Catch-up contribution rules for 2025 

Catch-up contributions can help older individuals save more as they near retirement. Participants who are aged 50 and older can elect to contribute an additional amount to their retirement account, known as a catch-up contribution. Starting in 2025, SECURE 2.0 raised the catch-up contribution amount (called a super catch-up) for participants ages 60 to 63. Regular and super catch-up contributions are typically made on a pretax basis, but plan sponsors may allow participants to elect Roth instead.

What’s changing under the new Roth catch-up contribution rule?

Beginning in 2026, regular and super catch-up contributions for certain high-paid participants (Roth catch-up participants) need to be made on an after-tax Roth basis instead of pretax. This rule applies to participants who:

• Are 50 years or older
• Are enrolled in a 401(k), 403(b), or 457(b) governmental plan
• Have FICA wages that exceed $145,000 (adjusted for the cost of living) in the previous calendar year from the employer sponsoring the plan

Who is exempt from the rule?

• Participants whose FICA wages are below the Roth catch-up wage threshold can make contributions on either an after-tax Roth or a pretax basis. 
• Participants who don’t receive FICA wages, such as partners and sole proprietors who only have self-employed income, aren’t subject to the rule.

What’s the effective date of the rule? 

The Roth catch-up rule, originally scheduled to take effect in 2024, was delayed to January 1, 2026, under IRS Notice 2023-62 (initial guidance on the Roth catch-up rule). Delaying the effective date provided much-needed relief to key stakeholders. 

The Roth catch-up rule must be operational on January 1, 2026, but the proposed regulations, issued on January 10, 2025, apply to tax years starting six months after the final regulations are published. For example, if the final regulations are published on July 20, 2026, then plans must adhere to them starting on January 1, 2028. There may be additional delays for certain collectively bargained plans.¹

From January 1, 2026, up until that regulatory applicability date, retirement plan administrators should comply with a reasonable, good faith interpretation of SECURE 2.0 and IRS Notice 2023-62. 

Key proposals with comments from stakeholders  

How are FICA wages determined for Roth catch-up participants?

Participants with FICA wages exceeding $145,000 (adjusted for the cost of living) from a sponsoring employer in the preceding calendar year are required to make all catch-up contributions on a Roth basis in the current year. FICA wages are determined separately for each employer. Wages aren’t combined even if the participant works for more than one employer that maintains the same plan. 

For example, if a participant receives $100,000 in FICA wages from both a parent company and its wholly owned subsidiary ($200,000 in total), the participant won’t be subject to the Roth catch-up requirement, even if both companies participate in the same plan. If, instead, the participant had prior year FICA wages from one of those companies that exceeded the $145,000 FICA wage threshold, then the catch-up contributions made from compensation from that company would have to be Roth, but catch-up from compensation from the other company would not. 

Stakeholder comments—In certain cases, considering FICA wages separately for each employer may cause administrative complications, especially if they’re affiliated employers under a single paymaster. To avoid unintended consequences, some stakeholders requested that the final regulations permit plan sponsors, on an optional basis, to aggregate FICA wages of affiliated employers to determine whether a participant is subject to the Roth catch-up requirement. 

How are Roth catch-up contributions treated by plan sponsors? 

Beneficial exception—Typically, contributions aren’t classified as a catch-up contribution until a plan or statutory limit is exceeded. This means initial contributions are considered regular contributions, and only the excess can be considered catch-up contributions. The proposed regulations, however, allow any Roth contributions that a Roth catch-up participant makes from compensation during the year to be treated as catch-up for the Roth catch-up requirement even if they’re made before reaching a limit. 

Deemed Roth catch-up election—Plans may provide for a deemed Roth catch-up election, meaning that Roth catch-up participants are automatically considered to have elected to make their catch-up contributions on a Roth basis. For these participants, all catch-up contributions are deemed Roth contributions, regardless of whether their plan has a separate election for catch-up contributions made throughout the year or uses a spillover design after a limit is reached. 

The deemed Roth election is contingent on the participant having an effective opportunity to make a different election, considering all relevant facts and circumstances. Proposed regulations don’t specify what effective opportunity means in this context. 

Stakeholder comments—Stakeholders generally appreciate that the beneficial exception allows Roth contributions to be treated as catch-up before a limit is exceeded, as well as the option for a deemed Roth election. However, certain stakeholders requested confirmation that the effective opportunity requirement for the deemed Roth election may be handled through a process that results in the least disruption.

For example, adding information to existing disclosures, such as summary plan descriptions, election forms, and annual safe harbor or automatic enrollment notices, is less disruptive than requiring a new process, which adds unnecessary administrative complexity, cost, and confusion.

What are the correction methods?

