Starting in 2026, catch-up contributions for workers age 50 and over who earned more than $145,000 in prior-year FICA wages (indexed; Fidelity cites $150,000) from their current employer must be made as Roth (after-tax) contributions — not pre-tax. The mandate, §603 of the SECURE 2.0 Act of 2022, was delayed to 2026 and is now in effect for 401(k), 403(b), and governmental 457(b) plans.
What Changes
- Who: 50+ participants whose prior-year Box 3/FICA wages from the employer sponsoring the plan exceeded the threshold ($145,000 indexed, commonly communicated as $150,000 for 2025 wages determining 2026 eligibility).
- What: Any catch-up contribution — the $8,000 regular catch-up (2026) or the $11,250 super catch-up for ages 60–63 (if the plan offers it) — must be designated Roth.
- Plan must offer Roth. If the plan does not have a Roth contribution feature and the participant is a high earner, the catch-up cannot be made at all. The plan must add Roth or forfeit catch-ups for that population.
Standard limits for 2026: $24,500 elective deferral, plus $8,000 catch-up (total $32,500 for 50–59 and 64+), or $11,250 super catch-up for 60–63 (total $35,750 where adopted).
Why It Matters for Take-Home and Payroll
A $8,000 pre-tax catch-up for a 24% marginal taxpayer saves ~$1,920 in current-year tax. The same $8,000 as Roth provides no current deduction — current-year tax rises by that amount, with qualified Roth distributions tax-free later. For a high earner, the Roth mandate shifts tax from retirement to today.
For a 52-year-old earning $170,000 who planned a $8,000 pre-tax catch-up, 2026 tax rises by ~$1,920 versus expectation. That change must be reflected in estimated withholding, not discovered in April 2027.
What Employers and Payroll Must Do
- Add Roth to the plan if not already present, before the first 2026 payroll that includes a catch-up for a high earner.
- Determine high-earner status per employer. Prior-year FICA wages from that employer, not total income, govern. A participant may be a high earner in one employer's plan and not in another.
- Update payroll logic to force Roth designation for catch-ups when status + age + threshold are met, and block pre-tax catch-up for that cohort.
- Communicate. Fidelity, Schwab, and Betterment have issued participant alerts; employers should mirror them in enrollment and first-quarter 2026 notices.
Simplify Your Financial Management
Roth catch-up mandates change the tax character of compensation mid-year. Beancount.io keeps elective deferrals, Roth versus pre-tax catch-ups, and employer-specific FICA wage history in version-controlled plain text — so payroll, W-2, and plan records reconcile without year-end rework. Get started for free and make the 2026 rule a payroll setting, not a surprise.