The IRS has finalized regulations that explain how two SECURE 2.0 Act changes to catch-up contributions will work in practice. Catch-up dollars are the extra amounts people age 50 or older can put into a 401(k), 403(b), or governmental 457(b) each year. The headline changes are simple: some higher earners will have to make those catch-ups as Roth starting in 2026, and people who are age 60 to 63 get a higher catch-up limit starting in 2025. The detailed rules in the final regulations generally apply in 2027, but the Roth requirement itself starts in 2026.
Bigger Catch-Ups at Ages 60 to 63 Begin in 2025
Beginning January 1, 2025, someone who is age 60, 61, 62, or 63 during the calendar year can contribute the greater of $10,000 or 150% of the standard age 50 catch-up limit. For 2025, that works out to $11,250 if the regular catch-up is $7,500. After 2025, the special limit is indexed for inflation. Plans may choose whether to offer this enhanced limit.
Roth-only Catch-Ups for Certain High Earners Start in 2026
If an employee’s prior-year FICA wages from the employer sponsoring the plan exceed a threshold set in the law, that person’s catch-up contributions must be Roth, meaning after-tax. The statute pegs the threshold to wages as defined under section 3121(a), which are Social Security and Medicare taxable wages. This amount is indexed over time, and SECURE 2.0 initially set it at $150,000.
The timing is as follows: plans need to operate the Roth-only rule beginning January 1, 2026, and the final regulations themselves generally apply for tax years beginning after December 31, 2026. The IRS did not extend the prior administrative transition relief beyond December 31, 2025, although plans may implement early using a reasonable, good-faith reading of the statute. Certain governmental and collectively bargained plans have a later applicability date.
A practical note: if a plan does not offer Roth contributions, affected high earners will not be able to make catch-ups once the 2026 rule is in effect. The statute also requires that when any participant is subject to the Roth-only rule, the plan must allow all catch-up-eligible participants to make Roth catch-ups. Most sponsors that want catch-ups available to everyone will add or confirm a Roth feature before 2026.
What the Final Regulations Clarify
The final regulations mostly follow the proposals but add a few employer-friendly options and guardrails:
- Who counts as the employer for the wage test. Plans may aggregate prior-year wages from certain separate common-law employers when determining who is over the threshold. This is permitted, not required, and helps multi-employer arrangements and controlled groups run a single rule.
- Deemed Roth elections. Plans can adopt a “deemed Roth” provision which automatically treats high earner contributions above the standard contribution limit, as Roth contributions. This approach has the further benefit of giving you access to the maximum range of correction options, should a deposit be made incorrectly, by a high earner. To comply with the “deemed Roth” approach, you will need to amend your plan in 2027, however, prior to that, you will need to have practices and procedures in place to correctly manage contributions in accordance with the new Roth catch-up rules and participants need to have a real opportunity to elect otherwise, if they do not want to make Roth catch-up contributions in 2026.
- How to fix mistakes. If catch-ups were taken pre-tax when they should have been Roth, the regulations outline two primary correction paths: a Form W-2 correction method and an in-plan Roth rollover method, with deadlines and consistency rules.
What Sponsors Should Do Next
Between now and year-end, review payroll and recordkeeping settings so the plan can 1) read prior-year FICA wages for the Roth test, 2) identify who is age 60 to 63 in each calendar year, and 3) apply the right catch-up limit and tax treatment. If you want a backstop against missed elections, consider adding a deemed Roth default for participants who are required to use Roth. Finally, confirm your plan document and participant communications reflect these rules and your design choices.
Quick Reference on Dates and Amounts
- Ages 60 to 63 higher catch-up: starts January 1, 2025; $11,250 for 2025; indexed thereafter.
- Roth-only catch-ups for higher earners: operational January 1, 2026; final-reg mechanics generally apply in 2027; transition relief ends December 31, 2025; limited later applicability for certain governmental and collectively bargained plans.
Disclosure: This content is for informational purposes only and not investment advice.
