As plan advisors, you’re likely already aware that the retirement landscape continues to shift under SECURE 2.0. Beginning January 1, 2026, one major change from SECURE 2.0 will require certain high-earning participants to make catch-up contributions as Roth, rather than pre-tax, deferrals. Advisors should help plan sponsors and participants prepare now to ensure compliance and effective communication.

The Rule In Brief

• Effective Date: Tax years beginning after December 31, 2025 (final regulations generally apply beginning in 2027)
• Affected Participants: Participants age 50 or older (including those who will turn 50 by year-end), whose prior-year W-2 wages exceed $150,000 (indexed for inflation). Only FICA wages reported in Box 3 on Form W-2 are considered under the regulations; thus, self-employed individuals are not subject to this new rule.
• What Changes: All catch-up contributions for high earners must be Roth. Participants whose prior year FICA wages fall below the $150,000 threshold may still choose between pre-tax or Roth contributions, if the plan allows.
• Plan Types: The new rule applies to 401(k), 403(b), and governmental 457(b) plans. SIMPLE and SEP IRAs are excluded.

Key Implications for Plans

Plans should be mindful of several key considerations going forward. First, if a plan does not offer Roth deferrals, affected participants will not be able to make catch-up contributions after December 31, 2025. Plan sponsors should determine now to change their plan features and should coordinate with their service providers if they wish to add or update Roth functionality. To this end, employers should identify high-wage participants using 2025 W-2 wages, so that the Roth rule is correctly applied in 2026.

Next, 401(k) and 403(b) plan documents generally must be amended by December 31, 2026, to comply with SECURE 2.0 requirements. Later deadlines apply to governmental and collectively bargained plans.

Correcting Failures

Final regulations clarifying the Roth catch-up contribution requirements provide two correction methods that may be used when participants subject to the Roth catch-up requirement make pre-tax catch-up contributions that should have been designated Roth contributions. To use either method, plans must include a deemed Roth election feature, to clarify that the plan will automatically treat an affected participant’s catch-up contributions as Roth contributions.

• Form W-2 Correction Method: Any catch-up contributions that should have been designated Roth contributions (adjusted for gains or losses) is transferred from the participant’s pre-tax account to the participant’s designated Roth account. The transferred amount is then reported as a designated Roth contribution on the participant’s Form W‑2 for the year of the deferral. This correction method is not permitted if the participant’s Form W-2 for the year has already been filed or furnished to the participant.
• In-Plan Roth Rollover Correction Method- A plan may directly roll over any catch-up contributions that should have been designated Roth contributions (adjusted for gains or losses) to the participant’s designated Roth account and report the amount of the in-plan Roth rollover on Form 1099-R for the year of the rollover. This contribution and any related earnings will need to be included in the participant’s gross income in the year the rollover occurs. This correction method is allowed even in plans that do not permit participant-elected in-plan Roth rollovers, as it is intended to correct an operational failure.

Next Steps for Plan Advisors

As we move quickly towards implementation of the Roth catch-up contribution requirement, plan advisors can assist their clients by confirming plans’ Roth deferral capability and catch up provisions, coordinating with payroll and other service providers to ensure plan features and operations will align with the new rule, identifying participants who are likely at or over the $150,000 threshold, and providing clear participant communications advising on the new rule. For plan sponsors, readiness will help mitigate compliance errors; for participants, Roth catch-ups may enhance long-term tax free growth. Plan advisors who can assist their clients through this transition will add significant value as 2026 approaches.

If you have any questions about the Roth Catch-Up Contribution Rule, our team is here to help. Please contact your trusted TBC advisor for the latest updates and guidance.

REMINDERS:

• December 1, 2025: Deadline to distribute annual safe harbor notices to plan participants.
• December 1, 2025: Deadline to distribute annual QDIA notice to plan participants, as well as annual automatic enrollment and default investment notices, which may be combined with the QDIA notice.