Roth Catch-Up Rule Secure 2.0
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Table of Contents
What are the Roth catch-up requirements under SECURE 2.0?
The SECURE 2.0 Act introduced new rules for catch-up contributions, which allow workers age 50 and older to save extra money in their retirement accounts.
Starting in 2026, employees who earn more than US$145,000 per year must put their catch-up contributions into a Roth account, meaning the money will be taxed upfront instead of later when withdrawn in retirement.
Key changes to catch-up contributions:
- The rule applies to 401(k), 403(b), and 457(b) retirement plans.
- Only workers who earn more than US$145,000 in the previous year (based on Social Security wages from Form W-2) must make Roth catch-up contributions.
- Government employees with 457(b) plans must also follow the rule.
- The IRS will adjust the US$145,000 threshold for inflation in the future.
This change ensures that higher-income workers pay taxes on their extra retirement contributions now, rather than when they withdraw the money later.
Why was the Roth catch-up mandate delayed until 2026?
Originally, this rule was supposed to start in 2024, but the IRS postponed it until 2026 because many employers needed more time to update their systems.
Reasons for the delay:
- Employers need to update payroll systems – Companies need to track which workers earn more than US$145,000 and automatically redirect their catch-up contributions to Roth accounts.
- Confusion over the wording of SECURE 2.0 – A mistake in the law’s language made it unclear if all catch-up contributions would still be allowed.
- IRS issued Notice 2023-62 – The IRS confirmed that catch-up contributions would continue but gave employers an extra two years to prepare.
- Businesses requested more time – Many companies and retirement plan providers asked Congress and the IRS to delay the rule because they weren’t ready.
What IRS guidance has been issued on Roth catch-up contributions?
To clear up confusion, the IRS released Notice 2023-62, explaining how the Roth catch-up rule will work.
Important Details from the IRS Notice:
- Catch-up contributions are NOT going away – A mistake in SECURE 2.0 made it seem like catch-up contributions would be eliminated, but the IRS confirmed they are still allowed.
- Employees who earn less than US$145,000 per year can still choose pre-tax or Roth contributions.
- Employers must adjust payroll systems to make sure high earners’ catch-up contributions go into Roth accounts.
- Errors can be corrected – If an employer mistakenly puts a high earner’s catch-up contribution in a pre-tax account, the IRS may allow fixes.
The IRS might still release more updates in the future, so employers and workers should stay informed about any changes.
How have catch-up contribution limits changed under SECURE 2.0?
The SECURE 2.0 Act also increased the amount older workers can save in their retirement accounts.
People 50 or older can make extra contributions on top of the regular 401(k) or 403(b) limit.
Additionally, starting in 2025, people ages 60 to 63 can contribute even more—their limit will be 50% higher than the standard catch-up amount.
These changes will let older workers boost their retirement savings in the years leading up to retirement.
What administrative steps must plan sponsors take to comply with the Roth catch-up rules?
Employers will need to:
- Update plan documents – Retirement plans must be updated to require Roth catch-up contributions for high earners.
- Adjust payroll systems – Employers must track workers’ income and make sure high earners’ catch-up contributions go into Roth accounts.
- Communicate with employees – Workers need to know about the new Roth requirement and how it affects their retirement savings.
- Work with plan administrators – Employers should coordinate with third-party plan providers to make sure their retirement plans are fully compliant.
- Fix mistakes quickly – If an employee’s catch-up contribution is misclassified, employers should have a process in place to correct the error.
Still confused on how SECURE 2.0 works? Let a tax pro help you understand.
How do Roth catch-up rules affect different retirement plan types?
The SECURE 2.0 Act changes how catch-up contributions work for different types of retirement plans. Starting in 2026, employees who earn more than US$145,000 per year must put their extra retirement contributions (catch-up contributions) into a Roth account instead of a traditional pre-tax account.
This means they will pay taxes on the money now but can withdraw it tax-free in retirement.
However, not all retirement plans follow the same rules, and the way this change applies depends on the type of plan an employee has.
- 401(k) Plans: These are the most common workplace retirement plans. Employees earning over US$145,000 will have to make their catch-up contributions on a Roth (after-tax) basis rather than a pre-tax basis. Employers must update their payroll systems to track who earns over US$145,000 and make sure the contributions are handled correctly.
- 403(b) Plans: Used mostly by public school employees, hospital workers, and nonprofit employees, these plans follow the same Roth catch-up rule as 401(k) plans. However, 403(b) plans have fewer restrictions on how contributions are tested.
- 457(b) Government Plans: Employees who work for state and local governments and participate in governmental 457(b) plans must also follow the new Roth catch-up requirement if they earn more than US$145,000. However, this rule does not apply to private nonprofit 457(b) plans.
- SIMPLE 401(k) and SIMPLE IRA Plans: These plans, typically used by small businesses, allow for catch-up contributions, but the Roth catch-up requirement does not apply to them. Employees can still make pre-tax catch-up contributions regardless of how much they earn.
- Dual-Qualified Plans: Some companies offer multiple types of retirement plans. In these cases, employers need to ensure that their plans follow both IRS nondiscrimination rules and universal availability requirements to allow all employees fair access to retirement benefits.
For employees, these changes do not reduce the amount they can contribute but do affect when taxes are paid on those contributions. Employers need to update their payroll systems, retirement plan documents, and employee communication to comply with the law before 2026.
Are plans required to adopt Roth contributions under SECURE 2.0?
Employers are not required to offer Roth contributions to all employees, but if their retirement plan allows catch-up contributions, then they must offer a Roth option for high earners.
This means that employees who make more than US$145,000 per year and are 50 or older will have to make their extra retirement contributions as Roth contributions rather than pre-tax contributions.
If a retirement plan does not currently allow Roth contributions, the employer must update the plan to include a Roth option before 2026. If they do not make this update, employees earning over US$145,000 will not be able to make any catch-up contributions at all.
This rule does not affect lower-income employees, who can still choose between Roth or pre-tax catch-up contributions if their employer offers both options.
Employers must also track who earns over US$145,000 based on their Social Security wages (reported on Form W-2) to ensure the rule is applied correctly.
If an employer does not make the necessary updates, some employees may lose the ability to make catch-up contributions altogether.
