IRS finalizes Roth catch-up rule for high earners over 50

In December 2022, President Biden signed the SECURE 2.0 Act into law, introducing sweeping changes to retirement savings plans. Among the most impactful provisions were new rules governing catch-up contributions—additional amounts employees aged 50 or older can contribute to 401(k) and similar plans beyond the standard annual limit.

Initially, these changes were set to take effect in 2024, but implementation challenges prompted the IRS to issue transitional relief in Notice 2023-62. Now, with the release of final regulations on September 15, 2025, the IRS has clarified key requirements and timelines for employers and plan participants.

What’s New in the Final Regulations

The final regulations, issued on September 15, 2025, confirm that starting January 1, 2026, employees aged 50 or older who earned more than $145,000 in FICA wages in the prior year must make catch-up contributions on a Roth (after-tax) basis. This applies to 401(k), 403(b), and governmental 457(b) plans.

Key clarifications include:

• Aggregation of Wages: Employers may aggregate wages from related entities to determine if an employee exceeds the $145,000 threshold.
• Correction Window: If a catch-up contribution is mistakenly made as pre-tax, plans have until the end of the following plan year to correct it.
• Deemed Roth Elections: If a participant subject to the Roth requirement elects pre-tax catch-up contributions, the plan may treat it as a Roth election unless the participant opts out.
• Puerto Rico Plans: Specific guidance is provided for plans covering participants in Puerto Rico.

Importantly, the final regulations do not extend the administrative transition period granted in Notice 2023-62, which ends December 31, 2025.

Super Catch-Up Contributions for Ages 60–63

In addition to the Roth mandate, the SECURE 2.0 Act introduces enhanced catch-up limits for individuals aged 60 to 63, effective for tax years beginning after December 31, 2024. These individuals may contribute up to 150% of the standard catch-up limit, which amounts to $11,250 in 2025.

This “super catch-up” provision is designed to help workers in their peak earning years accelerate retirement savings before transitioning to standard limits at age 64.

Implications for Employers

Employers offering workplace retirement plans must prepare now to comply with the Roth catch-up mandate:

• Add Roth Features: Plans that offer catch-up contributions must also offer Roth contributions to accommodate high earners.
• Update Payroll Systems: Employers must track FICA wages to determine Roth eligibility and communicate changes to employees.
• Amend Plans: Plan documents must be updated by December 31, 2026, to reflect the new requirements.

What Employees Should Know

Starting in 2026:

• High earners (those with more than $145,000 in FICA wages in the prior year) can only make Roth catch-up contributions.
• Roth contributions are made with after-tax dollars, which means they grow tax-free and can be withdrawn tax-free in retirement (a significant advantage if you expect to be in a higher tax bracket later in life).
• Super catch-up limits apply for ages 60–63, offering a short-term opportunity to boost retirement savings.

Next Steps

The final regulations provide much-needed clarity but also underscore the urgency for employers and employees to act. If you sponsor a retirement plan or are nearing retirement age, now is the time to review your plan structure, payroll systems, and communication strategies.

Need help navigating the new rules? Contact us to verify your plan is compliant and your employees are informed.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.