributions, the plan document must be amended before January 1, 2026, and payroll/recordkeeping systems must be updated to accept and track Roth designations. This amendment cannot be filed on a retroactive basis for the 2026 plan year — the Roth capability must be in place on the effective date.

Special case for plans that choose not to add Roth capability: A plan that decides not to offer Roth contributions is not required to add them. However, that plan must completely suspend catch-up contributions for all employees who are high earners under the $150,000 threshold. Accepting pre-tax catch-up contributions from high earners in 2026 while operating a non-Roth plan is a qualification failure.

Step 3: Coordinate With the Third-Party Administrator (TPA)

Most employer retirement plans are administered by a TPA or bundled provider (Fidelity, Vanguard, Principal, etc.). The TPA is responsible for:

• Updating the plan document to add or modify the Roth catch-up provision
• Configuring the recordkeeping system to auto-route catch-up contributions to Roth for identified high earners
• Updating enrollment and election systems so high earners cannot elect pre-tax catch-up
• Providing documentation for the plan amendment

Timeline: The plan document amendment for Roth catch-up is generally due by December 31, 2026 under current IRS guidance (consistent with the general SECURE 2.0 amendment deadline). However, the Roth catch-up requirement must be operationally implemented by January 1, 2026 — meaning the system must route contributions correctly even before the formal document amendment is filed. Operating correctly without yet having the signed amendment in place is permitted; operating incorrectly and then filing an amendment does not retroactively fix a qualification failure.

Action for CPAs: Confirm that each employer client's TPA has this implementation on their calendar and has communicated the plan year deadline. TPAs have been receiving a high volume of amendment requests; early confirmation avoids a queue delay that causes a January 1 compliance miss.

Step 4: Update Payroll Systems and Deferral Elections

Once the TPA has updated the plan, the payroll system must be configured to:

1. Identify high-earner participants (those earning over $150,000 in the prior year) using the prior-year W-2 data
2. Auto-recode their catch-up contribution elections from pre-tax to Roth
3. Prevent those participants from electing pre-tax catch-up during open enrollment or mid-year changes
4. Properly code Roth catch-up contributions on year-end W-2s (Box 12, Code BB for Roth 401(k))

Some payroll systems and bundled providers handle this configuration automatically once the prior-year wages are loaded. Others require manual configuration or a special feed from the payroll provider. Confirm with both the payroll system and TPA that the handoff of high-earner identification is automated and tested before January 1.

"Deemed Roth" election option: The final Treasury regulations permit plans to "deem" all catch-up contributions to be Roth for all participants — not just high earners — as a simplified compliance approach. If a plan implements universal Roth catch-up (all catch-up contributions are Roth regardless of prior-year wages), the employer avoids the administrative burden of identifying high earners and managing separate treatment. This is operationally simpler but requires employees who preferred pre-tax catch-up (particularly those in the 37% bracket who would prefer the current deduction) to switch to Roth treatment.

Step 5: Communicate to Affected Participants

High-earning employees aged 50+ who planned to continue pre-tax catch-up contributions will see their elections change. The communication obligation:

• Notify affected participants before January 1, 2026 (or as early as possible in Q1 2026 for plans that did not communicate in time)
• Explain that their catch-up contribution election will continue at the same dollar amount but will now be treated as Roth (after-tax), meaning no current-year tax deduction but tax-free growth and distribution
• Provide an opportunity to change the dollar amount if they prefer to adjust for the loss of the pre-tax deduction
• Confirm whether they can elect the super catch-up limit ($11,250 for ages 60–63) and whether that enhanced amount is also subject to Roth treatment (it is, for high earners)

Tax planning conversation for affected employees: For high earners in the 37% federal bracket who have been making pre-tax catch-up contributions, mandatory Roth treatment is a meaningful change — the lost current-year deduction on $8,000 costs approximately $2,960 in additional 2026 taxes at the 37% rate. The offset is tax-free growth on the Roth balance. Whether the tradeoff is favorable depends on expected retirement bracket, the length of the accumulation period, and state tax treatment of Roth distributions. For many high earners who expect their retirement income to remain taxable (due to RMDs from other accounts, rental income, Social Security), the Roth catch-up may be more advantageous than it first appears — particularly because Roth balances in 401(k) plans are subject to RMDs under pre-SECURE 2.0 rules, though this is being addressed separately in IRS guidance.

Step 6: File the Plan Amendment

The formal plan amendment adding or modifying the Roth catch-up provision must be signed by the employer and filed with the TPA by December 31, 2026, under the general SECURE 2.0 amendment deadline in IRS Notice 2024-2. If the employer receives a determination letter request or DOL audit before the amendment is filed, the failure to have a signed amendment on file may complicate the process — completing the amendment promptly rather than waiting until year-end is advisable.

