2026 Roth Catch-Up Rules: What High Earners Need to Know

November 10, 2025

By: Alicia Condon

Manager, Tax

Key Takeaways

Mandatory Roth Catch-Up: Employees earning $145,000+ must make catch-up contributions on after-tax basis starting January 1, 2026
Enhanced Limits: Workers aged 60-63 gain access to 50% higher catch-up contribution limits ($11,250 for 401(k) plans)
System Overhaul: 70% of employers need record keeping upgrades to track income thresholds and route contributions properly
Bottom Line: Plan sponsors have 12 months to implement systems changes that affect 35% of catch-up eligible participants

January 1, 2026, marks a watershed moment for retirement plan administration. The delayed provisions of the SECURE Act 2.0 finally take effect, fundamentally changing how high-earning employees save for retirement.

These aren’t minor adjustments; they represent structural changes that require immediate attention from CFOs, HR leaders, and plan administrators. Now is the time for strategic planning and Roth catch-up contributions.

The Mandatory Roth Catch-Up Transformation

The most significant change affects participants aged 50 and older who earned more than $145,000 in the prior year.

Starting in 2026, all catch-up 401(k), 403(b) and 457(b) contributions for these high earners must be made on a Roth (after-tax) basis. Catch-up contributions are additional amounts that employees aged 50 and older can contribute to retirement plans beyond the standard IRS or plan limits and were implemented in 2001.

A new requirement—originally set to take effect in 2024 but delayed due to industry readiness concerns—removes the pre-tax option that many executives have relied on for decades.

This change affects approximately 2.1 million retirement plan participants across the U.S., with the greatest impact seen in the technology, healthcare, and financial services sectors—industries where higher compensation is more common. For affected employees, this means losing immediate tax deductions worth $2,500 to $3,500 annually, depending on their tax bracket.

However, the long-term benefits of tax-free growth and distributions may offset this immediate cost for participants with 10 or more years until retirement.

Enhanced Catch-Up Limits for Pre-Retirees

While the Roth requirement creates challenges, SECURE Act 2.0 simultaneously expands savings opportunities for workers approaching retirement.

Beginning in 2026, participants aged 60 through 63 can contribute significantly higher catch-up amounts: $11,250 for 401(k) and 403(b) plans, and $5,250 for SIMPLE plans. This represents a 50% increase over standard catch-up limits.

Financial modeling shows that maximizing these enhanced limits over four years can add $150,000 to $200,000 to retirement savings, assuming average market returns. For employers, offering these enhanced limits positions their retirement benefits competitively, which can be particularly important for retaining experienced talent in tight labor markets.

Operational Requirements and Implementation Timeline

Successfully implementing these changes requires coordinated efforts across multiple departments and systems. Payroll systems must track prior-year compensation to identify affected participants, distinguish between regular and catch-up contributions, and route contributions to the appropriate pre-tax or Roth accounts based on income thresholds.

Industry surveys reveal that only 30% of current record keeping platforms fully support these requirements. Plan sponsors should immediately assess the capabilities of their current systems and engage vendors to discuss upgrade timelines. Companies that use multiple payroll systems or have recently undergone mergers face additional complexity in consolidating compensation data.

The IRS has provided flexibility in determining prior-year compensation, allowing employers to use W-2 wages or other reasonable methods consistently applied. However, this flexibility requires careful documentation of chosen methodologies to defend positions during potential audits.

Plan Document Updates and Compliance Deadlines

While operational changes must be implemented by January 1, 2026, plan sponsors have until December 31, 2026, to formally amend plan documents for most SECURE Act 2.0 provisions. This creates a unique compliance challenge where systems and procedures must be updated before formal plan amendments are required.

Best practices include drafting amendments early to ensure operational procedures align with planned document language. Working with ERISA counsel to review current plan provisions helps identify necessary changes and potential discretionary enhancements. Documentation of good-faith compliance efforts protects against potential corrections later.

Strategic Planning for High-Earning Employees

The mandatory Roth catch-up requirement fundamentally alters retirement planning strategies for affected executives. Traditional approaches which maximized pre-tax contributions to reduce current tax liability no longer apply for catch-up amounts. This shift requires comprehensive education and potentially restructured compensation packages.

Participant Communication Strategies

Effective communication determines whether these changes enhance or diminish employee satisfaction with retirement benefits. High earners typically require more time to adjust their tax planning and cash flow management strategies. Communication should begin immediately, even before the systems are fully ready.

Key messaging should emphasize that regular contribution limits remain unchanged—only catch-up contributions require Roth treatment for high earners. Participants can still contribute $23,500 (2025 limit) on a pre-tax basis before catch-up contributions begin. The enhanced limits for individuals aged 60-63 provide additional savings opportunities that may help offset the tax impact of Roth requirements.

Successful communication campaigns utilize multiple channels, including targeted emails to affected participants, general workforce education about enhanced limits, integration with annual benefits enrollment materials, and dedicated resources on benefits websites. Personalized projections that show long-term Roth benefits help participants understand the value, despite the immediate tax impacts.

Correction Programs and Compliance Relief

The IRS acknowledges the complexity of implementation and offers correction opportunities through the Employee Plans Compliance Resolution System (EPCRS). Plan sponsors demonstrating good-faith compliance efforts can correct inadvertent failures with reduced or waived penalties.

Documentation becomes crucial for defending compliance positions. Maintain records of system configuration decisions, participant communications and education efforts, testing protocols and results, and any vendor limitations or delays. Regular audits of contribution routing and income verification processes help identify and correct issues before they become systematic failures.

Cost-Benefit Analysis for Employers

While implementation requires investment, strategic execution can yield competitive advantages. Initial costs include system upgrades, as well as consultant and legal fees for plan amendments and compliance reviews, and staff time for implementation and ongoing administration.

However, there are benefits which include enhanced ability to attract and retain senior talent, improved retirement readiness for longtime employees, and potential SECURE Act 2.0 tax credits for small employers. Companies report that comprehensive retirement benefits, including these new provisions, improve employee satisfaction scores by 15-20%.

Looking Beyond 2026

These changes signal broader shifts in retirement policy favoring Roth contributions and expanded savings opportunities for older workers. Future legislation may further increase income thresholds, expand Roth requirements to all participants, or enhance catch-up limits for additional age groups.

Forward-thinking organizations are incorporating flexibility into their retirement programs to anticipate and accommodate future changes. This includes investing in scalable technology platforms, developing comprehensive financial wellness programs, and creating communication frameworks adaptable to regulatory evolution.

January 1, 2026 is approaching and successful execution requires immediate action. Organizations that view these requirements as opportunities to enhance their retirement programs, rather than mere compliance obligations, will emerge with more substantial benefits that truly serve their workforce’s needs.

Ready to ensure your retirement plan meets 2026 requirements while maximizing value for participants? Contact Wiss’ Employee Benefit Plan specialists today to develop your implementation roadmap. Follow Wiss for ongoing updates and insights on retirement plan compliance and strategic benefits management.