Final IRS Regulations on Roth Catch-Up & Catch-Up Contribution Changes under SECURE 2.0
Nate Moody, CPFA – RETIREMENT ADVISOR, PARTNER
September 2025
On September 15, 2025, the U.S. Department of the Treasury and the IRS issued final regulations (TD 10033) implementing key catch-up contribution provisions under the SECURE Act 2.0. These rules affect how certain higher-earning employees make “catch-up” contributions and also refine catch-up limits for older employees and those in SIMPLE plans. As plan sponsors, fiduciaries, and administrators, you should understand these changes, review your plan documents, payroll/recordkeeping systems, and prepare participant communications.
For plan committees, the message is clear: understanding your fiduciary duties and maintaining a strong, well-documented governance process is more important than ever.
Below is a dive into what changed, what the deadlines are, and what steps you’ll want to take.
What the Final Rules Say
- Mandatory Roth Catch-Up for High Earners
Participants age 50+ with prior calendar-year FICA wages above $145,000 must make catch-up contributions as Roth contributions (after-tax). If prior-year wages do not exceed the threshold, the requirement does not apply. This requirement applies to Catch-Up contributions only and does not impact a participant’s ability to save Pre-Tax and/or Roth for normal elective deferrals (for 2025, that limit is $23,500). - “Super Catch-Up” for Ages 60–63
Employees reaching ages 60–63 may contribute up to 150% of the standard catch-up limit (“super catch-up”). For 2025, that’s 50% more than the normal catch-up of $7,500 (an additional $3,750). These “Super Catch-Up” contributions are also subject to the Roth requirement for those participants that it applies to. - Deemed Roth Elections & Correction Mechanisms
Plans may adopt a deemed Roth election so required Roth catch-ups default automatically. If contributions are mistakenly made pre-tax when Roth is required, correction methods include W‑2 adjustments or in-plan Roth rollovers. A de minimis exception applies for errors under $250. - Aggregation Rules for Determining Income Threshold
Determining whether a participant’s prior-year wages exceed the $145,000 (indexed) threshold is not always straightforward, especially for employees with multiple employers under common ownership or when a “common paymaster” is used. The final regulations clarify that:- Default Rule: The threshold is determined based on FICA wages from the participant’s common law employer — meaning the employer that actually pays wages and controls the employment relationship.
- Aggregation Option: A plan may choose to aggregate wages from multiple employers within the same controlled group or from related employers using a common paymaster arrangement. This can simplify administration in complex organizational structures and ensure that high earners working across subsidiaries are treated consistently.
- Plan Document Requirement: Importantly, aggregation is not automatic. If a sponsor wants to aggregate wages across related employers, the plan document must explicitly provide for this treatment. Without a plan amendment or specific language, only the common law employer’s wages are considered.
- No Roth-Only Mandate for All Participants Importantly, the IRS confirmed that a plan may not require all catch-up contributions to be Roth. The Roth-only rule applies strictly to participants above the wage threshold; those under it must still have the option to make pre-tax catch-ups if the plan allows them.
- Applicability & Deadlines
- Roth catch-up requirement is effective January 1, 2026.
- The final regulations generally apply beginning January 1, 2027.
- Later dates may apply to governmental or collectively bargained plans.
Implications & Key Considerations for Plan Sponsors
- Plan Document Review & Amendments: Ensure your plan includes Roth contribution features, catch-up provisions, and (if desired) deemed Roth elections.
- System Updates: Payroll and recordkeepers must track prior-year FICA wages and apply thresholds accurately.
- Universal Availability & Testing: Plans must permit all catch-up eligible participants to make Roth contributions if offered.
- Participant Communications: Participants over the threshold need clear messaging about the change, tax impact, and deadlines.
- Amendment Timing: Plan amendments must be adopted by December 31, 2026, though operational readiness is needed by early 2026.
