---
title: Significant Changes Coming to Catch-Up Contributions in 2026
description: Under ruling by the Internal Revenue Service as published September 16, 2025, for tax years beginning after December 31, 2026, the SECURE 2.0 act dictates that Highly Paid Individuals (“HPIs”) making catch-up contributions to a 401(k) plan, a 403(b) plan, or a governmental 457(b) plan must do this on a Roth basis (rather than “Pre-Tax”).
image: https://blog.sweeneyconrad.com/hubfs/Catch-Up%20Changes.jpeg
---
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# Significant Changes Coming to Catch-Up Contributions in 2026
By Jill Kinney, CPA | Sep 30, 2025
[](https://blog.sweeneyconrad.com)
INSIGHTS/BLOG
Under ruling by the Internal Revenue Service as published September 16, 2025, for tax years beginning after December 31, 2026, the SECURE 2.0 act dictates that Highly Paid Individuals (“HPIs”) making catch-up contributions to a 401(k) plan, 403(b) plan, or 457(b) plan must do this on a Roth basis (rather than “Pre-Tax”).
Despite the fact that the IRS has only issued proposals on how to administer this, and nothing is final, we still recommend Plan Sponsors follow those proposed guidelines for the time being, and to prepare their payroll staff now.
**Who is required to follow these new guidelines?**
Generally, HPIs that earn more than $145,000 (adjusted for cost-of-living in subsequent years) in FICA wages in the year prior must make catch-up contributions as designated Roth contributions. Note that this is on an employer-basis and not on a cumulative participant-basis, if the employee is employed by multiple companies. Proposed regulations define FICA wages based on Social Security taxable wages for the tax year as reported in Box 3 on Form W-2. It is important to keep in mind that this amount may differ from wages reported in Box 1 on Form W-2, which is typically used to calculate plan compensation.
This does not necessarily mean that Plan Sponsors are required to add a Roth deferral option to their plans, but it does mean that plans without this provision would prohibit HPIs from making catch-up contributions. Should a Plan Sponsor choose not to add a Roth deferral option, they will be required to monitor who on their plan is an HPI and prevent them from deferring more than what is allowed for participants under 50 (for 2025 is $23,500). Should a Plan Sponsor decide to amend their plan provisions, it is important to closely review the wording which may allow all participants eligible to make Roth contributions, regardless of age.
**Does an HPI have to elect to have their catch-up contributions treated as Roth?**
While a plan can provide that catch-up contributions will be Roth without an affirmative election from HPI participant, the participant must have an opportunity to opt out. (Remember – it is imperative that you maintain appropriate documentation!) In this instance, their deferrals must stop when the under-50 deferral limit is reached. This should be communicated clearly to all participants - at this point in time, it can be included in an annual note in place of being added to the Summary Plan Description.
**What should Plan Sponsors do in the event that a mistake is made?**
Corrections for errors related to this change depend primarily on when the mistake is identified. If it is identified prior to issuance of Form W-2, then the employer can correct the issue and move contributions above the deferral limit to the participant’s Roth account. They must then correct the Form W-2 to include those contributions as taxable wages.
Should the mistake be caught no later than 2 ½ months after the end of the plan year (in the case of testing failures) or by the April 15th tax deadline (in the case of catch-ups triggered by the participant exceeding the deferral limit) the mistake can be resolved by an in-plan Roth rollover. We are still waiting for clarity on whether the employer and participant can self-correct after the timeline outlined above.
If the mistake is not caught by the dates outlined above, then the only correction available is the distribution or return of the catch-up contribution amount to the plan participant. It is worth noting that proposed regulations indicate that in order to correct mistakes, the Plan Sponsor must have a policy and procedure in place when the deferrals are made that is specifically related to the Roth catch-up contribution requirement.
**What should I do next?**
Ensure that your Third-Party Administrator, payroll department, and/or service provider (as well as other relevant parties) are educated on the nuances of this requirement and the proposed guidance and regulations that have been made available by the IRS thus far. Plan Sponsors should issue a notice to participants now, and start gathering documentation to support participant elections who wish to make these catch-up deferrals – this will lighten the burden for the payroll team and ensure participants’ deferrals continue as they would expect in the coming year.
Our ERISA audit team can help if you are looking for a new audit partner with an understanding of these new regulations.
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