Written By Erika Ferris

February 24, 2026

If you are age 50 or older and saving for retirement through your workplace plan, you may already be taking advantage of catch-up contributions – the extra amount you are allowed to save each year beyond regular limits. SECURE 2.0 changed the catch-up contribution for some, beginning in 2026.

What’s Changing?

Starting January 1, 2026, certain workers will be required to make their catch-up contributions as Roth contributions, rather than traditional pre-tax contributions. This requirement applies if:

• You are age 50 or older, and
• Your prior-year FICA wages from your employer exceeded $150,000 (indexed for 2026)

If both apply, any catch-up contributions you make to a 401(k), 403(b), or governmental 457(b) plan must be made as a Roth contribution.

When Does It Take Effect?

The Roth catch-up requirement takes effect for the 2026 plan year. While employers have been given some flexibility as systems and processes were updated, participants subject to the rule should expect it to apply beginning in 2026.

What This Means for Employers and Retirement Plans

From an employer standpoint, this change requires some operational updates. Retirement plans must be able to:

• Accept Roth contributions
• Identify which participants are subject to the rule based on prior-year FICA wages
• Communicate clearly with employees about how the change affects their contributions

If a plan does not offer a Roth option, employees who are required to make Roth catch-up contributions may not be able to make catch-up contributions at all. It is important to know if the Roth option is available or if the plan can be amended to offer Roth contributions.

Not all compensation is considered, so even if an employee earns more than $150,000, they may not be subject to this requirement. Specifically, FICA wages are used from the prior year of the sponsoring employer. These are the wages that show on the W-2 in Box 3. Employers need to work with their payroll providers to quickly identify those impacted to communicate with them the requirement for any catch-up contribution.

What This Means for Retirement Plan Participants

For participants, the biggest impact is on tax timing, not savings opportunity. Roth contributions are made with after-tax dollars. This reduces the current tax-deduction that is realized using a pre-tax catch-up contribution. It also reduces the take-home pay amount, which should be factored into any annual budgeting.

Later in retirement, qualified distributions provide for tax-free income, creating greater flexibility when planning for withdrawals. One thing that is for certain is taxes, but the unknown is the future tax rates. Roth distributions offer a hedge against potentially higher tax rates.

The Bottom Line

Employers need to quickly identify after year end which employees are required to make their catch-up contributions as Roth and communicate the change to those employees. If the plan does not allow for Roth contributions, amending the plan should be discussed with the document provider.

Participants impacted by this rule should continue to save, understanding the current impact the change may have on their taxes. This presents a good time to review retirement goals and the impact saving, investing, and spending have on those goals.

Whether you sponsor the retirement plan or are a participant impacted by this rule, reach out to your valued financial advisor for answers to your questions and guidance on next steps.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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