What’s changing?
Section 603 of the Secure 2.0 Act mandates that catch-up contributions made by certain high-income earners in employer-sponsored retirement plans must be designated as Roth (after-tax) contributions.
This rule applies to plan years beginning on or after Jan. 1, 2026.
Key highlights
- Who’s affected: This impacts employees age 50 or older earning more than $145,000 in FICA wages from their employer in the prior calendar year.
- Mandatory Roth treatment: These employees must make catch-up contributions on a Roth basis.
- Indexed threshold: The $145,000 wage threshold will be adjusted annually for inflation.
Action items for employers
- Update payroll systems: Track employee wages to determine Roth eligibility.
- Communicate with employees: Educate high earners on the tax implications and benefits of Roth contributions.
- Coordinate with recordkeepers: Ensure systems are ready to process Roth catch-up contributions.
Why it matters
This change supports long-term retirement planning by encouraging tax diversification. While it may increase current tax liability for some employees, Roth contributions grow tax free and offer significant benefits in retirement.
Suggested next steps
- Engage your plan advisor to assess readiness.
Be on the lookout, as additional information about preparation for this provision will be provided in the coming months.