What the New Roth Catch-Up Rule Means for Your Retirement Plan

Starting January 1, 2026, there’s an important change affecting catch-up contributions in many employer-sponsored retirement plans such as 401(k)s, 403(b)s, and government 457(b)s. If you’re age 50 or older and your wages from the plan sponsor exceed a certain threshold, your catch-up contributions will need to be made on a Roth (after-tax) basis instead of traditional pre-tax. 

This isn’t about a new type of retirement account — it’s about how certain contributions get taxed. And while it doesn’t change your base elective deferral options, it could affect your take-home pay and planning choices. Here’s what you need to know and what you can do to prepare.

What’s Actually Changing?

Under current rules, when you turn 50, you can make extra “catch-up” contributions in your 401(k) or similar plan. Traditionally, you could choose to make these pre-tax contributions (reducing taxable income today).
Starting January 1, 2026, if your prior-year wages from your employer are above the IRS threshold, those catch-up contributions must be Roth — meaning you pay tax now, but they grow tax-free and qualified withdrawals are generally tax-free in retirement. 

Importantly:
• This only affects catch-up contributions, not your regular elective deferrals (unless your plan already makes them Roth).
• The rule kicks in based on your prior-year wages from the employer sponsoring the plan. 

So, Who Is Affected?

You would be in the group impacted by the new rule in 2026 if:

• You are eligible for catch-up contributions (generally age 50 or older), and
• You participate in an employer-sponsored plan that allows catch-up contributions, and
• Your 2025 FICA wages from that employer are above $150,000 (the IRS threshold used for 2026).  

If all three apply, then your catch-up contributions in 2026 and later must be designated as Roth catch-up contributions.

Why Does This Matter?

The change alters the tax timing for part of your retirement savings:

• Traditional, pre-tax catch-up gives you a tax break now but is taxable in retirement.
• Roth catch-up doesn’t reduce taxable income today, but qualified withdrawals later are tax-free.

This shift matters because Roth catch-ups can mean less take-home pay today, especially for higher-earning participants used to pre-tax catch-ups. But it also creates tax-diversified retirement savings that may provide flexibility in retirement.

What Employers and Plan Sponsors Should Think About

This change also affects plan operations. Here are key considerations:

1. Roth Availability
If your plan doesn’t currently allow Roth contributions, you’ll want to address that to ensure impacted employees still have access to catch-up savings. 

2. Payroll & Recordkeeping
Plans must correctly identify employees above the wage threshold and apply the Roth requirement only to their catch-up contributions. Coordination between payroll and recordkeepers is critical. 

3. Communication
Participants will likely have questions. Clear messaging about how the rule works — and when it applies — can reduce confusion and help employees make informed decisions.

4. Plan Amendments
Depending on service provider timelines, plan document updates may be needed before 2026.

What Participants Should Do

If you think you’ll be affected in 2026:

• Check your catch-up strategy now — understand how Roth catch-ups could affect your taxes today and down the road.
• Talk with your plan administrator or advisor about how your plan will handle the change.
• Consider how this shift fits within your broader retirement saving strategy.

Looking Ahead

SECURE 2.0 and IRS guidance continue to refine how retirement plans operate — including this Roth catch-up provision. While implementation may take a bit of adjustment, planning ahead now can help both employers and participants transition smoothly. 

Need Help With Your Plan?

At WRFA, we help plan sponsors and participants understand rule changes like this one and assess how they affect your retirement goals. Contact us if you have questions or want help reviewing your plan design and communications.

Disclosure: The information provided in this blog post is for educational and informational purposes only and should not be construed as financial advice. While we strive to present accurate and up-to-date information, the financial, tax, and legal landscape is subject to change, and individual circumstances vary. Readers are encouraged to consult with a qualified financial advisor or professional before making any financial decisions or implementing strategies discussed in this post. Our firm does not guarantee the accuracy, completeness, or suitability of the information provided, and we disclaim any liability for any direct or indirect damages arising from the use of this information. Artificial Intelligence was used to assist in the writing of this article. Past performance is not indicative of future results. Any investment involves risk, and individuals should carefully consider their financial situation and risk tolerance before making any investment decisions.