September 18, 2025

Treasury and IRS Finalize Regulations on Roth Catch-Up Contributions

In Summary

• Employees aged 50 or older with prior-year wages over $145,000 (indexed for inflation) who make catch-up contributions must designate those amounts as after-tax Roth contributions.
• Plans that offer Roth catch-up contributions to high-income participants must extend the Roth option to all participants eligible for catch-up contributions; otherwise, high-income employees in plans without a Roth feature will be unable to make any catch-up contributions.
• The mandatory Roth catch-up requirement applies for taxable years beginning after December 31, 2026. This follows a transition period that was set to expire on December 31, 2025, which has not been extended by the final regulations.
• Employers and plan administrators must prepare by updating payroll/recordkeeping systems to track prior-year wages, defaulting eligible participants’ catch-up contributions to Roth, and updating plan documents and participant communications.

The Treasury Department and the IRS have issued final regulations on catch-up contributions under the SECURE 2.0 Act. The regulations confirm that certain higher-income employees who make catch-up contributions to workplace retirement plans will be required to designate those amounts as after-tax Roth contributions. These rules will affect plan sponsors, administrators, and participants as they prepare for the upcoming compliance dates. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.

Catch Up Contributions – Background

Catch-up contributions allow workers ages 50 and older to contribute additional amounts to 401(k) or similar retirement plans. SECURE 2.0 created new rules for higher-income employees, defined as those with more than $145,000 in wages from the prior year. These employees must make catch-up contributions as Roth. The law also introduced new higher contribution limits for employees between ages 60 and 63 and for participants in SIMPLE plans.

The IRS issued proposed regulations in January 2025 and requested public comments. A transition period announced in Notice 2023-62 gives plan sponsors until December 31, 2025, to update systems and processes before the requirement takes effect.

What the Final Regulations Say

The final regulations “generally follow” the proposals issued in January. Employees with more than $145,000 in FICA wages from the sponsoring employer in the prior year must make catch-up contributions as Roth, and that amount will be indexed for inflation. 

Plans that offer Roth catch-up contributions to higher-income participants must extend the option to all participants eligible for catch-up contributions. Plans without a Roth feature are not required to add one, but higher-income participants in those plans will not be able to make catch-up contributions.

Participants under the wage threshold may continue to make catch-up contributions on a pre-tax or Roth basis, depending on plan design. The enhanced limit for employees ages 60 through 63 stays in place at 150% of the standard catch-up, equal to $11,250 in 2025 compared with the standard $7,500 limit. SIMPLE plans also follow the enhanced structure, with participants in the 60 to 63 age group permitted an additional $5,250 in 2025.

The final regulations also make several important changes. Plan administrators are now permitted to aggregate wages from certain separate common law employers to determine whether an employee is subject to the Roth catch-up requirement.

As for correcting errors, if too much money is directed to a Roth account, plan administrators have until the end of the following plan year to make the correction. In addition, if a participant is no longer subject to the Roth catch-up requirement because of a reduction in wages or a corrected Form W-2, the automatic Roth treatment must end within a reasonable period of time.

The Roth catch-up requirement will apply for taxable years beginning after December 31, 2026. Plans that are ready may begin implementing in 2026 if they apply a reasonable and good faith interpretation of the statute. The final regulations do not extend the earlier transition relief beyond December 31, 2025.

Action Steps for Plan Sponsors

Employers and plan administrators should begin preparing now for the Roth-only requirement. Payroll and recordkeeping systems will need to track wages from the prior year to determine who is affected. Systems must also default those participants’ catch-up contributions to Roth.

Plan documents and participant communications should be updated to reflect the new rules. Sponsors will need to prepare for the higher contribution limits for employees ages 60 through 63 and the expanded limits for SIMPLE plans. Correction procedures should be reviewed and tested in case errors occur. Clear communication to employees will be important, particularly for those who may see catch-up contributions change from pre-tax to Roth.

FAQ — New Roth Catch-Up Rules

• Who is affected by the Roth catch-up rule? Employees ages 50 or older who earned more than $145,000 in wages from the sponsoring employer in the prior year. The amount will be indexed for inflation in future years.
• When does the requirement take effect? The Roth catch-up rule applies to taxable years beginning after December 31, 2026. Plans may implement the rule in 2026 and use a reasonable and good faith interpretation of the law. 
• What happens to employees under the threshold? Participants below the income threshold can continue to choose between pre-tax and Roth catch-up contributions, depending on what the plan allows.
• What if a mistake is made? The final regulations describe correction methods if catch-up contributions are incorrectly treated as pre-tax. Plan sponsors should review and update correction procedures to reflect the new guidance.

Contact Us

The final regulations clarify that the SECURE 2.0 catch-up provisions will work in practice. Those who begin to plan now will be better positioned to meet the new requirements. If you have questions about the information outlined above or need assistance with your next benefit plan audit, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.