In September of 2025, the Internal Revenue Service (IRS) issued final regulations on the Roth catch-up contribution requirement mandated by the SECURE 2.0 Act. Although the final rules officially apply to contributions for taxable years starting after December 31, 2025, it is important to note that the effective date of the Roth requirement was not delayed.
Starting January 1, 2026, any catch-up contributions for highly paid individuals (HPI) must be made as Roth contributions.
An HPI is defined as anyone earning more than $145,000 in FICA wages in the prior year (for the same employer). The $145,000 compensation limit is indexed, so the final threshold may change by the time the rule takes effect next year.
Because the compensation limit is determined separately for each employer, new employees are exempt from this rule regardless of their current income. Also exempt are individuals who receive non-W2 income such as partners or sole proprietors.
For 2025 the standard 401(k) limit is $23,500 and the basic catch-up contribution limit is $7,500. Those ages 60-63 have an enhanced catch-up limit of $11,250. These indexed limits are expected to change for 2026. Actuarial firm Milliman has projected that the standard limit will increase to $24,500 with the catch-up contribution set at $8,000 ($11,500 enhanced) Once the new limits are formally announced we will share that information with you.
If your plan does not currently allow for Roth contributions, catch-up contributions are not available to HPIs without a plan amendment to add Roth. Alternatively, you can amend your plan to remove catch-up contributions.
As always, we are happy to help you navigate regulatory changes that affect your plan. Please reach out to your consultant with any questions.