In this series of articles, we explore the implications of SECURE 2.0’s changes to catch-up contributions and how employers should respond.

The SECURE 2.0 Act indicates that any plan that permits catch-up contributions must require certain employees—i.e., those whose wages from their employer exceed $145,000 in the prior calendar year—to make their catch-up contributions on a Roth basis. This change is required beginning with the 2024 calendar year. With that time fast approaching, employers have expressed significant concerns regarding the ability to implement the necessary system changes—specifically to payroll and recordkeeping systems—by year-end.

In response, employers have begun to explore alternatives that might simplify implementation (or avoid the need to do it altogether). This has produced several questions about what employers can and cannot do, including, can an employer choose to offer catch-up contributions only to lower-paid employees, i.e., those making $145,000 or less? The simple answer, at least for now, appears to be no.

SECURE 2.0 features a universal availability requirement under which any plan that offers catch-up contributions is required to provide for Roth catch-up contributions by high earners with wages above the $145,000 limit. This means that plans cannot avoid making a change by restricting catch-up contributions to only lower-paid workers. Instead, if a plan allows catch-up contributions, the contribution opportunity must be made available to all catch-up eligible participants, regardless of the wages they receive. This also means that employers who do not currently offer Roth contributions under their plans will need to add them if they want to continue to provide catch-up contributions.

Given this requirement, if an employer is unable or unwilling to comply with the new Roth catch-up rule, the employer must eliminate catch-up contributions from its plan entirely—for all eligible workers—something that is unlikely to be desirable.

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