The amendment should specifically address:

• Addition of the designated Roth contribution feature (if not previously in the plan)
• The catch-up contribution routing rule for high earners
• Definitions of "high earner" and the applicable prior-year wage threshold

TPAs typically prepare a standardized SECURE 2.0 amendment package covering multiple provisions. Confirm that the Roth catch-up provision is included in the amendment the TPA has prepared, not just the Roth elective deferral feature.

Common Mistakes

Waiting until 2026 Q1 to start the process. The TPA amendment and payroll system configuration must be completed before January 1, 2026. Q4 2025 is the action window. Clients who have not confirmed the TPA is implementing are already at risk.

Using Box 1 wages instead of Box 3 FICA wages. The $150,000 threshold uses Box 3 (Social Security wages), not Box 1 (total wages). For employees with significant 401(k) deferrals, the two numbers differ. Using Box 1 overstates prior-year wages for some employees; using Box 1 may misidentify borderline cases. Confirm the payroll system is pulling Box 3, not Box 1.

Assuming the enhanced catch-up for ages 60–63 is not Roth. The $11,250 enhanced 401(k) catch-up limit for participants aged 60–63 (SECURE 2.0 §109) is catch-up compensation — and it is subject to mandatory Roth treatment for high earners in the same way as the standard $8,000 catch-up. For a 61-year-old employee earning $200,000, the entire $11,250 enhanced catch-up must be Roth.

Applying the rule to all participants regardless of wages. The $150,000 threshold is a floor, not a universal requirement. Employees earning $145,000 in 2025 FICA wages may continue making pre-tax catch-up contributions in 2026 without any Roth requirement (though a "deemed Roth" election by the plan would override this).

Missing SIMPLE IRA plans. The Roth catch-up requirement applies to SIMPLE IRAs, not just 401(k) plans. SIMPLE IRA catch-up contributions ($3,500 standard; $5,250 for ages 60–63) must also be Roth for high earners. SIMPLE IRA administration is handled differently from 401(k) plans and some TPAs and financial institutions have been slower to implement Roth capability for SIMPLE IRAs. Confirm separately.

FAQ

What is the exact wage threshold for the 2026 Roth catch-up rule?

The threshold for 2026 is $150,000 in FICA wages (Box 3 of Form W-2) paid by the same employer in 2025. This is indexed from the §402(g) base amount; the IRS confirms the applicable figure annually. Employees who received exactly $150,000 or less are not high earners for 2026 and may continue making pre-tax catch-up contributions.

What happens if a plan doesn't offer Roth contributions and misses the deadline to add them?

The plan cannot accept any catch-up contributions from high earners — pre-tax catch-up is no longer permitted for this group, and Roth catch-up is unavailable without the plan feature. These employees effectively lose catch-up contribution capacity. The employer should work with the TPA to add the Roth feature as soon as possible and process a retroactive corrective contribution under EPCRS if catch-up contributions were inadvertently accepted pre-tax.

Does the rule apply to non-calendar-year plans?

Yes, for plan years beginning on or after January 1, 2026. A plan with a July 1 plan year start date implements the rule beginning July 1, 2026, using the 2025 W-2 wages to identify high earners for that plan year.

Is the Roth catch-up subject to income limits like Roth IRA contributions?

No. Roth contributions to a 401(k) or 403(b) plan are not subject to the Roth IRA income limits (which phase out at $150,000–$165,000 for single filers and $236,000–$246,000 for MFJ in 2026). An employee earning $300,000 who cannot contribute directly to a Roth IRA can still make Roth catch-up contributions to their employer's 401(k).

How does the Roth catch-up affect the employer's matching obligation?

Employer matching contributions on Roth catch-up contributions must themselves be designated as Roth, per SECURE 2.0 §604. This affects the employer's tax deduction (employer Roth matches are still deductible to the employer under IRC §404 when contributed) and the employee's tax treatment (the employer match to Roth becomes Roth basis for the employee's account). Confirm that the plan document and recordkeeping system handle employer Roth match contributions as well as employee Roth catch-up contributions.

Should we just implement "deemed Roth" for everyone to simplify compliance?

The deemed Roth approach simplifies administration — no need to identify high earners or manage split treatment — but it eliminates pre-tax catch-up for employees who preferred it. For a client business where most catch-up participants are below the $150,000 threshold, forcing all catch-up to Roth may generate employee relations issues. For a client business where most participants are high earners anyway, deemed Roth is a reasonable simplification. The answer depends on the participant demographics.

For background on all the SECURE 2.0 Act provisions taking effect in 2025 and 2026 — including the RMD age increase, enhanced catch-up for ages 60–63, mandatory auto-enrollment, and retirement plan selection framework — see SECURE 2.0 Act Retirement Plan Changes Every CPA Must Know for 2025–2026 and SEP IRA vs SIMPLE IRA vs Solo 401(k): Choosing the Right Retirement Plan for Small Business Clients.

Arvori helps CPAs and employers streamline retirement plan compliance workflows and year-end planning reviews. Visit arvori.app to learn more.