Seyfarth Synopsis: On September 15, 2025, the Department of the Treasury and the Internal Revenue Service (“IRS”) issued final regulations (“Final Regulations”) implementing key provisions of the SECURE 2.0 Act, including the Roth catch-up requirement for high earners (“Roth Catch-Up Requirement”) and the enhanced “super catch-up” contribution limits for participants ages 60 to 63. Proposed regulations were issued earlier this year (see our Legal Update here), and administrative questions lingered following the issuance of the proposed regulations. These Final Regulations (previewed on our blog here) provide comprehensive guidance for retirement plan sponsors and administrators, clarifying operational requirements and correction methods for contributions subject to the Roth Catch-Up Requirement, as well as the enhanced super catch-up contribution limits. We will discuss answers to some of those lingering questions and significant changes in the Final Regulations below.
Roth Catch-Up Requirement
As a quick refresh, pursuant to the Roth Catch-Up Requirement, any participant in a 401(k), 403(b) or governmental 457(b) plan who (i) is age 50 or older (or will reach 50 by the end of the calendar year) and (ii) earned more than $145,000 in FICA wages from the employer sponsoring the plan in the prior year (as indexed for inflation) is generally required to make any catch-up contributions as Roth contributions.
The Roth Catch-Up Requirement goes into effect on January 1, 2026 and the IRS has not provided for any further delay. However, plan sponsors are not required to comply with the Final Regulations until January 1, 2027. For 2026, plan sponsors are allowed to rely on a reasonable, good faith interpretation of the statute and proposed regulations.
Q&A-1. Who is the "employer sponsoring the plan" for purposes of the FICA wage threshold?
Under the proposed regulations, the term “employer” referred solely to the participant’s common law employer that participates in the plan – meaning wages were not aggregated across related employers (including employers within the same controlled group or affiliated service group). This approach posed significant administrative challenges for plans sponsored by employers in controlled groups and affiliated service groups, where employee transfers between entities are sometimes common.
In response to comments, the IRS adopted a more flexible position in the Final Regulations. A plan may provide for aggregation of FICA wages across the employee’s common law employer and one or more related employers within the same controlled group for purposes of applying the Roth Catch-Up Requirement.
Importantly, this is not an “all-or-nothing” rule. The final regulations permit selective aggregation where plan sponsors can choose which related employers to include, provided those entities are explicitly identified in the plan document. Accordingly, plan sponsors should carefully evaluate their approach to wage aggregation under the $145,000 threshold and ensure that plan documents are appropriately amended to reflect that design choice.
Q&A-2. What if the employer uses a common paymaster?
The Final Regulations also offer welcome administrative clarity for employers using a common paymaster. Specifically, if a common law employer utilizes a common paymaster arrangement, the plan may treat the common law employer and one or more other employers using that same paymaster as a single employer for purposes of applying the Roth Catch-Up Requirement.
This flexibility helps alleviate concerns around employer identification and wage tracking in common paymaster situations.
Q&A-3. How are catch-up contributions generally administered under a 401(k) plan?
Plans that allow for catch-up contributions typically use one of two approaches:
- Spillover Approach: Under the “Spillover Approach,” a participant makes one deferral election applicable to both elective deferrals and catch-up contributions. If the participant is catch-up eligible (i.e., age 50 or older, or will reach 50 by the end of the calendar year), his or her deferrals “spillover” once the participant hits the Internal Revenue Code (“Code”) Section 402(g) limit ($23,500 for 2025) and are automatically made as catch-up contributions up to that limit ($7,500 in 2025). In other words, the participant does not have to make a separate catch-up contribution election.
- Separate Election Approach: Under the “Separate Election Approach,” catch-up eligible participants make a separate catch-up contribution election. If a participant makes both a regular and a catch-up contribution election, the plan may be administered to run both elections simultaneously, where both types of contributions are made to the plan until the respective limits are reached.
Q&A-4. Can a plan treat an election to make pre-tax contributions as an election to make designated Roth catch-up contributions?
