The Kentucky CPA Journal

Feature

Mandatory Roth Catch-Up Contributions: What CPAs and Plan Sponsors Need to Know

Issue 4
December 22, 2025

By Kimberly Lindsey

As part of the ongoing evolution of retirement plan rules under the SECURE 2.0 Act of 2022, a significant change is coming in how certain catch-up contributions must be treated for tax purposes. Starting in tax year 2026, employees aged 50 and older whose wages exceed an income threshold will be required to designate their catch-up contributions as Roth (after-tax) contributions, rather than traditional pre-tax deferrals. The rule, initially scheduled for 2024, has been delayed to give employers and plan administrators time to adjust systems and procedures. Thomson Reuters Tax+1

What are catch-up contributions?

A catch-up contribution is an additional elective deferral available to employees aged 50 or older in qualified retirement plans such as 401(k), 403(b) and certain 457(b) plans. These contributions allow older participants to accelerate their retirement savings beyond the standard annual elective deferral limit. Traditionally, catch-up contributions could be made on either a pre-tax or Roth basis, at the participant’s election. Thomson Reuters Tax

Under SECURE 2.0, the fundamental rule remains: catch-up contributions are available to older participants. But a new requirement now governs how — and for whom — those catch-up contributions must be reported for tax purposes. Tax News

The mandatory Roth requirement

Section 603 of SECURE 2.0 added Internal Revenue Code Section 414(v)(7), mandating that catch-up contributions made by certain high-income employees must be designated as Roth contributions — meaning they are funded with after-tax dollars. Thomson Reuters Tax

Under this requirement, an employee who:

• is eligible to make catch-up contributions because they are 50 or older, and

• had wages from their employer in the preceding calendar year that exceeded $145,000 (adjusted annually for inflation), must make any catch-up contributions as designated Roth contributions beginning in 2026. Thomson Reuters Tax+1

Because Roth contributions are not deductible in the year of the contribution, these catch-ups will not reduce current taxable income. Instead, both the contributions and any earnings may be withdrawn tax-free in retirement, provided certain conditions are met. Thomson Reuters Tax

Plans without a Roth feature

A critical compliance issue is whether a plan offers a Roth contribution option. If a plan does not provide a Roth component, participants subject to the mandatory rule cannot make catch-up contributions at all. SECURE 2.0 does not require all plans to adopt Roth features, but plan sponsors may wish to add Roth options to avoid disqualifying eligible workers from making catch-up contributions. Thomson Reuters Tax

Moreover, if a plan permits Roth catch-up contributions for affected employees, the regulations generally require that all catch-up eligible participants must be allowed to make their catch-up contributions on a Roth basis, even if their wages are below the threshold. Thomson Reuters Tax

Final regulations and effective dates

In September 2025, the Department of the Treasury and IRS issued final regulations implementing several SECURE 2.0 provisions related to catch-up contributions. These rules clarify how the mandatory Roth requirement applies and address administrative issues such as correction methods and transition relief. IRS

Because of stakeholder concerns about administrability, the IRS provided a two-year transition period through December 31, 2025 under Notice 2023-62. During this period, plans will not be penalized for noncompliance with the Roth-catch-up mandate. Beginning Jan. 1, 2026, affected participants must adhere to the mandatory Roth treatment. The regulations themselves generally apply beginning Jan. 1, 2027, but employers are encouraged to apply the rules in good faith for 2026. Tax News

The final regulatory guidance also outlines relief for employers and outlines permissible correction methods if catch-up contributions were incorrectly designated. Among corrective options are transferring contributions to a Roth account or completing an in-plan Roth rollover, with appropriate reporting adjustments. Thomson Reuters Tax

Beyond the Roth mandate: Other catch-up changes

SECURE 2.0 also expanded catch-up contribution limits for certain age groups and plan types. Participants aged 60 to 63 may contribute up to 150 percent of the standard catch-up limit in 401(k), 403(b) and 457(b) plans, whereas in SIMPLE plans the increased limit is 110 percent of the standard amount. These higher limits are also indexed for inflation. Mauldin & Jenkins

These enhancements, sometimes referred to as “super catch-ups,” recognize that peak earning years and retirement savings potential often overlap in the early 60s. They provide an opportunity for accelerated retirement savings for those who can afford to take advantage of them. Mauldin & Jenkins

Planning considerations for advisors

For CPAs and plan sponsors, the mandatory Roth catch-up requirement introduces both administrative and tax-planning considerations:

• Payroll systems and plan records must track prior-year wages to determine whether participants meet the threshold for mandatory Roth treatment.

• Plan design reviews may be necessary to ensure Roth options are available and properly administered.

• Participant communications should explain the change well before 2026 so that employees understand how their catch-up contributions will be taxed.

• Tax strategy implications will vary depending on whether participants prefer an upfront tax deduction (pre-tax) or future tax-free withdrawal (Roth). Those near the threshold should evaluate their filing status, wage definitions and retirement income projections.

Many financial advisors argue that Roth contributions can be a powerful tool for long-term tax diversification, especially for high earners expecting higher tax rates in retirement. But for some participants, especially those closer to retirement or seeking immediate tax relief, the loss of the pre-tax catch-up option may influence contribution behavior and savings outcomes.

Conclusion

The mandatory Roth requirement for catch-up contributions represents a noteworthy shift in retirement plan tax policy. CPAs and plan sponsors will play a critical role in helping employers and employees navigate these changes. With thoughtful planning and clear communication, the transition to after-tax catch-up contributions can be managed effectively and can support long-term retirement success for plan participants.