Photo by Brett Jordan on Unsplash
Starting January 1, 2026, workers who earn more than $150,000 in FICA wages will no longer be allowed to make traditional pretax catch-up contributions to their 401(k) plans. Instead, those contributions must be designated as Roth contributions, a shift that will reshape retirement savings strategies for millions of higher-income employees.
The change stems from Section 603 of the SECURE 2.0 Act, which applies to plan years and taxable years beginning after December 31, 2025. The Treasury Department and the IRS issued final regulations on the Roth catch-up rule and related SECURE 2.0 catch-up provisions on September 15, 2025, a financial advisory firm’s regulatory insights article said.
Who Counts as a High Earner
Under the new framework, participants who earned more than $150,000 in FICA wages in 2025 are considered high earners for 2026, a financial institution’s investment education article said. Those individuals will be required to make any catch-up contributions on a Roth basis, meaning the money goes in after taxes but grows and can be withdrawn tax-free in retirement.
Participants whose FICA wages fall below that threshold still have a choice. They can make catch-up contributions on either a Roth or pretax basis, a retirement plan services provider’s legislative viewpoint article said. The rule also carves out an important exception: participants who don’t receive FICA wages, such as partners and sole proprietors who only have self-employed income, aren’t subject to the requirement at all, the same article said.
Lawmakers originally intended for this rule to begin in 2024, but they moved the start date to 2026 to give employers time to update systems and plan documents, a wealth management firm’s client advisory said. The Roth catch-up requirement must be operational on January 1, 2026, with an exception for multiemployer union plans, according to the retirement plan services provider’s legislative viewpoint article.
New Contribution Limits for 2026
Alongside the Roth mandate, the dollar limits on 401(k) contributions are rising. Catch-up contributions already allow workers age 50 and older to save more than the standard annual limit in their employer-sponsored retirement plans, the wealth management firm’s client advisory noted. For 2026, those limits look like this:
- Regular 401(k) contribution limit: $24,500
- Standard catch-up contribution limit: $8,000
- Enhanced “super catch-up” for ages 60 to 63: $11,250
The super catch-up gives workers in that narrow age band a chance to accelerate savings during their peak earning years, the wealth management firm’s advisory said. Combined, these figures mean catch-up eligible participants can contribute up to $32,500 in salary deferrals to their 401(k) plan in 2026, a retirement plan administration firm’s employer guidance article said.
For high earners, however, all of that catch-up money—whether it’s the standard $8,000 or the enhanced $11,250—must now flow into a Roth account rather than a traditional pretax one.
The Risk for Employers and Business Owners
The new requirement creates a potential trap for companies that haven’t updated their retirement plans. If an employer does not offer a Roth 401(k) option, high-earning employees cannot make catch-up contributions at all, a wealth management firm’s client advisory said. In other words, the absence of a Roth feature doesn’t just limit options—it eliminates the catch-up opportunity entirely for anyone above the wage threshold.
That gap carries particular weight for small business owners. Because business owners often fall into the “high earner” group themselves, failing to add a Roth feature to their company’s plan could unintentionally eliminate their own ability to make catch-up contributions, a retirement plan administration firm’s employer guidance article said. For owners who have long relied on pretax catch-up savings to reduce taxable income near retirement, that oversight could prove costly.
The stakes extend beyond individual savers. Plan sponsors now face pressure to confirm their 401(k) documents include a Roth option before the new year, since the rule takes effect regardless of whether a given plan is ready. Human resources and benefits teams are being pushed to audit payroll systems, verify FICA wage calculations from 2025, and ensure that payroll providers can correctly flag which employees cross the $150,000 threshold.
For employees, the shift means rethinking tax strategy. Roth contributions offer no immediate tax deduction, unlike traditional pretax catch-up contributions, but they allow savings to grow tax-free and can be withdrawn without additional tax in retirement. Financial advisors are expected to field a wave of questions in the coming months from clients trying to understand how the mandatory Roth treatment will affect their take-home pay and long-term retirement projections.
With the effective date just weeks away, the message from plan administrators and advisory firms alike is consistent: high earners and the employers who sponsor their retirement plans have little time left to prepare for a rule that fundamentally changes how catch-up savings will work.
