Employer Scenarios: SECURE 2.0 Roth Catch-Up Provision

Changes to the SECURE 2.0 Act will impact certain participants making catch-up contributions to your retirement plan beginning January 1, 2026.

Below are some of “Employer Scenarios” we have seen regarding SECURE Act 2.0- Roth Catch-up.

An employee aged 52 earns $180,000 in 2025 and makes a catch–up contribution in 2026.

Since they earned more than $150,000 in 2025, the catch-up must be Roth. The employer’s payroll system must:

• Identify eligible employees based on prior- year FICA wages
• Automatically route their catch-up contributions to the Roth source in the plan

Example using 2025 limits: The employee deferral election is pre-tax and their rate is set to maximize their contributions to the $31,000 limit. The payroll provider would process the $23,500 deferrals as pre-tax, however the $7,500 will need to be withheld as Roth to satisfy the new catch-up rule.

Action Step: Work with payroll provider to ensure the system can flag “Roth-Required” employees and automatically switches the withholding to Roth once the Employee reaches the deferral limit. If the software cannot automatically make this adjustment a second option may be to adjust the deferral rates for pre-tax and Roth to satisfy the goals of the employee election.

Our plan only allows for pre-tax deferral and does not have a Roth feature available.

Starting in 2026, high earners (>$150,000) cannot make catch-up contributions unless a Roth source is added.

Action Steps: Amend the plan to add a Roth Contribution feature before 2026 OR communicate with high earners that catch up contributions will not be available.

In a group of 20 employees age 50+, 12 earn above $150,000 and 8 earn below.

• Those above the threshold must have Roth catch-ups
• Those below the threshold can choose Roth or pre-tax

Further example: Employee is age 63 is not a high wage earner and elects Pre-tax employee deferrals and meets the limit of $23,500 the catch up can be contributed to either pre-tax or Roth, unlike the other employee who earned above the $150,000 in 2025.

Action Step: Ensure Payroll can handle both pre-tax and Roth catch-up contributions concurrently and can flag “Roth-Required” employees.

A high wage earner (earning more than $150,000 in 2025) was not flagged in 2026 and made all the contributions to the pre-tax source, and it was not caught until 2027.

The IRS recommendation is to require the participant to convert the catch-up amount to Roth by completing an in-plan Roth conversion. A 1099-R will be issued to the participant in the amount of the catch-up contributions however this will be reported as income in the 2027 tax year rather than 2026.

Additional Content

To help you better understand the SECURE Act 2.0 Roth Catch-up changes, we recommend reading these additional blog posts:

Overview: SECURE Act 2.0 Roth Catch Up Provision

Frequently Asked Questions: SECURE Act 2.0 Roth Catch Up Provision