The IRS recently issued final regulations that require retirement plan sponsors to begin designating employees’ catch-up contributions to 401(k) and 403(b) plans as after-tax Roth contributions, beginning on Jan. 1, 2026. The change, introduced by the SECURE Act 2.0, applies to plan participants aged 50 and older whose prior year Social Security wages were $145,000 or more.
Background
Historically, catch-up contributions to employer-sponsored retirement plans have been made with pre-tax dollars, which qualify for a tax deduction and reduce eligible employees’ taxable income in the year of funding.
For example, in 2025, workers aged 50 and older can contribute an additional $7,500 in pre-tax catch-up contributions to their employer-sponsored plans, above the $23,500 maximum statutory threshold. The amount for individuals aged 60 to 63 is $11,250. All contributions grow tax-deferred until savers take withdrawals in retirement, when they must pay taxes on those amounts at their ordinary income tax rates. When savers reach age 73, they must begin taking annual required minimum distributions (RMDs) from their accounts and paying the related income tax liabilities.
By contrast, contributions to Roth 401(k) plans are made with after-tax dollars, which require plan participants to pay income tax on the contributed amount upfront, in the year of contribution. Those Roth investments escape the RMD rules but can be withdrawn tax-free when account owners reach the age of 59½.
SECURE Act Changes to Catch-Up Contributions
Under the final regulations, employers must use “a reasonable, good faith interpretation of statutory provisions” to treat eligible employees’ catch-up contributions as Roth contributions beginning in tax years after Dec. 31, 2025. This may require significant updates to existing payroll and recordkeeping systems processes, including tracking plan participants’ ages and FICA wages to determine Roth eligibility and deciding on a method for implementing the Roth catch-up contributions, either through an automatic deemed election once employees meet or exceed the statutory thresholds or a required separate election made by the qualifying plan participant. It also requires plan sponsors and administrators to have in place appropriate documentation to help participants understand and adapt to changes in the ways they may save for retirement.
About the Author: Olga Ismail is the head of Retirement Plan Consulting and a financial advisor with Provenance Wealth Advisors (PWA), an Independent SEC-Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. She can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or info@provwealth.com.
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Olga Ismail is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.
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Posted on October 17, 2025