While the proposed regulations clarify how to implement the Roth catch-up requirement, the process remains complex, and mistakes are likely to occur. If Roth catch-up participants make pretax catch-up contributions, the proposed regulations offer two correction methods: 

W-2 correction method—With this approach, participants’ pretax catch-up contribution (adjusted for gains or losses) is transferred to their Roth account. The contribution amount alone, excluding earnings adjustments, is then reported as a designated Roth contribution on participants’ Form W-2 for the applicable year. Only the contribution itself is taxed, not any earnings. This method can’t be used if participants’ Form W-2 for that year has already been filed or issued to participants.

In-plan Roth rollover method—This method requires an in-plan Roth rollover of the pretax catch-up contribution (adjusted for gains or losses). The adjusted amount, not just the contribution, is reported as taxable income on Form 1099-R for the year of the rollover. 

These correction methods can only be used if the plan includes a deemed Roth catch-up election and meets specific deadlines. Under the proposed regulations, the deadlines vary based on which limit has been exceeded to cause the pretax contribution to be a catch-up.

For example, if the pretax contribution exceeded the annual deferral limit under Internal Revenue Code Section 402(g), the correction deadline would be April 15 following the year it was made (same as a refund of an excess deferral). Also, a plan must apply the same correction method for all participants with contributions in excess of the same applicable limit. 

Stakeholder comments—Stakeholders raised several concerns about the mechanics of the correction options, including:

• In-plan Roth rollover feature—They requested that the final regulations confirm plans aren’t required to offer an in-plan Roth rollover feature to all participants in order to use the correction option.
• Recapture tax—They asked that the final regulations clarify that the 10% recapture tax, which generally applies if a participant under the age of 59½ withdraws in-plan Roth rollover amounts within five years, doesn’t apply for corrections.
• Deadline concerns—They suggested extending the deadlines for use of the in-plan Roth rollover method in the final regulations to a later uniform date, such as the last day of the following plan year.
• Uniform correction method—They requested removing the requirement that the same correction method be used for all participants with contributions in excess of the same applicable limit. Alternatively, they suggested replacing the proposed rule with a more flexible one based on facts and circumstances, such as the correction date.

What about plan designs without Roth? 

Many retirement plan practitioners believed plans had to either permit Roth contributions or eliminate their catch-up contribution provision to comply with the Roth catch-up requirement. The prevailing thought was that a plan couldn’t satisfy the requirement if it only permitted pretax contributions while having any Roth catch-up participants. Surprisingly, the proposed regulations allow plans to offer only pretax contributions and still allow catch-up contributions. In such cases, employees with FICA wages exceeding $145,000 (adjusted for the cost of living) would be ineligible to make catch-up contributions. 

The proposed regulations warn that there may be instances in which a plan may need to preclude one or more highly compensated employees from making catch-up contributions. Their exclusion applies even if they’re not subject to the Roth catch-up requirement (e.g., an owner or partner) to the extent the benefits, rights, and features nondiscrimination requirements are met.

While plans can limit contributions to pretax only, they can’t restrict them to Roth alone. Additionally, a plan can’t mandate that all catch-up contributions be made on a Roth basis regardless of prior year FICA wages.  

Stakeholder comments—Stakeholders appreciate that the proposed regulations permit plans to limit contributions to pretax only and, in that case, participants subject to the Roth catch-up requirement aren’t eligible to make any catch-up contributions. However, to avoid administrative complexity, they requested that the final regulations exempt this plan design from benefits, rights, and features nondiscrimination testing. Additionally, stakeholders have requested that the final regulations permit plans to only allow catch-up contributions to be made on a Roth basis for all participants since it may be challenging for some plan sponsors to track the Roth catch-up FICA wage threshold.

You can access the full text of the proposed rules and submitted comments by visiting the Office of the Federal Register. 

Collaboration will help drive success

The Roth catch-up requirement significantly changes retirement plan administration, affecting plan sponsors, payroll companies, plan recordkeepers, third-party administrators, ERISA consultants, and plan participants. Collaboration among all stakeholders is needed for successful implementation of the rule. Payroll companies may play the most critical role since they have real-time access to the data used to determine when Roth catch-up contributions become applicable. 

While these rules introduce complexities and potential compliance challenges, the proposed regulations offer a clearer path forward. By understanding and preparing for these changes and staying informed about regulatory developments, stakeholders can navigate the transition more effectively and aim to ensure compliance. We anticipate that the final regulations will provide even more clarity as stakeholder comments are reviewed and considered.

1 For collectively bargained plans, the regulation generally applies for the first taxable year beginning after the date on which the plan's collective bargaining agreement that is in effect on 12/31/25, terminates (without regard to any extension), if that is later than the regulatory applicability date of nonunion plans.