What The New IRS Rule Means For Plan Sponsors & Workers Over 50
If you’re 50 or older and use catch-up contributions to bulk up your retirement savings, or you help run a plan that offers them, there’s a rule change that should be on your radar.
In mid-September, the IRS and Treasury finalized how a piece of the SECURE 2.0 Act will work. The short version: starting in 2026, certain higher-earning workers will only be able to make their catch-up contributions as Roth (after-tax) dollars.
Getting ahead of the change now will make 2026 a lot less painful.
First, What Are Catch-Up Contributions and Why Do THey Matter?
Once you hit age 50, you can put extra money into your 401(k), 403(b), or similar plan, above the standard IRS limit. That’s been true for years.
To put that in perspective for 2025:
Under age 50: $23,500
Ages 50–59 and 64+: $31,000 (includes a $7,500 catch-up)
Ages 60–63: $34,750 (includes an $11,250 “super” catch-up)
SECURE 2.0 added another layer on top: starting in 2025, workers ages 60–63 get access to “super” catch-up contributions, up to 150% of the regular catch-up limit (or 110% for SIMPLE plans).
Next year, your catch-up contribution may be required to be made as a Roth contribution, especially if your income exceeds certain thresholds.
For employees, the downside is giving up the upfront tax break on catch-up contributions. The upside? Tax-free withdrawals later.
For employers, the stakes are higher: if the plan isn’t set up to handle Roth catch-ups, some employees could lose access to them entirely.
Diving Into the New Rule: Roth Required for Some
Here’s the key change:
If you made more than $145,000 in FICA wages in 2025 (adjusted annually), all your catch-up dollars will have to go in as Roth contributions, after tax dollars, starting January 1, 2026.
This means if you fall into the higher-income category, your Roth catch-up will be automatically applied to your eligible contributions once you hit age 50.
A few quick clarifications:
This does not apply to SIMPLE IRAs or SEP plans.
Wages are measured using Box 3 on your W-2.
If your plan does not include a Roth deferral option, catch-up contributions won’t be permitted in your plan regardless of income.
Congress delayed this rule once (from 2024 to 2026) to give employers time to adjust. That grace period is ending soon.
Two Types of Catch-Up Contributions
Depending on your age and plan setup, catch-ups may fall into these buckets:
Standard age-50 catch-ups
These are the usual “extra” contributions, and the ones subject to the Roth rule if you’re over the wage limit.“Super” catch-ups at ages 60–63
Optional, but attractive for late-career savers (and yes, Roth rule applies to these as well).
If You Sponsor a Plan, Start Here
A survey from the Plan Sponsor Council of America says only 5% of plan sponsors feel fully ready.
Payroll providers will bear the heavy lifting here. Plan sponsors should lean on their payroll providers and ensure that there is clarity on how catch-up contributions are being made.
To facilitate administration of this new rule and employee experience, we suggest permitting “Deemed” Roth contributions. This means that there is an assumption that catch-up contributions will be considered Roth, even if an employee has elected pre-tax deferrals for their base contribution. Deemed Roth feature is typically setup as a function of payroll and must be included in your governing plan documents.
To avoid last-minute scrambling, here’s what employers should be doing in 2025:
Check whether your plan even offer Roth - this is a great deferral option for all employees, regardless of income.
Talk to payroll and your recordkeeper about tracking who’s subject to the rule.
Permit “Deemed” Roth contributions and amend plan document(s).
Review catch-up provisions for ages 60–63 and for 403(b) service-based rules.
Create employee communications, especially for those over the wage limit.
Work with your Recordkeeper or TPA on plan amendments.
What’s the Timeline?
Here’s how the rollout shakes out:
Now — Setup a call with payroll and recordkeeper.
December 31, 2025 — New catch-up limits kick in.
January 1, 2026 — Roth requirement becomes real.
Late 2026 — Formal plan amendments are due.
We’re here to help
For the workers affected, the downside is giving up the upfront tax break on catch-up contributions. The upside? Tax-free withdrawals later.
For employers, the stakes are higher: if the plan isn’t set up to handle Roth catch-ups, some employees could lose access to them entirely.
Bottom line: Roth is about to move from optional to unavoidable for a lot of savers. Getting ahead of the change now will make 2026 a lot less painful. If you or someone you know may need assistance, let’s meet!
Disclosure: This material is for informational and educational purposes only and should not be considered personalized tax, legal, or investment advice. You should consult your own qualified tax, legal, and financial professionals before making any decisions based on this information. Tax laws and regulations, including those discussed here, may change and can vary based on individual circumstances. The examples and explanations provided are for general understanding and should not be relied upon to predict or guarantee outcomes. Investing and retirement planning involve risk, including possible loss of principal. Past performance does not guarantee future results. Advisory services are offered through Human Investing, LLC, an SEC-registered investment adviser.
