The SECURE 2.0 Act of 2022 is a major federal law designed to encourage increased retirement savings in plans like 401(k) plans. One provision provides increased catch-up contributions for employees aged 60 to 63. The other provision requires highly paid employees to make catch-up contributions as Roth (after-tax) contributions instead of traditional (pre-tax) contributions.
Catch-up contributions are additional contributions that employees who are aged 50 or older may make to 401(k) plans or similar retirement plans sponsored by their employer ($8,000 for 2026). The SECURE 2.0 Act increased the catch-up contribution limit for employees aged 60 to 63, starting in 2025 ($11,250 for 2026).
The SECURE 2.0 Act requires highly paid employees (employees with FICA wages exceeding $150,000) who make catch-up contributions to make those contributions as Roth contributions, rather than traditional contributions.
Employers who sponsor retirement plans like 401(k) plans had a number of practical questions about how they would be required to implement these provisions. On September 15, 2025, the Internal Revenue Service issued final regulations providing much-needed guidance.
Unfortunately, the preamble to the final regulations states that “the Treasury Department and the IRS expect that a plan’s terms will be made clear as to whether or not a reference to the catch-up contribution limit under section 414(v) in the plan document includes the optional higher limit for participants attaining age 60, 61, 62, or 63.” See 90 Fed. Reg. 44527 (Sept. 16, 2025) at 44532. The preamble then notes the plan amendment deadline applicable for required SECURE Act 2.0 amendments under Notice 2024-02. Id.
Consequently, a plan amendment that specifically permits the increased catch-up limit is required. Pursuant to Q & A J-1 of Notice 2024-02, the deadline for most plans to adopt an amendment adopting the optional, higher, catch-up limit is December 31, 2026. However, alternate deadlines apply for governmental, nonprofit, and union-sponsored plans.
The SECURE Act 2.0 now prevents eligible employees with FICA wages for the prior year that exceed a designated limit from making catch-up contributions as traditional contributions but instead requires catch-up contributions to be made as Roth contributions. This requirement applies to employee contributions made on or after January 1, 2026. The FICA wage limit is adjusted annually, and IRS Notice 2025-67 sets the Roth catch-up wage threshold for 2025 at $150,000.
These requirements raise several implementation questions for employers, including wage determinations, contribution elections, plan design limitations, and correction methods.
The final regulations answer these questions. Employers must use the employee’s FICA wages for the prior calendar year, as reported in Box 3 of Form W-2, for purposes of determining which employees are required to make catch-up contributions as Roth contributions. See 90 Fed. Reg. 44527 (Sept. 16, 2025) at 44535.
The final regulations permit employers to treat catch-up contributions made by employees subject to the mandatory Roth contribution requirement as if the employee had elected for any catch-up contributions to be treated as Roth. Thus, the employer is permitted to automatically convert pre-tax contributions that become catch-up contributions to Roth elections. See 90 Fed. Reg. 44527 (Sept. 16, 2025) at 44536.
However, the employer’s use of a deemed Roth election is subject to the requirement that the employer give the employee the “effective opportunity” to make a new election that is different from the deemed election. Id.
To date, the IRS has declined to give any specific guidance on what constitutes an effective opportunity and has stated only that the requirement will be judged on all of the facts and circumstances. However, employers who use the deemed Roth election option will want to provide employees with as much up-front notice of the right to make a new election as is reasonably possible under the circumstances.
Ideally, this would be done in the employer’s summary plan description or an annual notice to participants provided prior to the beginning of the plan year. If such regular, up-front notice is not reasonably possible under the facts and circumstances, the notification could also be made as a disclosure on the employee’s deferral election form or, if need be, at the time the participant’s deferrals exceed the applicable limit.
If an employer’s plan does not permit employees to make Roth contributions, then employees who are subject to the mandatory Roth catch-up contribution must not be permitted to make catch-up contributions. The final regulations also make clear that employers are not required to have a plan that permits Roth contributions, and that such plans may still permit employees not subject to the Roth catch-up requirement to make catch-up contributions. See 90 Fed. Reg. 44527 (Sept. 16, 2025) at 44536-44537.
The final regulations provide two new methods for correcting circumstances when employee deferrals are contributed to the plan as traditional contributions but were required to be made as Roth catch-up contributions. See 90 Fed. Reg. 44527 (Sept. 16, 2025) at 44540. First, if the employer discovers the problem before the employee’s Form W-2 is issued, the plan may convert the pre-tax amount and applicable earnings to Roth, in essence, by moving the contribution into the Roth account in the plan, and reporting the excess amount, not including earnings, as a Roth contribution on the Form W-2.
Alternately, the plan may move the excess amount, and earnings, to the Roth account and report the excess earnings as taxable income on Form 1099-R in the year of the rollover. The preamble to the final regulations notes that a plan may use this correction method even if it does not otherwise allow in-plan Roth rollovers; and provides that doing so will not expand the in-plan Roth rollover availability to other plan participants.
As one might expect, the final regulations are lengthy and complex. This article is intended only as a brief summary of some provisions that may be helpful to employers. It does not address all alternative deadlines applicable to governmental, nonprofit, or union-sponsored plans.
Consequently, please treat this article as a starting point for developing a roadmap for implementing the Roth catch-up requirements. The next step will be to review the particulars of the employer’s actual plan, consult with the employer’s third-party administrator, and explore the detailed requirements applicable to the employer’s specific plan based on the plan terms and applicable facts and circumstances.
This article is published in the February 18, 2026 edition of the New Hampshire Bar News at page 26.
Dodd Griffith is a shareholder and director at Gallagher, Callahan & Gartrell, PC. His practice focuses on the representation of businesses and business owners in a range of tax and transactional matters, including tax planning for business transactions, executive compensation, deferred compensation for executives, employee benefits, tax-exempt lending, and tax credit transactions.