401(k) Catch-Up Contributions for High Earners Starting in 2026

The SECURE Act 2.0 enacted at year-end 2022 put in place new rules that changed how catch-up contributions for higher earners may be made. The original effective date has come and gone, but the delayed date is finally around the corner.

Starting in 2026, catch-up contributions made to 401(k), 403(b) and governmental 457 plans for those who made $150,000 or more in the previous year must be made as a Roth contribution, and may no longer be made on a pre-tax basis.

This new rule effects all employees that receive FICA wages including Individual 401(k) plans where the business owner is operating as a Corporation, S-Corporation or LLC taxed as a corporation. As explained below, partners and sole proprietors with only self-employment income are not subject to the Roth-only rule.

What Are 401(k) Catch-Up Contributions?

Catch-up contributions allow employees aged 50 or older to make additional salary deferrals above the annual limit, up to the catch-up limit in effect for the year. For 2026, the annual limit is $24,500, and the catch-up limit for employees aged 50 and older is $8,000. This means that catch-up eligible participants can contribute up to $32,500 in salary deferrals to their 401(k) plan in 2026. 

In addition, the SECURE Act raised the catch-up limit for participants ages 60–63 to the greater of $10,000 or 150% of the regular catch-up limit. For 2026, that amount is $11,250.

High Earners Must Contribute Catch-Ups as Roth

Beginning in 2026, SECURE 2.0 requires “high earners” to make catch-up contributions on a Roth basis. If a plan does not offer Roth contributions, these participants cannot make catch-up contributions.

The final regulations clarify:

• High Earner: defined as a plan participant who - in the preceding calendar year - received more than $150,000 in FICA wages “from the employer sponsoring the plan”, as reported in Box 3 of the Form W-2.
• Aggregation option: If easier to administer, final regulations give employers the option to aggregate the FICA wages paid by members of a controlled group, employers using a common paymaster, and predecessor/successor employers in asset sales.
• No wages, no Roth mandate: If a participant had no FICA wages from the sponsor (e.g., partners or sole-proprietors with only self-employment income), they are not subject to the Roth-only rule for that year. They can make catch-ups on either a pre-tax or Roth basis.
• Plans without Roth: May still permit tax-deductible catch-ups for participants below the $150,000 wage threshold.
• Threshold indexing: The $150,000 threshold to increase with inflation in $5,000 increments.
• Corrections: If pre-tax catch-ups are made in error, employers can correct them by either:
  • Form W-2 method: Transfer contributions plus earnings to Roth and report on the W-2 (if not yet filed/furnished).
  • In-plan Roth rollover method: Transfer contributions plus earnings to Roth and report the rollover on Form 1099-R.

Deemed Roth Catch-Up Election

The final regulations also allow plans to adopt a “deemed Roth catch-up election.” This feature lets payroll systems automatically treat excess deferrals as Roth catch-ups once the annual limit ($24,500 for 2026) is reached.

• Participants must have an effective opportunity to elect otherwise.
• The deemed election must be written into the plan document.
• If it turns out a participant wasn’t subject to the Roth-only requirement, amounts already treated as Roth do not need to be recharacterized—the election simply stops.

Amendment Deadlines for SECURE 2.0 Changes

While employers must begin operating their plans in line with SECURE 2.0’s catch-up rules as they take effect, the formal plan amendment deadline is later:

• Most plans: The last day of the first plan year beginning on or after January 1, 2027 (December 31, 2027 for calendar-year plans).
• Governmental and collectively bargained plans: The last day of the first plan year beginning on or after January 1, 2029.
• Operational compliance comes first. Employers must follow the new Roth-only catch-up rules for high earners beginning in 2026 and apply the higher age 60–63 catch-ups.

Formal amendment comes later. Plan sponsors don’t need to formally update plan documents until the 2027 (or 2029) deadline.

Amendment Deadline for Adding a Roth

If you intend to allow catch-up contributions to your plan, it must have a Roth contribution feature. Adding Roth to a plan is a discretionary amendment. Under IRS rules, discretionary amendments must be adopted by the last day of the plan year in which the change is effective. Only the vested portion of his account if he should leave the company.

For example, using a 6 year graded vesting schedule, a participant typically receives vesting credit for each year of service in 20% increments. If an employee leaves the company after working 3 but less than 4 years, he or she would be entitled to just 40% of the employer contributions in the plan. Any non-vested portion will be forfeited and remain in the plan and may be reallocated to the remaining participants.

Preparation Steps for Employers

To ensure compliance and support employees, employers should take the following steps:

1. Review Plan Documents
   • Confirm Roth contributions are permitted. Amend the plan if necessary.
   • Decide whether to offer the higher age 60–63 catch-ups.
   • Consider adopting a deemed Roth catch-up election.
2. Consult with Your 401(k) Provider
   • Amend your plan on time if adding Roth (no later than the last day of the effective plan year).
   • Confirm in-plan Roth rollover options for correcting failures.
3. Confirm Payroll Provider Readiness
   • Ensure payroll can track prior-year FICA wages to identify high earners.
   • Apply the deemed Roth election, if adopted.
4. Educate Employees
   • Inform employees aged 50+ about catch-up opportunities.
   • Promote the higher age 60–63 catch-ups.
   • Highlight the Roth-only rule for high earners beginning in 2026.