Yes. If a participant is subject to the Roth Catch-Up Requirement, the plan sponsor may treat an election by the participant to make pre-tax contributions as an election to make any catch-up contributions as Roth, i.e., the “Deemed Roth Approach.” The Final Regulations clarify that the Deemed Roth Approach may be used by plans that use either the Spillover Approach or the Separate Election Approach described above. Importantly, however, use of the Deemed Roth Approach is contingent upon providing impacted participants with an “effective opportunity” to make a different election, which is a nuanced requirement described in more detail in Q&A-7 below.
Q&A-5. Are plans required to use the Deemed Roth Approach?
No. Plans are not required to use the Deemed Roth Approach. However, the available correction opportunities described in the Final Regulations (described in more detail in Q&A-10 below) are contingent upon a plan utilizing the Deemed Roth Approach. Therefore, we anticipate that many plans will consider use of the Deemed Roth Approach in order to preserve access to these correction opportunities.
Plans that use the Deemed Roth Approach must specify the use of this approach in the plan document.
Q&A-6. What is the alternative to the Deemed Roth Approach?
We are aware of several recordkeepers who are proposing the “Zero-Out Approach” as an alternative to the Deemed Roth Approach. Under the Zero-Out Approach, a participant’s deferral election is zeroed-out if he or she is subject to the Roth Catch-Up Requirement and has not made a specific Roth catch-up deferral election. Use of the Zero-Out Approach in lieu of the Deemed Roth Approach is generally permitted under the Final Regulations and theoretically could be used with either the Spillover or Separate Election Approach. However, as explained in more detail in Q&A-10 below, plans that use the Zero-Out Approach would not have access to the IRS correction relief set forth in the Final Regulations.
Q&A-7. What is an “effective opportunity” to make a new election?
The application of the Deemed Roth Approach to a participant is conditioned upon the participant having an “effective opportunity” to make a new election that is different than the deemed election. This “effective opportunity” determination is made in accordance with existing Treas. Reg. §1.401(k)-1(e)(2)(ii), which applies a facts and circumstances test in lieu of a more rigid standard. At a high level, a participant must be given a real and timely chance to choose something other than “deemed” Roth catch-up contributions, such as opting for pre-tax catch-up contributions (if still available to them because they previously made non-catch-up Roth contributions during the year – see Q&A-8 below) or choosing not to make catch-up contributions at all. The Final Regulations do not provide any more specificity, leading to lingering questions about how to best administer this “effective opportunity” requirement in practice.
Q&A-8. Should a plan sponsor aggregate pre-tax and Roth 401(k) deferrals made to date for purposes of determining whether the participant has reached the Code Section 402(g) limit?
Under the Final Regulations, a plan sponsor is allowed to either aggregate a participant’s “regular” (i.e., non catch-up) pre-tax and Roth deferrals, or to count only regular pre-tax deferrals, when determining whether a participant has met the Code Section 402(g) limit for purposes of applying the Roth Catch-Up Requirement. (Plans must still ensure that the Code Section 402(g) limit is not exceeded for the year in accordance with the general rules.) Further, the Final Regulations also specify that if a plan uses the Deemed Roth Approach, a participant must still have an “effective opportunity” to make a new election in lieu of the deemed Roth election.
An “effective opportunity” to make a new election on the recordkeeping system would appear to include an election to make pre-tax catch-up deferrals if (i) the participant also made designated regular Roth contributions during the calendar year; and (ii) such Roth contributions were aggregated toward determining whether the Code Section 402(g) limit was reached as described above. The Final Regulations acknowledge the administrative complexity in this approach and instead of expecting plan sponsors to track these nuances in real time, generally allow a plan sponsor to honor a participant’s affirmative pre-tax catch-up contribution election with the understanding that any excess pre-tax contributions will ultimately be converted to Roth catch-up contributions following the close of the plan year using one of the correction procedures set forth in the Final Regulations.
Q&A-9. Would a plan that uses the Separate Election approach also be required to give participants an “effective opportunity” make a pre-tax catch-up election?
