Roth Catch-Up Under SECURE 2.0: What Plan Sponsors Need to Know
Beginning in 2026, certain employees will only be able to make catch-up contributions on a Roth basis. This change is part of SECURE 2.0, which introduced several updates to improve retirement savings options and outcomes. One of the most impactful provisions is the Roth Catch-Up rule.
Originally effective in 2024, the IRS delayed implementation due to complexity and administrative challenges. The new effective date is January 1, 2026, and the rule applies to 401(k), 403(b), and governmental 457(b) plans.
Who Is Impacted?
A Highly Paid Individual (HPI) is defined as an employee whose FICA wages exceeded $145,000 in the prior year. This threshold will be adjusted annually. For example, 2025 wages will determine which employees are subject to the Roth Catch-Up in 2026. Sole proprietors (Schedule C filers) and partners in a partnership are not affected, since they do not receive FICA wages.
Employees who are HPIs between ages 60 and 63 will still be eligible for increased catch-up contributions, but those amounts must also be classified as Roth. Importantly, catch-up contributions will not be available to HPIs if the plan does not offer a Roth contribution feature.
Key Rules and Corrections
All catch-up contributions made by HPIs must be Roth contributions rather than pre-tax. In certain cases — such as plans subject to ADP testing — catch-up contributions may be determined after the end of the year. In these situations, the amounts reclassified as catch-up must be converted to Roth through an In-Plan Roth Rollover/Transfer.
If contributions are not properly classified, corrective measures are required. Timeframes for the correction vary based on the type of failure.
Preparing for Implementation
Plan sponsors should begin preparing now to ensure smooth compliance with the 2026 effective date. The most important steps include:
Identifying HPIs based on FICA wages,
Confirming that plan documents include Roth provisions and In-Plan Roth Rollover/Transfer options, and
Coordinating with payroll providers to ensure proper classification and reporting.
Plan Now, Benefit Later
Our team at Clark Schaefer Hackett is available to help you navigate these changes — from identifying HPIs to coordinating with payroll and updating plan documents. Contact us with questions or to discuss the right steps for your organization.
By preparing now, plan sponsors can ensure compliance while also supporting employees’ long-term retirement savings goals.
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