Beginning January 1, 2026, high-income employees will be required to make catch-up contributions to workplace retirement plans on a Roth (after-tax) basis.
Under the SECURE 2.0 Act, employees aged 50 or older who earn more than $145,000 (in 2025) in W-2 wages from the same employer in the prior year will no longer be permitted to make pre-tax catch-up contributions. Instead, all of their catch-up contributions must be made as Roth contributions. This income threshold will be indexed for inflation in future years.
What’s Changing
- Starting in 2026, employees aged 50+ with more than $145,000 in W-2 wages in 2025 must make all catch-up contributions as Roth (after-tax) contributions.
- Pre-tax catch-up contributions will no longer be allowed for these individuals, although pre-tax contributions will continue to be offered for non-catch-up contributions.
- If a plan does not offer a Roth option, affected employees will not be able to make catch-up contributions at all.
- There is no opt-out provision – affected employees who wish to avoid Roth treatment must limit contributions to the standard deferral amount.
For 2025, the standard deferral limit is $23,500. The catch-up limit is $7,500, and individuals aged 60-63 may be eligible for a higher “super catch-up” limit of $11,250. The limits for 2026 will be released in early November 2025.
What Employers and Employees Should Know
Employers should take proactive steps to ensure compliance by:
- Confirming whether their retirement plan includes a Roth contribution feature.
- Implementing systems to track prior-year W-2 wages.
- Considering the application of “deemed Roth elections” for affected employees, even if no explicit Roth election is made.
Plans that do not comply may be required to return catch-up contributions to affected employees.
Employees who are likely to exceed the $145,000 threshold should:
- Confirm whether their employer’s plan offers a Roth option.
- Understand the tax implications of Roth contributions.
- Coordinate with financial advisors to adjust their retirement savings strategy accordingly.
Next Steps
This change will affect both employer plan sponsors and participants. Employers should begin working with plan administrators and legal counsel now to ensure their plans are updated and compliant before the January 1, 2026, effective date. Employees should review their 2025 income projections and plan contributions to avoid surprises in the new year.
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