Rules Finalized for Roth Catch-Up Contributions in 401(k) Plans

The IRS and the Treasury Department have finalized regulations — and a start date — regarding Roth (after-tax) catch-up contributions in 401(k)s and other retirement plans implemented by the SECURE Act 2.0. And employers should prepare now, experts said.

Beginning in 2027, traditional catch-up contributions must be treated as after-tax , rather than pretax, when they are made by employees ages 50 and older whose prior-year income from their existing employer exceeded $145,000. In 2025, workers older than age 50 are permitted to contribute an additional $7,500 in their plan, on top of the standard employee contribution of $23,500, for a total of $31,000.

The regulations allow for employees ages 60 through 63 to make "super catch-up" contributions. For 2025, that figure is $11,250. Certain catch-up contributions in 403(b) plans will not be designated as Roth contributions, according to the IRS.

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The Roth catch-up changes as part of SECURE 2.0 — the sweeping federal law passed in late 2022 with a range of retirement provisions — were originally slated to take effect in 2024 but were pushed back in August 2023.

The Roth catch-up rule will generally take effect for most plans beginning after Dec. 31, 2026, officially giving employers more time to comply. But some retirement plans are allowed to follow the Roth catch-up rules next year on a “reasonable, good faith” basis, the IRS said, indicating that employers should be preparing to comply immediately.

"The final regulations provide guidance for plan administrators to implement and comply with the new Roth catch-up rule and reflect comments received in response to the proposed regulations issued in January," the IRS said in a statement. The final regulations "generally follow" previously proposed rules, the IRS announcement stated, but some changes were made following the public comment period. For instance, the final regulations permit a plan administrator to aggregate wages received by a participant in the prior year from certain separate common-law employers in determining whether the participant is subject to the Roth catch-up requirement.

Other changes include one related to the correction of a failure to comply with the Roth catch-up requirement. If a plan puts too much money into a Roth account, the plan administrator has until the end of the next plan year to fix it, according to the new regulations. 

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Employer Action

The Roth change for catch-up contributions is one employers have to take action on, said Julia Zuckerman, vice president of compliance at New York City-based HR consulting firm Segal.

The Roth catch-up rule "requires action on the part of defined contribution plan sponsors who sponsor salary deferral plans — unlike many other SECURE 2.0 provisions that are optional for plan sponsors to adopt," she said.  

Although the final rule is not effective until Jan. 1, 2027, she said, plans should still follow the statute in 2026 per the government’s reasonable, good-faith interpretation. "Following the final rule is considered a reasonable, good-faith interpretation," she said.

“It's important that employers work with their payroll providers and recordkeepers to be sure that systems are in place” for 2026, so that the catch-up contributions of Roth-restricted employees are treated as Roth contributions. For 2026, Roth-restricted participant status is based on 2025 Federal Insurance Contributions Act (FICA) wages, she said.

"In light of the final rule, plan sponsors should review and amend plan documents, and update participant communications accordingly," Zuckerman said. "They may also want to consider whether to apply the FICA wage test on a common paymaster or controlled group basis, and/or whether to provide for a 'deemed' Roth catch-up election — i.e., automatically treat all applicable catch-up contributions on a Roth basis."