Participants in Section 401(k), Section 403(b) and governmental Section 457(b) Plans who are age 50 or older are able to make salary deferrals in excess of the limit on salary deferrals for younger participants. These additional contributions are commonly referred to as “catch-up contributions.” Participants eligible to make catch-up contributions have been able to make these contributions on a pre-tax or Roth (after-tax) basis. Currently, depending on the participant’s age, these additional contributions could be as much as $11,250.
The SECURE 2.0 Act in 2022 made changes to catch-up contributions for plan participants who have FICA wages exceeding $145,000 in 2025, mandating that catch-up deferrals for these highly compensated participants may be made only on a Roth (after-tax) basis starting January 1, 2026. On September 16, 2025, the Department of the Treasury and the Internal Revenue Service issued final regulations implementing this change.
Our Employee Benefits team is currently reviewing the final regulations in detail and will provide more comprehensive guidance in the weeks to come.
Action Items:
- Identify employees who are likely to earn more than $145,000 in FICA wages in 2025.
- Ensure your payroll service provider is prepared by January 1, 2026 to track deferrals made by these employees to designate catch-up contributions as Roth, even if the participant does not affirmatively elect Roth treatment.
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