Roth Catch-up Final Regulations Issued

At A Glance

• The Internal Revenue Service (IRS) issued final regulations for the Roth Catch-up provisions of the SECURE 2.0 Act.
• The final regulations generally adopted the proposed regulations, with some notable changes, including the option to aggregate FICA wages for certain multiple-employer arrangements. 
• The final regulations did not extend the administrative transition period authorized under Notice 2023-62, therefore the Roth catch-up requirement applies beginning January 1, 2026.

Background

On September 16, 2025, the IRS issued final regulations for certain provisions of the 2022 SECURE 2.0 Act, specifically, the SECURE 2.0 requirements that catch-up contributions to 401(k), 403(b), and governmental 457(b) retirement plans be made as post-tax Roth contributions for employees who earned over $145,000 in FICA-taxable wages (Box 3 on Form W-2) in the previous calendar year. This contribution requirement is effective for plan years starting after December 31, 2025.

The new final regulations, however, are effective for plan years beginning after December 31, 2026, though, plans can apply a reasonable, good-faith interpretation of the statutory provisions during 2026. Furthermore, plans subject to a collective bargaining agreement, certain multi-employer plans, and governmental plans may delay implementation of these rules under certain conditions.

Roth Catch-up Requirement Details

Generally, employees over the age of 50 are allowed to make extra contributions (a.k.a. catch-up contributions), into their 401(k), 403(b), or 457(b) retirement accounts beyond the IRS’s regular annual limit ($23,500 for 2025).

Starting in 2026, the SECURE 2.0 Act adds the following requirements based on an employee’s FICA-eligible wages in the previous calendar year:

• Employees earned $145,000 or more: Any catch-up contributions made into these account types must instead be made into a Roth account and are subject to tax.
• Employees earned less than $145,000: Catch-up contributions may continue to be made on a pre-tax basis into 401(k), 403(b), or 457(b) retirement accounts.

This new Roth catch-up requirement for high earners presents new complexity and administrative requirements for affected employers. For employers that choose to include Roth catch-up in their retirement plans, these upcoming compliance requirements will need close coordination with retirement plan recordkeepers and payroll service providers.  

Final Regulation Highlights

Deemed Contribution Elections 

The regulations allow employers to adopt a plan design that, by default, enrolls employees who meet the FICA wage threshold into the post-tax Roth catch-up, without the need for the employee to make a separate election. In this plan design, the pre-tax election of a Roth catch-up required employee is “deemed” to include catch-up contributions into a post-tax Roth account. 

If a deemed election plan design is adopted, employees must be given an “effective opportunity” to change their elections or opt- out of Roth catch-up contributions entirely.

New Corrective Options for Plans Adopting Deemed Elections 

The final regulations also adopt two new corrective options for employers that implement a deemed election plan design.

Separate Elections for Catch-up Contributions 

Some plan designs may allow employees to make separate elections for pre-tax, Roth, and catch-up contributions. If an employee makes a separate election for Roth contributions in certain plan designs, the final regulations allow such contributions to be reclassified as catch-up contributions for purposes of meeting the Roth catch-up requirements, even if the Roth contributions were made before the pre-tax contribution limit was reached. 

New Hires and the Self-Employed

The calculation of the wage threshold is based on wages earned from the retirement plan sponsor (i.e., the employer). In other words, the Roth catch-up requirement doesn’t apply to self-employed individuals, and newly hired employees aren’t subject to the requirement even if they met the wage threshold at their former employer. Furthermore, proration of wages for newly hired employees who do not meet the threshold for a partial year worked is not allowed.

Multiple Employer Aggregation Option  

While not required, the final regulations allow employers to design their plan to aggregate wages for employees who are employed by a common paymaster or the same controlled group. In such a plan design, employees who work for multiple employers within the same control group where the FICA earnings threshold was not met may still be subject to the Roth catch-up requirement for each employer by aggregating the FICA-taxable wages. The final regulations have special considerations when company ownership or structure changes.