In 2026, many high-income earners aged 50 and older will face a significant change in how they save for retirement. Under rules enacted by the SECURE 2.0 Act and finalized by the IRS, certain workers will be required to make 401(k) catch-up contributions only to Roth accounts, rather than traditional pre-tax accounts—eliminating an important tax deduction opportunity for many older employees.
What Are 401(k) Catch-Up Contributions?
Catch-up contributions allow workers aged 50 and older to contribute more to their retirement plans beyond the standard annual deferral limit.
For 2025, the IRS limits are:
- Standard 401(k) elective deferral limit: $23,500
- Standard catch-up contribution (age 50+): $7,500
- Enhanced catch-up contribution (ages 60–63): Up to $11,250 (replacing the $7,500 standard catch-up)
As a result, individuals ages 60 to 63 may contribute up to $34,750 in 2025. Once a participant turns 64, the catch-up limit reverts to the standard $7,500 (as adjusted for inflation in future years).
The New Rule: Roth Catch-Up Contributions Required
Beginning January 1, 2026, individuals whose prior-year wages from the plan sponsor exceed $150,000 (indexed for inflation) will be required to make any catch-up contributions on a Roth (after-tax) basis.
Key details to understand:
- The income test is based on FICA wages from the employer sponsoring the plan, not total household income.
- Required Roth catch-up contributions do not reduce current taxable income.
- Qualified Roth withdrawals in retirement may be tax-free, provided IRS requirements are met.
While Roth accounts can be highly beneficial for long-term tax planning, this rule removes the immediate tax deduction that many high earners have relied on during their peak earning years.
Who Will Be Affected?
The Roth catch-up requirement applies to workers who:
- Are age 50 or older, and
- Earn more than $150,000 in prior-year wages from the plan sponsor (indexed for inflation), and
- Participate in an employer-sponsored 401(k), 403(b), or governmental 457(b) plan
Important Plan Design Note
If an employer-sponsored plan does not offer a Roth contribution option, participants subject to the Roth catch-up requirement will not be permitted to make catch-up contributions at all until the plan is amended to allow Roth contributions. This makes plan readiness a critical issue for employers ahead of 2026.
At a Glance: Catch-Up Contributions Before vs. After 2026
| Feature | Through 2025 | Starting in 2026 |
| Eligibility | Age 50+ workers | Age 50+ workers |
| Catch-Up Limits | $7,500 standard; up to $11,250 for ages 60–63 | Same limits (indexed) |
| Workers below Roth catch-up wage threshold | May choose pre-tax or Roth catch-up contributions | May choose pre-tax or Roth catch-up contributions |
| Workers above Roth catch-up wage threshold | May make pre-tax catch-up contributions | Must make Roth catch-up contributions |
| Tax treatment of catch-up | Pre-tax deductible or Roth after-tax | Roth only (after-tax) |
| Effective date | Through Dec. 31, 2025 | Jan. 1, 2026 |
Why This Matters for Retirement Planning
For many high-income earners, pre-tax catch-up contributions have played a key role in reducing taxable income during their highest earning years. The mandatory shift to Roth catch-up contributions may:
- Increase current-year taxable income
- Affect cash flow and withholding strategies
- Require greater coordination with tax brackets, Medicare IRMAA thresholds, and Social Security taxation
This change does not eliminate the value of catch-up contributions—but it does change how and when the tax benefits are realized.
What Employers Should Do Now
Plan sponsors, HR teams, and payroll providers should begin preparing well in advance of 2026 by:
- Confirming whether their plans currently allow Roth contributions
- Coordinating with payroll systems to track prior-year FICA wages accurately
- Updating plan documents and participant communications
- Working with recordkeepers and advisors to test operational readiness
The Roth catch-up requirement was originally scheduled to take effect in 2024, but IRS transition relief delayed enforcement until 2026, providing employers additional time to comply.
Conclusion
The Roth catch-up requirement represents one of the most meaningful retirement plan changes for older, high-income workers in years. While Roth contributions offer valuable tax-free growth potential, the loss of immediate tax deductions may require a reassessment of retirement and tax strategies.
Both employees and employers should take time now to understand how this rule applies to their situation and to plan accordingly.
Sources
- SECURE 2.0 Act of 2022, Section 603
Established the Roth catch-up contribution requirement for certain high-income workers and created the enhanced catch-up contribution for ages 60–63.
https://www.congress.gov/bill/117th-congress/house-bill/2617 - IRS Notice 2023-62 – Transition Relief for Roth Catch-Up Contributions
Provided a two-year administrative transition period delaying enforcement of the Roth catch-up requirement until 2026.
https://www.irs.gov/pub/irs-drop/n-23-62.pdf - IRS Notice 2024-80 – Retirement Plan Cost-of-Living Adjustments for 2025
Confirmed 2025 contribution limits and reiterated that the $145,000 Roth catch-up wage threshold is indexed for inflation.
https://www.irs.gov/pub/irs-drop/n-24-80.pdf - IRS Final Regulations under SECURE 2.0 Section 603 (September 2025)
Finalized operational rules for Roth catch-up contributions, including plan design requirements and good-faith compliance standards.
https://www.federalregister.gov