Retirement Plan Catch-up Contributions

Super-Catch-up and Catch-up as Roth Requirements

Beginning January 1, 2026, significant changes will be implemented regarding retirement plan catch-up contributions for certain individuals. Both individuals and retirement plan sponsors need to be aware of these changes. The changes discussed below apply to most 401(k), 403(b), and governmental 457(b) retirement plans. Other types of plans are also subject to catch-up changes under the SECURE 2.0 Act of 2022 but are outside the scope of this article.

In late 2022, Congress passed the SECURE 2.0 Act, hoping to encourage more workers to save for retirement. Among other things, the Act introduced changes to catch-up contributions, including a new, optional “super” catch-up limit for those aged 60-63 and mandatory Roth treatment of catch-up contributions for high earners.

Catch-up Contributions

Under federal law, taxpayers can save a portion of their income in retirement plans and enjoy tax advantages for doing so. Workers aged 50 and above have the option of making additional elective deferrals known as catch-up contributions. The 2025 catch-up limit for most retirement plans is $7,500.

Super Catch-up Contributions

Beginning in 2025, SECURE 2.0 provides for an enhanced super catch-up of $11,250 for taxpayers aged 60-63. Once a participant turns 64, they revert back to the age 50 catch-up contribution in effect for that year. The super catch-up limit will be indexed for inflation starting in 2026.

Under the super catch-up rules, plan sponsors must not only track participants aged 50 and above but must also track participants who will attain ages 60, 61, 62, or 63 during the calendar year. Further, they will need to track participants who reach age 64 and are no longer eligible for the super catch-up limit.

Catch-up as Roth Contributions

The SECURE 2.0 Act added a requirement that highly compensated retirement plan participants making catch-up contributions must make such contributions as Roth contributions. SECURE 2.0 defined a highly compensated employee as one who earned wages of $145,000 or more in the prior year. This threshold is indexed for cost-of-living for years starting after 2025. Classifying the catch-up contributions for these employees as Roth contributions means that contributions are not made pretax but are includible in gross income in the year of the contribution. Distributions from the account, including earnings, generally are tax-free.

This Roth requirement was originally due to take effect in 2024 but was delayed until 2026 due to concerns that retirement plans and service providers could not change their administrative and recordkeeping procedures in time to comply.

Individuals earning more than $145,000 in wages should check with their plan sponsors to see if a Roth provision has been added for 2026. Plan sponsors may but are not required to add Roth deferrals, so you will want to clarify what your plan allows.

Plan sponsors who want to add Roth deferrals or want to implement the new Roth rules must develop processes to identify participants who will be subject to the new Roth catch-up requirement, track FICA wages of participants, and implement the deemed Roth catch-up elections. Plan documents, employee communications, and summary plan descriptions must all be updated to reflect the new Roth requirements.

The laws regulating retirement plans and plan sponsors are incredibly complex, and this article is a greatly simplified version of one aspect of the new SECURE 2.0 rules. As a plan sponsor you may want to contact your third-party administrator or ERISA counsel. R&A has a team that specializes in helping plan sponsors comply with these rules. If you have questions or want additional information about issues raised in this article, please give us a call. We would love to be of service.