Catch-up contributions have long been a way for taxpayers to put more dollars into their retirement accounts as they get older. But the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act, enacted in 2022, included a major change to the catch-up contribution rules for higher-income taxpayers — and employers that sponsor qualified retirement plans.
It requires higher-income taxpayers to make catch-up contributions to qualified plans as after-tax Roth contributions. The requirement was scheduled to take effect in 2024, but the IRS delayed it by two years. The IRS has now issued final regulations for the requirement. Here’s what employees and employers need to know for 2026 and beyond.
Catch-Up Contributions 101
For many years, taxpayers age 50 or older have been allowed to make catch-up contributions to their 401(k) or other employer-sponsored qualified retirement plan accounts, up to an annual limit that’s adjusted for inflation. For 2025, eligible individuals can chip in an additional $7,500 on top of the regular $23,500 limit, for a total of $31,000.
Under SECURE 2.0, beginning in 2025, those age 60 to 63 can make additional catch-up contributions, for a total catch-up contribution of up to $11,250 (if their retirement plans allow) and a maximum overall contribution up to $34,750 for 2025.
In 2026, the catch-up limit rises to $8,000, and the regular limit increases to $24,500, for a total of $32,500. The total catch-up contribution limit for participants age 60 to 63 remains at $11,250, for a maximum overall contribution up to $35,750.
The New Roth Requirement
The current rules also allow eligible taxpayers to choose whether to make a pretax or after-tax Roth contribution, provided the qualified plan includes the Roth option. But SECURE 2.0 requires that, beginning in 2026, any catch-up contributions made by higher-income participants to 401(k), 403(b) or 457(b) plans be designated as Roth contributions. A plan that allows higher-income participants to make such catch-up contributions must also allow other participants age 50 or older to opt to make Roth catch-up contributions.
The Roth requirement was originally scheduled to take effect for tax years beginning after December 31, 2023. But, in 2023, the IRS extended the effective date to January 1, 2026, as transitional relief. That effective date hasn’t been extended any further.
Finer Points of the Final Regs
The final regs provide employers with guidance on implementing the Roth requirement. For example, they explain how employers should determine whether a participant is subject to the higher-income earner rules. That is, for 2026 plan years, the Roth requirement applies to participants whose 2025 Social Security wages from the employer exceed $150,000 as reflected in Box 3 of Form W-2, “Wage and Tax Statement.” The $150,000 threshold will be adjusted annually for inflation.
The final regs also allow — but don’t require — an employer to treat all related organizations as a single employer if all of the organizations are within a controlled group or use a “common paymaster” (that is, a related organization that pays the employees of two or more organizations on their behalf). In such cases, an employee’s wages from the employer sponsoring the plan, and from one or more other employers that are aggregated with that employer, will be treated as coming from the employer sponsoring the plan for purposes of determining whether the new catch-up rules apply.
In addition, the final regs permit employers to adopt a “deemed election” approach in their plans for employees subject to the new rules. Such employees will be automatically deemed to have made an irrevocable Roth election for catch-up contributions, though they must be given an “effective opportunity” to make a different election — for instance, to not make catch-up contributions.
Notably, employers that don’t already include a qualified Roth contribution program in their qualified retirement plans face a critical decision. They must either amend their plans to allow Roth contributions or eliminate higher-income participants’ ability to make any catch-up contributions. By December 31, 2026, most employers will need to amend their plans to reflect the new rules, as well as update their systems and procedures to comply with the final regs’ many administrative requirements.
Important: Although the final regs don’t officially take effect until 2027, the SECURE 2.0 changes to the catch-up contribution rules are effective for 2026.
Impact on Higher-Income Earners
As a result of the required Roth treatment of catch-up contributions, higher-income participants making such contributions will have to pay income taxes on them upfront — while they may be in a higher tax bracket than they’ll be during retirement. Some people could even be pushed into a higher tax bracket during the years the new rules apply. In addition, the adjusted gross incomes of higher-income earners making catch-up contributions will increase, potentially reducing or eliminating their eligibility for various federal tax breaks with income-based phaseouts.
On the bright side, withdrawals of both contributions and earnings from Roth accounts are tax-free, provided the account has been open for five years and the account owner is age 59½ or older. Plus, Roth accounts generally don’t have required minimum distributions.
Help May Be Needed
You may want to re-evaluate some of your tax planning if you’re age 50 or older with income high enough to likely subject you to the new catch-up contribution rules coming in 2026. And if you’re an employer that offers an affected qualified plan, ensure you make the necessary updates to comply with the final regs. Contact your tax and benefits advisors for help.
