SECURE 2.0's Roth Catch-Up Rule: Final IRS Guidance and Next Steps for Plan Sponsors

Overview 

The SECURE 2.0 Act continues to reshape retirement plan administration, and one of the most significant upcoming shifts is the Roth Catch-Up mandate. Effective January 1, 2026, highly compensated employees age 50 and older must make their catch-up contributions on a Roth basis. The IRS has issued final regulations¹ clarifying these rules, providing guidance on what to expect and how to comply with the rules.

What is the Roth Catch-Up Mandate?

 SECURE 2.0 introduced a new provision that requires highly compensated employees to make their age 50+ catch-up contributions as Roth contributions effective January 1, 2026. The rule applies to 401(k) and 403(b) plans. 

In this case, highly compensated employees are defined as those whose FICA wages from the plan sponsor exceed a defined threshold in the previous year. For 2025, that threshold is $145,000, so employees age 50 and older who earn at least $145,000 this year will be subject to the Roth Catch-up Rule in 2026. 

For employees who worked only part of the preceding year, only their FICA wages earned during their period of employment with the plan sponsor should be considered. Employees who had no FICA wages from the plan sponsor in the prior year are not subject to this rule. The FICA wage threshold will be adjusted in the future for cost-of-living increases at the same time and in the same manner as other IRS defined limits.  

Timing

The Roth catch-up mandate is effective January 1, 2026. Employers should ensure that all payroll systems and administrative processes are ready to ensure smooth compliance and minimize errors. While the IRS final regulations provided a good faith compliance period through 2026, this allowance is meant to offer grace during implementation, not to delay preparation.  

Key Highlights from the Final Regulations

Universal Availability Requirement² 

• Plan sponsors cannot selectively restrict Roth catch-up to only certain employees.  

• One narrow exception: if a plan does not permit Roth contributions at all, the employer may exclude high-earning participants from catch-up contributions (without violating nondiscrimination rules). 

• The regulations do not allow a plan to require that all participants always make their catch-up contributions as Roth. The choice must still rest with the employee, unless the participant is subject to the Roth mandate.  

Deemed Roth Election Option 

• To ease administrative burden, the final regulations permit a deemed Roth election approach for participants subject to the mandate, meaning that a plan may consider catch-up contributions to be Roth without requiring a formal “affirmative election” from the participant. 

• If a plan uses deemed elections, it must also provide the participant with an effective opportunity to opt out or choose differently. 

• The deemed election mechanism will only apply after the participant has reached the standard elective deferral limit. The standard limit in 2025, for example, is $23,500 so amounts above this limit are considered to be the catch-up contributions. Accordingly, amounts above the standard limit next year would also be considered the catch-up contributions. 

Interaction With Prior Roth Contributions 

• If a participant already made designated Roth contributions earlier in the year (i.e. non–catch-up Roth elective deferrals) up to the catch-up limit, then their actual catch-up contributions may not need to be Roth. In other words, the Roth requirement only kicks in to the extent that prior Roth elective deferrals have not already matched the catch-up limit.  

Correction Rules for Mistakes 

• The final regulations retain two primary correction methods if a catch-up contribution was incorrectly made pre-tax when it should have been Roth: 

1. A Form W-2 correction (i.e. reclassify the contribution and adjust W-2) if the W-2 has not been filed/ furnished yet 
2. An In-plan Roth rollover (i.e. move the amount from pre-tax to Roth account, with appropriate tax treatment)  

• If a plan fails to use deemed election, in some cases the only option for correcting errors beyond statutory limits is distributing the erroneous contribution as a taxable distribution.  

• The final regulations also include de minimis exceptions: no correction is required if the erroneous pre-tax amount is ≤ $250, or if a wage adjustment (on amended W-2) affects the threshold determination after the correction deadline.  

Plan Amendment Deadline  

• The SECURE 2.0 plan amendment deadline is December 31, 2026. This is also the recommended deadline for adopting Roth catch-up provisions in plan documents. Recordkeepers and Third Party Administrators will be working on amending or restating plan documents in the coming year. 

Next Steps for Plan Sponsors

To ensure a smooth transition to the Roth catch-up mandate, employers should take the following actions: 

• Coordinate with Payroll – Review payroll systems and contribution processes to ensure they can correctly distinguish between pre-tax and Roth catch-up contributions. Confirm that high-earning participants’ contributions will be properly tracked. Be sure to test any automatic or deemed election features to prevent errors. Note: Many payroll providers have spent the last few years preparing for the implementation of this rule so, generally speaking, payroll systems should be ready to implement this provision. Be sure to contact your payroll representative to ensure you have any specific directions you need to comply with this mandate in 2026. 

• Update Recordkeeper – Provide your plan recordkeeper with a list of employees subject to the Roth catch-up mandate. Ensure they understand the plan’s approach - whether using formal elections or the deemed Roth election method - so contributions are accurately recorded and reported. Here again, recordkeepers have been working to update their systems as well and likely have a defined process to intake or collect information from employers about who will be subject to this rule in the coming year. In most cases, plan sponsors will be asked for this information in January 2026 (since it depends on 2025 FICA wages).  

• Educate Participants – Communicate the upcoming changes to participants who may be affected by the mandate and explain how their age 50+ catch-up contributions will need to be made on a Roth basis, starting in 2026. Our Vita team is actively reaching out to current clients to help provide additional resources and communications for employees.  

The Roth catch-up mandate reflects an important shift in retirement plan administration. With the final guidance in place, employers can proceed with coordinating with vendors and participants to ensure compliance and streamlined administration in 2026. For questions about this mandate and how it impacts your retirement plan, you are welcome to contact our retirement planning team at planning@vitamail.com.

Disclosure 

This information is intended for informational purposes only and should not be construed as investment, tax, or legal advice. The material is believed to be accurate as of the date of publication but may change without notice. Past performance is not indicative of future results. 

References 

¹ Internal Revenue Service. (2025, September 23). Treasury, IRS issue final regulations on new Roth catch-up rule, other SECURE 2.0 Act provisions. U.S. Department of the Treasury. https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-on-new-roth-catch-up-rule-other-secure-2point0-act-provisions 

² Nolt, K. (2025, October 2). The Roth Catch-Up Regulations are Final: What You Need to Know! Trucker Huss. https://www.truckerhuss.com/newsletter/roth-catchup-regulations/