The IRS has finalized rules under SECURE 2.0 that change how catch-up contributions work for higher-earning employees. Starting January 1, 2026, employees earning above the annual threshold (currently about $145,000, indexed each year) must make their catch-up contributions on a Roth (after-tax) basis. The IRS also clarified special higher limits for employees ages 60–63, how wages get counted across related employers, and how errors can be corrected. While the rule technically takes effect in 2026, there’s a “good faith” compliance standard for that first year—meaning sponsors should start aligning their plans, but won’t face harsh enforcement until the final regulations go live on January 1, 2027.
What Plan Sponsors Should Do
This is a good time to get ahead. First, confirm your plan permits Roth contributions; if not, you’ll need to amend it so high earners can keep making catch-up contributions. Work with payroll and recordkeepers to identify who will be over the income threshold and make sure their contributions get directed to Roth. Because employees may be surprised when their take-home pay changes, plan for clear communication about what’s coming in 2026—and reinforce that the rules become fully enforceable in 2027.
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