Yes. If the plan uses the Separate Election Approach and the Deemed Roth Approach, the Final Regulations specify that the plan can deem the catch-up contributions to be Roth contributions and any such contributions made as Roth catch-up contributions will be “irrevocably” designated as Roth contributions regardless of whether the participant ultimately hits the Code Section 402(g) limit. However, the participant must be given an “effective opportunity” to make a different election on a go-forward basis. Therefore, if a participant subject to the Roth Catch-Up Requirement wants to make a pre-tax catch-up contribution election on the recordkeeping system (presumably because they are making “regular” contributions on a Roth basis), a plan using the Deemed Roth approach must honor that pre-tax catch-up election on a go-forward basis. In the event that a participant makes a pre-tax catch-up election and certain of these pre-tax contributions must ultimately be converted to Roth in order to comply with the Roth Catch-Up Requirement, the Final Regulations provide correction methods. Alternatively, in order to comply with the effective opportunity requirement, a participant must also have the opportunity to stop making Roth catch-up contributions on a go-forward basis.
Q&A-10. What correction opportunities are available to plan sponsors and administrators?
Under the Final Regulations, plan sponsors and administrators have two primary correction methods available when catch-up contributions are mistakenly made on a pre-tax basis instead of a Roth basis for those subject to the Roth Catch-Up Requirement:
- Form W-2 Correction Method. If the participant’s Form W-2 has not yet been filed or furnished for the year of the error, the plan may recharacterize the contribution by transferring the erroneous pre-tax amount (plus earnings) to the Roth account and reporting the erroneous pre-tax amount as Roth (excluding earnings) on the participant’s Form W-2 for the year of the contribution. Importantly, the original erroneous pre-tax amount (excluding earnings) is treated as taxable income for that year, but no withholding is required at the time of the transfer. The participant includes the amount in gross income when filing their tax return, similar to how designated Roth contributions are normally taxed. The plan does not withhold taxes from the transferred amount and the participant is responsible for any tax liability when filing.
- In-Plan Roth Rollover Method. If the Form W-2 has already been issued, the plan may instead transfer the pre-tax catch-up contribution (plus earnings) to the participant’s Roth account and report the conversion on a Form 1099-R for the year of the transfer. Similar to the W-2 correction approach noted above, the converted amount is treated as taxable income for that year, but no withholding is required at the time of the transfer. However, unlike the W-2 correction approach described above, any earnings associated with the converted pre-tax amount are also included in the taxable amount. The plan does not withhold taxes from the transferred amount, and the participant is responsible for any tax liability when filing.
To use either method, the plan must include “Deemed Roth Approach” language in the plan document, which specifies that the plan automatically treats catch-up contributions as Roth once a participant subject to the mandate exceeds the regular deferral limit.
Please note that the selected correction method must be applied consistently to similarly situated participants. For example, a plan may use the Form W-2 method for all participants whose W-2s have not yet been filed, and the in-plan rollover method for those whose W-2s have already been issued. However, the choice of correction method cannot be based on factors like investment performance or participant preference.
Q&A-11. Are Puerto Rico Participants Subject to the Roth Catch-Up Requirement?
No. Regardless of whether a Puerto Rico employee is participating in a plan that covers just Puerto Rico participants (“Puerto Rico-Only Plan”) or a plan that covers both mainland U.S. and Puerto Rico employees (“Dual-Qualified Plan”), the Puerto Rico employee is not subject to the Roth Catch-Up Requirement. The Final Regulations removed the requirement in the proposed regulations specifying that Puerto Rico participants in a Dual-Qualified Plan must be given the opportunity to make Catch-Up Contributions on an after-tax basis. Instead, under the Final Regulations, because the Puerto Rico tax code does not permit Roth 401(k) contributions, the Roth Catch-Up Mandate is “treated as satisfied” with respect to Puerto Rico participants without any further action by the plan sponsor. However, in the event that the Puerto Rico tax code is later amended to allow for Roth 401(k) contributions, the Roth catch-up mandate will then begin to apply on a “go forward” basis with respect to Puerto Rico participants in a Dual-Qualified Plan.
