Roth Catch-Up Contribution Final Rules: Takeaways for Employers

Amanda Wilke, CEBSJanuary 29, 2026February 2, 2026

On September 16, 2025, the Department of the Treasury and the Internal Revenue Service (IRS) issued final rules implementing a SECURE 2.0 Act provision requiring that catch-up contributions made by certain higher-income participants be designated as after-tax Roth contributions. The final rules also provide guidance relating to increased “super” catch-up contribution limits under the SECURE 2.0 Act for certain retirement plan participants, specifically employees between the ages of 60 and 63. Super catch-up contributions will be addressed in a future blog post.

Proposed rules were previously issued on January 10, 2025, providing guidance on catch-up contributions and automatic enrollment requirements. See our previous blog post, “SECURE 2.0 Update: IRS Issues Proposed Rules for Qualified Retirement Plans (Part One)—Catch-Up Contributions,” for a summary of the proposed rules.

The 2026 inflation adjusted amounts for standard and catch-up contribution limits are as follows.

All participants can defer up to $24,500.
In addition to that amount, participants ages 50-59 and over 64 can defer an additional $8,000 as catch-up.
For ages 60-63, the $8,000 limit doesn’t apply; instead, ages 60-63 can defer an additional $11,250 catch up.

The final rules impact catch-up contributions for certain types of employment-based retirement plans beginning January 1, 2026.

Employees earning more than $145,000 from the prior year must make catch-up contributions to their 401(k), 403(b) or governmental 457(b) plan on a Roth (after-tax) basis. The $145,000 threshold will be indexed annually for inflation. For 2026, the inflation adjusted amount is $150,000.

Roth Catch-Up Eligibility

Under Internal Revenue Code Section 414(v), plans may allow participants in 401(k), 403(b) and governmental 457(b) plans who are aged 50 or older to make catch-up contributions to their retirement plan accounts, in addition to regular deferrals.

If a plan chooses to offer Roth catch-up contributions, the final rules apply to an employee:

Aged 50 and older
Participating in a 401(k), 403(b) or governmental 457(b) plan
Whose prior year Social Security wages from an employer-sponsored plan exceeded $150,000. The $150,000 threshold for 2026 is based on the participant’s prior calendar year Social Security earnings from Box 3 on Form W-2. An employer may treat related organizations as a single employer in determining an employee’s wages if the organizations use a common paymaster (i.e., one employer within a controlled group handles payroll and taxes for employees who work for controlled group) or if the organizations are part of a controlled group or an affiliated service group.

Deemed Roth Elections

The final rules state plans may deem a participant’s catch-up contribution as a Roth contribution. Trucker Huss explains deemed contributions as “once a participant is subject to the Roth catch-up rule, the plan may automatically treat (deem) any additional contributions (i.e., catch-up contributions) as designated Roth contributions,” eliminating the need to affirmatively elect Roth catch-up contributions.

If a plan decides to use deemed elections:

The plan document must be amended to specify the deemed election rule
Participant communications must be clear
The plan must provide a participant with an “effective opportunity” to elect not to make catch-up contributions.

The final rules clarify that deemed elections must be suspended within a reasonable timeframe following the date on which either:

The employee is no longer subject to the Roth mandate
An amended Form W-2 is given to the employee for the prior year indicating the employee is not subject to the Roth mandate based on their wages.

Alternative to Deemed Roth Elections

The rules also allow employers to use an alternative to the deemed approach. Under the alternative approach, participants that are subject to the Roth mandate must actively choose Roth treatment for their catch-up contributions. If a participant does not do so, they will be unable to make any catch-up contributions until a Roth election is made.

An important factor for employers considering the alternative approach is that the correction methods discussed in the final rules are only available to plans using the deemed election approach.

Final Rule Clarifications

The final rules make several additional administrative clarifications.

No Roth feature is okay. A plan is not required to implement a Roth catch-up feature. Segal explains, if a plan does not implement the feature, participants age 50 and older earning more than $150,000 for 2026 cannot make catch-up contributions unless the plan restricts catch-up contributions to participants that are not Roth-limited participants.
Opting out. Participants that are eligible to make Roth catch-up contributions must have the option to opt out of making them. However, if they opt out of the Roth provision, they cannot make any catch-up contributions.
Wage threshold. The $150,000 wage threshold is not prorated for the first year of employment. The employee’s actual earned wages must exceed the full wage threshold.

Multiemployer Plans

The final rules state that the employer sponsoring the plan is the common law employer that is the source of the participant’s FICA wages and contributions to the multiemployer plan. The rules also apply the FICA wages test separately for each contributing employer in a multiemployer plan. See our previous blog on the proposed rules for an example illustrating this concept in multiemployer plans.

According to the final rules, the plan may combine FICA wages from the employee’s common law employer and one or more related employers within the same controlled group. Aggregation of certain related employers is permissible where the employers being aggregated are listed in the plan document.

Corrections

At times, contributions are classified incorrectly and need to be corrected within the plan year. For example, when a participant earning over $150,000 mistakenly makes Roth catch-up contributions as pre-tax catch-up contributions, the plan must correct the error. The final rules include two correction methods, Form W-2 corrections and in-plan Roth rollovers, in addition to using IRS’s Employee Plan Compliance Resolution System (EPCRS). A plan can use either of the correction methods included in the final rules but must use the same method for all similarly situated participants in a plan year.

