Mandatory Roth catch-up contributions begin in 2026

Beginning in 2026, many employer-sponsored retirement plans are expected to begin implementing the SECURE 2.0 Roth catch-up requirement for certain higher-wage employees. Under this rule, affected employees may no longer make pre-tax catch-up contributions and instead must contribute those amounts on a Roth basis. Final Treasury and IRS regulations generally apply to contributions in taxable years beginning after Dec. 31, 2026, but they permit earlier implementation using a reasonable, good-faith interpretation of the statute.

For tax professionals, this rule has impact because it changes how catch-up contributions are treated for clients who routinely maximize retirement plan deferrals and may affect payroll withholding and cash flow.

What the mandatory Roth catch-up requirement does

Under §414(v)(7)(A), catch-up contributions must be made to a designated Roth account (DRA) if an employee’s prior-year wages exceed the indexed wage threshold. These Roth catch-up contributions are included in income when made, and qualified distributions may be excluded from income if applicable requirements are met.

This rule applies only to catch-up contributions, not to regular elective deferrals. Employees may still choose pre-tax or Roth treatment for their base deferrals if the plan allows both options.

⇾ When the Roth catch-up requirement applies, affected employees can still make catch-up contributions, but they can’t make them on a pre-tax basis.

Employees subject to the Roth catch-up requirement

An employee is subject to the mandatory Roth catch-up requirement if their Federal Insurance Contributions Act (FICA) wages from the same employer exceeded the indexed wage threshold in the prior year. Wages are measured using Box 3 of the employee’s Form W-2, Wage and Tax Statement, not Box 1.

Employees without prior-year FICA wages from the employer, including new hires, are not subject to the rule for that year. Self-employment income does not count as wages for this purpose.

⇾ Eligibility is determined using prior-year FICA wages from the same employer, not total income.

Where the Roth catch-up requirement applies

The mandatory Roth requirement applies to catch-up contributions made to the following defined contribution plans:

• §401(k) plans
• §403(b) plans
• Governmental §457(b) plans

It does not apply to simplified employee pensions (SEPs) or SIMPLE plans (Savings Incentive Match Plan for Employees) under §414(v)(7)(C). Certain special catch-up contributions available in §§403(b) and 457(b) plans are also excluded.

Both standard catch-up contributions and higher age-based catch-ups are subject to the Roth requirement if the wage threshold is met.

⇾ The rule applies broadly across common employer plans but excludes SIMPLE plans and SEPs.

Interaction with higher age-based catch-ups

SECURE 2.0 also increased catch-up contribution limits for employees ages 60 through 63, allowing a higher contribution amount than the standard age-50 catch-up. These higher limits do not change how the mandatory Roth rule works.

If an employee meets the wage threshold, any catch-up contribution they make, whether standard or higher, must be contributed as Roth.

⇾ Expanded catch-up limits increase how much can be contributed, not how those contributions are taxed.

What if a plan does not offer Roth contributions?

Employer plans are not required to offer Roth contributions. However, the mandatory Roth catch-up rule creates a practical consequence.

If a plan does not include a Roth feature, employees subject to the Roth catch-up requirement cannot make catch-up contributions at all. They can’t contribute those amounts on either a pre-tax or Roth basis unless the plan is amended.

As a result, many plan sponsors are updating plan documents and payroll systems in anticipation of implementation.

⇾ Plans without a Roth option may effectively block catch-up contributions for higher-wage employees.

Implications for retirement contributions

For affected employees, the shift from pre-tax to Roth catch-up contributions can increase current taxable income and withholding. While Roth contributions may provide long-term tax advantages, the immediate cash flow impact often surprises taxpayers during the filing season.

Tax professionals should be prepared to discuss higher current-year tax liability, changes in payroll withholding, coordination with other Roth strategies and long-term tax diversification goals.

⇾ When the Roth catch-up requirement applies, affected employees don’t have an option to make pre-tax catch-up contributions.

⇾ The rule accelerates taxation but may still support long-term retirement planning when coordinated properly.

The takeaway for advising clients on catch-up contributions

The mandatory Roth catch-up requirement changes how catch-up contributions are treated for higher-wage employees nearing retirement. Clients who previously relied on pre-tax catch-up contributions may see higher taxable income and increased withholding, even though their overall retirement savings approach has not changed.

Tax professionals should be ready to explain how prior-year FICA wages determine whether the rule applies and how plan design affects eligibility.

⇾ NATP will continue monitoring plan implementation timelines and IRS guidance to support members advising employers and taxpayers through this change.