Participants in Puerto-Rico Only Plans have always been fully exempt from the Roth Catch-Up Requirement because these plans are not subject to the U.S. Internal Revenue Code.
Super Catch-Ups
By way of background, Section 109 of SECURE 2.0 amended the IRC to increase the applicable catch-up dollar limit (i.e., generally $7,500 for most catch-up individuals) for eligible participants who will turn age 60, 61, 62 or 63 during the tax year. For these eligible employees participating in a 401(k), 403(b) and governmental 457(b) plan, the increased catch-up limit is 150% of the otherwise applicable catch-up limit, or $11,250 for 2025. Note, special rules apply to participants in a SIMPLE plan.
The implementation of the enhanced “super catch-up” limits is optional for plan sponsors, but could have been implemented as early as January 1, 2025. While a number of clients already amended their plans to provide for this increased limit for 2025, some questions remained as to whether this change had to be adopted on a controlled group basis and whether a plan that incorporates the limit in IRC Section 414(v) can rely on that reference to automatically incorporate the higher catch-up limit.
Q&A-12. If a plan sponsor adopts the super catch-up contribution for one plan, must all plans within the controlled group or affiliated service group also adopt the increased limits?
Yes – with one narrow exception. The Final Regulations reaffirm the “universal availability” requirement, which generally mandates that all catch-up eligible participants under plans maintained by the same employer must be given an effective opportunity to make the same dollar amount of catch-up contributions.
While the IRS introduced a helpful exception to this rule in the proposed, and now Final, Regulations – permitting plans to offer the super catch-up to eligible employees without violating universal availability – it stopped short of creating an exception for adoption on a controlled group or affiliated service group basis. In fact, the preamble to the Final Regulations makes clear that if any applicable employer plan within a controlled group or affiliated service adopts super catch-up contributions, then all applicable employer plans within that controlled group must also offer the increased limit (subject to the exception for collectively bargained participants discussed below).
Q&A-13. If a plan sponsor adopts super catch-ups for non-collectively bargained employees, must it also extend super catch-ups to collectively bargained employees?
No. The Final Regulations expressly provide that a plan does not fail the universal availability requirement merely because employees described in Code Section 410(b)(2) (e.g., collectively bargained employees) are permitted to make catch-up contributions to a lesser extent than other employees.
Accordingly, a plan may allow non-collectively bargained participants to contribute up to the increased catch-up limit while limiting collectively bargained employees to the standard catch-up limit. This exception offers welcome flexibility for employers who may wish to offer the enhanced benefit to non-union employees without needing to renegotiate collective bargaining agreements.
Q&A-14. Must a plan be amended to reflect adoption of super catch-ups, or can it be incorporated into the plan by reference?
It depends on how the plan is currently drafted. Many plan documents do not state the specific IRS limit for catch-up contributions but instead incorporate the statutory limit under Code Section 414(v) by reference. However, the IRS clarified in the Final Regulations that a general reference to Code Section 414(v) is not sufficient to adopt the increased limit.
The IRS stated that it “expects that a plan’s terms will be made clear as to whether or not a reference to the catch-up contribution limit under section 414(v) in the plan document includes the optional higher limit…” Therefore, all plan sponsors – regardless of whether they intend to implement super catch-ups – should review their plan documents to confirm that the applicable limit is clearly stated or appropriately referenced.
Q&A-15. What are the deadlines to amend a plan?
The general SECURE Act 2.0 amendment deadline applies to these SECURE 2.0 requirements. This means that 401(k) and 403(b) plans would have until December 31, 2026 to amend the plan document to include any required plan language. This deadline is applicable even if a plan has already adopted the super catch-up for the 2025 plan year.
Governmental 457(b) plans have until December 31, 2029 to amend for SECURE Act 2.0 compliance. Further, multiemployer and certain other plans maintained under a collective bargaining agreement have until the later of January 1, 2027 or the expiration of the current agreement to amend.
Moving forward, plan sponsors would have until the end of the plan year in which the increased catch-up limit is adopted to amend their plans.
