As a reminder to all covered employers, the IRS has proposed regulations under the SECURE 2.0 Act that will significantly impact catch-up contributions for retirement plans, particularly 401(k), 403(b), and 457(b) plans.

• These regulations are not yet final and may be subject to change.

• While the IRS has indicated that plan sponsors may rely on the proposed rules for planning and implementation, final regulations are expected to be published after the current administrative transition period ends.

Additional Information:

Summary of Proposed Regulations:

Mandatory Roth Catch-Up Contributions: Starting in 2026, participants aged 50+ earning over $145,000 in FICA wages from their plan-sponsoring employer must make catch-up contributions on a Roth (after-tax) basis.

Super Catch-Up Contributions: Beginning in 2025, participants aged 60–63 may contribute up to the greater of $10,000 or 150% of the regular catch-up limit.

Plan Design Considerations

• Plans are not required to offer Roth contributions. However, high earners cannot make catch-up contributions unless a Roth feature is available.
• Plans must track which participants are subject to the Roth mandate, even if Roth contributions are not permitted.
• The Roth requirement applies to both regular and super catch-up contributions.
• Plans may use a spillover design, automatically treating excess deferrals as catch-up contributions.
• Deemed Roth elections are allowed, but participants must be given a chance to opt out or change their election.
• Sponsors cannot require all catch-up contributions to be Roth just to simplify tracking.

Special Rules

• Dual-qualified plans (U.S. & Puerto Rico) may satisfy the Roth mandate by allowing Puerto Rico participants to make traditional after-tax catch-up contributions.
• Only FICA wages from the participant’s common law employer count toward the $145,000 threshold. Wages from other affiliated employers are not aggregated.

Correction Methods: If a plan mistakenly allows pre-tax catch-up contributions for a high earner, two IRS-approved correction methods are available:

1. W-2 Correction: Recharacterize and report the contribution as Roth before issuing the W-2.
2. In-Plan Roth Rollover: Transfer the contribution to a Roth account and report on Form 1099-R.

These methods require the plan to have compliance procedures and use deemed Roth elections.

Timing

• Mandatory Roth catch-up: Effective January 1, 2026.
• Super catch-up: Available for tax years beginning after December 31, 2024.
• Final regulations are pending, but plans may rely on the proposed rules and begin preparing now.

For additional information:

• IRS Press Release – SECURE 2.0 Act Proposed Regulations
• IRS Proposed Regulation – Catch-Up Contributions

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