Get Ready for the Roth Catch-up Requirement: What Plan Sponsors Need to Know to Prepare for the 2026 Changes
The Roth catch-up contribution requirements will take effect January 1, 2026 for most plans. What does this mean?
- Mandatory Roth Treatment for High Earners
Starting January 1, 2026, participants aged 50+ whose prior-year FICA wages exceed $150,000 (indexed annually) must make any catch-up contributions on an after-tax Roth basis—no traditional pre-tax catch-up allowed.
- Catch-up Eligibility Unchanged
Only those already eligible for catch-up contributions (aged 50+) are affected; the overall catch-up amount limits remain the same
Timeline and Effective dates for the new Roth catch-up rules
The statutory requirement is that most plans must comply starting with taxable years beginning after December 31, 2025, with the following exceptions:
- Collectively bargained plans are given until the first taxable year beginning after the date on which the last collective bargaining agreement (CBA) that is in effect on December 31, 2025, terminates. Any extensions to these agreements are not considered. For example: If a CBA is in effect on December 31, 2025, and terminates on June 30, 2026, the new rules would begin in the first tax year starting after June 30, 2026.
- Multiemployer 414(f) plans have a similar rule, but uses November 17, 2025, as the reference date. The rule takes effect the first taxable year beginning after the last CBA in effect on November 17, 2025, terminates. Again, extensions are not considered.
- Governmental plans are given until the first tax year that begins after their legislative body has had a full session to make any necessary changes to the plan (starting after December 31, 2025).
Most plans can rely on a reasonable, good faith interpretation of the Roth catch-up rules until the end of the 2026 tax year. Plan amendments generally will be due by December 31, 2026.
If a plan doesn’t offer Roth contributions, there’s no requirement to add a Roth feature. However, high income earners, as defined above, won’t be allowed to make catch-up contributions.
Deemed Roth Elections
Plans can adopt a “deemed Roth election” approach that will automatically treat catch-up contributions as Roth for affected employees. Employees must be given a chance to opt out.
Some retirement plans let participants choose during each payroll period to treat part of their contributions as catch-up contributions, even if they haven’t yet hit the annual contribution limit. The plan may automatically treat those catch-up contributions as Roth contributions, even if it turns out those contributions didn’t actually qualify as catch-up contributions.
Things Plan Sponsors Should be Thinking About Now:
1. Review current Roth availability in the plan
To accommodate catch-up contributions from high-income earner employees, the plan will need to offer Roth contributions with the start of the 2026 tax year. If the plan doesn’t currently include a Roth option, now might be the time to consider adding this feature to help ensure uninterrupted retirement savings for participants.
2. Consider a deemed Roth election strategy
Implementing a deemed Roth election can help streamline plan operations and provide access to IRS-approved correction methods. This proactive approach can help minimize administrative complexity while maintaining compliance with the new requirements.
3. Evaluate system readiness
Coordinate with your payroll provider and recordkeeper to help ensure systems can properly identify affected participants using prior-year FICA wages that are Social Security wages reported in Box 3 of Form W2 and accurately process Roth catch-up contributions. Early preparation helps prevent processing delays and reduces the risk of administrative errors.
4. Develop a communication strategy for employees
Clear, timely communication is essential. Create a strategic approach to update plan documents, revise enrollment materials, and develop targeted communications that help participants understand how these changes affect their retirement savings strategy.
5. Establish error resolution protocols
Mistakes can be fixed using W-2 corrections, in-plan Roth rollovers, or both. However, to use the special correction methods, the plan must have implemented a deemed Roth election methodology. The deadline for corrections is the end of the year following the year for which the catch-up contribution was made. If a plan does not include a “deemed Roth election” provision, pre-tax catch-up contributions made for a high-income earner must be distributed from the plan.
Take a proactive approach to compliance by determining your preferred correction method. Whether through W-2 adjustments, in-plan rollovers, or a combination of both. Become familiar with the $250 de minimis exception as it provides relief by allowing small errors under $250 to remain uncorrected, helping to reduce administrative burden for minor discrepancies.
Bottom Line: The Roth catch-up mandate requires deliberate planning across operations, payroll, and communications teams. With a short window before the 2026 plan year launches, staying ahead ensures plan sponsors meet compliance timelines while helping their employees adjust smoothly to this important shift.
By Julie Courtney, CPA, Shannon & Associates
SECURE 2.0 Changes to SIMPLE IRA Plans
For the 2026 tax year, the SECURE 2.0 Act provides increased contribution limits for SIMPLE IRA plans, specifically targeting small employers and individuals aged 60 to 63.
Increased Limits for Small Employers (2026)
Employers with 25 or fewer employees must allow higher salary deferral limits, which are automatically 110% of the standard limits. Larger small employers (26–100 employees) may also offer these higher limits if they provide an increased employer contribution.
- Employer Qualification (26–100 employees): To use the higher limits, these employers must formally elect them and increase their contribution to either a 4% match (up from 3%) or a 3% non-elective contribution (up from 2%).
- Vesting: All employee and employer contributions to a SIMPLE IRA remain 100% vested immediately.
Enhanced “Super” Catch-Up for Ages 60–63
Beginning in 2025 and continuing through 2026, individuals who reach ages 60, 61, 62, or 63 by the end of the year are eligible for an even higher catch-up amount, often called a “super catch-up”.
- 2026 Super Catch-Up Limit: $5,250.
- Total Maximum Deferral (Age 60-63): Individuals in this age bracket can defer a total of $23,350 if in a small employer’s enhanced plan ($18,100 + $5,250) or $22,250 in a standard plan ($17,000 + $5,250).
- Reversion: Once an individual turns 64, their catch-up limit reverts to the standard age 50+ amount.
New Roth Options: SECURE 2.0 now allows SIMPLE IRAs to accept Roth contributions if the employer chooses to offer this feature.
By Bethany Hulbert, CPC, Shannon & Associates
IRS Limits for Qualified Retirement Plans
The IRS has released the cost-of-living adjustments that provide the dollar limitations for retirement plans in 2026. The following chart highlights some of the key limits. For more details, please see IRS Notice 2025-67 or contact us.