Form W-2 Correction Method. A plan could transfer the improper contributions (adjusted for allocable gain or loss) from the participant’s pre-tax account to the participant’s designated Roth account and adjust the participant’s Form W-2 for the year of improper contributions. This method can be used only if the participant’s Form W-2 for that year has not yet been filed or given to the participant.
In-Plan Roth Rollover Correction Method. A plan could directly roll over the catch-up contribution (adjusted for earnings and losses) from the participant’s pre-tax account to their Roth account and report the amount of the in-plan Roth rollover on Form 1099-R for the year of the rollover. This method can be used even if the plan doesn’t offer in-plan Roth rollovers to employees. An employee also does not need to have agreed to a corrective rollover for the employer to use this method.

Plans may use different correction methods for participants exceeding the same applicable elective deferral limit, but the same method must be used for all similarly situated participants.

Under the final rules, correction is not required if either:

The amount of catch-up contributions that should have been Roth contributions is de minimis (i.e., does not exceed $250, excluding earnings and losses)
The determination that the FICA wages were incorrect for the prior year was not made until after the correction deadline.

Correction Deadline

Under the final rules, the correction deadline is based on which limit is used to recharacterize pre-tax deferrals as Roth catch-up contributions.

Statutory individual or aggregated annual deferral limit exceeded. The plan has until the last day of the taxable year following the taxable year in which the catch-up contribution was made to make a correction.
Employer-provided or average deferral percentage (ADP) limit exceeded. The correction must be made by the last day of the plan year following the plan year in which the catch-up contribution was made.

Plans must also comply with earlier correction deadlines that have other tax consequences. Baker Donelson provides this example: “[I]f the deferral is a catch-up contribution because it exceeds the individual deferral limit, the applicable correction deadline to avoid penalty taxes is to recharacterize the deferral by April 15 of the calendar year following the calendar year for which the deferral was made.”

Effective Date Applicability and Plan Amendments

In some cases, effective dates and plan amendments vary by type of plan. The final rules became effective November 17, 2025, and in general, they are applicable to tax years beginning after December 31, 2026. However, the final rules make exceptions to the applicability dates for some plan types, and defer to IRS Notice 2024-2 for deadlines to make required plan amendments.

401(k) and 403(b) plans

There is no exception to the applicability date for 401(k) and 403(b) plans under the final rules, with applicability beginning after December 31, 2026.

Most 401(k) and 403(b) plans also have until December 31, 2026 to amend their plan documents to incorporate any required changes. For a collectively bargained 403(b) plan of a tax-exempt organization, the deadline for plan amendments is December 31, 2028. For 403(b) plans maintained by a public school, the deadline is December 31, 2029.

Collectively bargained plans and multiemployer plans

Collectively bargained plans have delayed applicability dates for the final rules’ requirements. The final rules apply with respect to contributions in taxable years beginning after:

The later of the first taxable year beginning after December 31, 2026, or
The first taxable year that begins after the expiration (without regard to any extension) of the last collective bargaining agreement related to the plan in effect on December 31, 2025.

For multiemployer plans governed by a collective bargaining agreement (CBA), the final rules’ compliance mandate date has been extended. Applicability timing for these plans is the first taxable year following the termination of the last CBA that is in effect on November 17, 2025, without regard to any extensions to those agreements. The Treasury Department and IRS granted the extension with the understanding that multiemployer plans would benefit from an extended applicability date due to the unique issues faced by those plans (e.g., multiemployer plans do not have access to or control over their contributing employers’ payroll systems and must implement complex administrative coordination procedures to comply).

All collectively bargained plans have until December 31, 2028, to amend their plan documents to incorporate any required changes.

Governmental plans

For governmental 457(b) plans, the final rules do not apply until the latter of:

The first taxable year beginning after December 31, 2026
The first taxable year beginning after the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2025.

The deadline to amend a governmental plan is the latter of:

December 31, 2029
If applicable, the first day of the first plan year beginning more than 180 days after the date of notification by the Secretary of the Treasury that the plan was administered in a manner that is inconsistent with the requirements of Internal Revenue Code Section 457(b).

Prior to the applicability date of the final regulations, a reasonable, good faith interpretation standard applies with respect to the provisions in the final regulations.

Next Steps for Employers

Employers should take the following steps to prepare for changes resulting from the Roth catch-up provisions.

Examine current plan options. Check to see whether the plan already includes a Roth contribution option. If not, consider adding one to accommodate high-earning participants.
Update plan documents. If the plan includes a Roth catch-up contribution option, ensure plan documents reflect the Roth catch-up requirements. If the plan does not include a Roth catch-up option, amend the plan to state that highly paid participants and those without Social Security wages are not allowed to make catch-up contributions.
Communicate with participants. Explain the upcoming changes to Roth contributions, the availability of higher catch-up limits for eligible participants and document distribution.
Establish deemed election procedures. Determine whether Roth catch-up contributions will be administered as deemed or affirmative elections, establish procedures for when the election is triggered, establish processes to notify participants of their option to opt-out of catch-up contributions or modify contributions once the limitation on exclusion for elective deferrals is met, and implement processes to stop deemed Roth contributions within a reasonable time after a participant is no longer subject to the Roth requirement.
Update payroll systems. Develop processes and update systems to track eligible participants, the 2026 $150,000 earnings threshold indexed for inflation, FICA wages and the deemed Roth catch-up elections.
Implement correction procedures. Adopt procedures for correcting errors when a participant mistakenly makes a Roth catch-up contribution as a pre-tax catch-up contribution.
Recordkeeping. Maintain records related to participants’ prior-year FICA wages including adjustments to Form W-2 filings, employer aggregation decisions, participant election history, deemed or alternative election decisions, and correction methods and calculations.
Consult with service providers. Discuss required administrative updates, plan amendments and implementation questions with service providers.

To learn more, view the International Foundation’s webcast, “Roth Catch-Up Rule: Final Regulations and Future Challenges,” and look for additional updates on SECURE 2.0 provisions in our SECURE 2.0 Toolkit.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.