- Indexing & Monitoring: Thresholds and catch-up amounts will adjust for inflation; sponsors must track updates.
- Corrections & Compliance: Regulations outline correction methods; errors not corrected properly may create compliance risks.
Action Plan for Sponsors
| Task | Responsible Party | Target Timing |
| Review plan documents (Roth features, catch-up language, deemed Roth elections, aggregation provisions) | TPA / Recordkeeper | Q4 2025 |
| Update payroll & recordkeeping systems for 2026 | Plan Sponsor / Payroll | Q4 2025 |
| Draft participant communications | Recordkeeper / Plan Sponsor | Late 2025 |
| Adopt necessary amendments | TPA / Recordkeeper | By Dec 31, 2026 |
| Monitor inflation indexing & IRS updates | Plan Sponsor / Payroll | Ongoing |
Considerations for Additional Tax-Deductible Programs
One of the most practical consequences of these final regulations is that highly compensated employees (HCEs) who exceed the $145,000 threshold will lose the ability to make pre-tax catch-up contributions. For many senior executives, this means a reduction in the immediate tax deductibility of their retirement plan savings. While Roth catch-ups provide long-term tax advantages, sponsors may wish to consider offering complementary programs to offset the loss of short-term tax deductions.
Potential plan design and benefit strategies include:
- Nonqualified Deferred Compensation (NQDC) Plans (e.g., 409A or 457(f))
Allow executives to defer a portion of salary or bonus on a pre-tax basis, often with flexible distribution schedules. While these plans introduce additional compliance and funding considerations, they can help restore lost pre-tax savings capacity. - Qualified Supplemental Plans (e.g., 457(b) for Tax-Exempt or Governmental Entities)
For eligible organizations, a 457(b) plan provides another tax-advantaged vehicle with elective deferrals beyond the 401(k) or 403(b). - Executive Bonus or Split-Dollar Arrangements
For employers seeking to provide executives with supplemental tax-advantaged benefits, properly structured bonus or life insurance arrangements can provide additional long-term accumulation while addressing retention needs. - Financial Planning Support
Providing individualized planning for impacted employees can help executives evaluate the tradeoffs between Roth and other savings strategies, and better align savings across taxable, tax-deferred, and tax-free accounts.
The final regulations clarify Roth catch-up rules, including thresholds, corrections, and operational requirements. They also introduce new complexities for plan sponsors, particularly around payroll integration and participant communication. From a fiduciary perspective, early preparation is critical to ensure smooth implementation and compliance.
While SECURE 2.0 shifts some retirement savings into Roth for higher earners, plan sponsors have an opportunity to revisit their executive benefits strategy holistically. Adding supplemental programs can preserve the tax efficiency of compensation packages, support retention of top talent, and demonstrate a thoughtful, proactive fiduciary approach.
Securities Disclosure: Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Investment Advisory Services offered through Valmark Advisers, Inc. a SEC Registered Investment Advisor. | 130 Springside Drive, Suite 300, Akron, OH 44333–2431 | Telephone: (800) 765‑5201 | Lebel & Harriman, LLP and Lebel & Harriman Retirement Advisors are separate entities from Valmark Securities, Inc. and Valmark Advisers, Inc.
This material is not intended to provide and should not be relied on for tax or legal advice. Any information contained herein is of a general nature. You should seek specific advice from your tax or legal professional before pursuing any idea contemplated.
Sources
- IRS, Treasury, IRS issue final regulations on new Roth catch-up rule and other SECURE 2.0 Act provisions (Sept. 2025)
- Groom Law Group, IRS Issues Final Regulations on Catch-Up Rule Changes (Sept. 2025),
- Reinhart Boerner Van Deuren, Final IRS Regulations Address Catch-Up Contributions Under SECURE 2.0 (Sept. 2025)
- Current Federal Tax Developments, Understanding the Final Regulations for Catch-Up Contributions Under SECURE 2.0 Act (Sept. 2025)
