The SECURE 2.0 Act, part of the 2022 year-end omnibus spending package, introduced sweeping changes to retirement savings rules. Among the most significant updates are provisions affecting catch-up contributions to qualified retirement plans. To address employer concerns and implementation challenges, the U.S. Department of the Treasury and IRS recently issued final regulations providing clarity on these rules.
Key Highlights of the Final Regulations
1. Mandatory Roth Treatment for High Earners
Starting with taxable years after December 31, 2026, employees aged 50 or older who earned more than $145,000 in the prior year (indexed for inflation) must make catch-up contributions on a Roth basis. This means contributions will be made with after-tax dollars rather than pre-tax deferrals.
2. Increased Catch-Up Limits for Certain Age Groups
While the standard catch-up limit for 2025 is $7,500 for most 401(k), 403(b), and governmental 457 plans, the final regulations introduce higher limits for specific participants:
- Ages 60–63: Up to 150% of the standard catch-up amount.
- SIMPLE plans: 110% of the standard amount, and 150% for ages 60–63.
Notable Changes from Proposed Rules
- Wage Aggregation: Employers can aggregate wages from certain related employers to determine if an employee meets the $145,000 threshold.
- Correction Methods: Plans can fix errors by either:
- Reclassifying pre-tax contributions as Roth and reporting on Form W-2, or
- Making an in-plan Roth rollover and reporting on Form 1099-R.
Corrections are only required if erroneous pre-tax catch-up contributions exceed $250.
Implementation Timeline
- The Roth catch-up requirement applies to contributions for tax years beginning after 2026.
- Plans may adopt the rule earlier using a reasonable, good-faith interpretation.
- The IRS confirmed that the transition relief period under Notice 2023-62 ends December 31, 2025.
Next Steps
Employers should review plan documents, payroll systems, and participant communications to ensure compliance. For assistance with SECURE 2.0 implementation and managing retirement plan costs, contact our team.
©2026
FAQs
What is the Roth catch-up rule under SECURE 2.0?
The Roth catch-up rule requires employees aged 50+ earning more than $145,000 in the prior year to make catch-up contributions on an after-tax Roth basis starting in 2027.
When do the new catch-up contribution rules take effect?
The mandatory Roth treatment applies to tax years beginning after December 31, 2026. Plans may adopt the rule earlier under a reasonable interpretation.
Who must make Roth catch-up contributions?
Employees aged 50 or older with prior-year wages exceeding $145,000 (indexed annually) must make Roth catch-up contributions.
What are the new catch-up limits for ages 60–63?
Participants aged 60–63 can contribute up to 150% of the standard catch-up limit for qualified plans.
Can employers implement the Roth rule before 2027?
Yes, plans can adopt the Roth catch-up rule early using a reasonable, good-faith interpretation of the law.