QUESTION: We know that the SECURE 2.0 Act requires us to treat certain catch-up contributions made to our 401(k) plan as Roth contributions. Can you tell us more about this requirement?
ANSWER: As you know, if a 401(k) plan permits it, participants who are age 50 or older can make additional elective deferrals, known as “catch-up” contributions. The SECURE 2.0 Act added Code § 414(v)(7), requiring catch-up contributions made by certain participants to be designated Roth contributions. (As background, Roth contributions are not pre-tax; they are includible in gross income in the year of the contribution. But eligible distributions from the Roth account, including earnings, are generally tax-free.) Here are some key features of the Roth catch-up requirement:
- Affected Participants. Roth treatment is required for catch-up contributions made by participants whose wages for the preceding calendar year from the employer sponsoring the plan exceeded $145,000 (annually indexed for inflation). For example, Roth treatment is required for catch-up contributions made in 2026 by any participant whose 2025 wages exceeded $150,000.
- Roth Treatment for Other Participants. If a plan allows eligible participants subject to mandatory Roth tax treatment to make catch-up contributions, then all eligible participants must be permitted to make catch-up contributions as designated Roth contributions. That is, participants whose wages are below the threshold for required Roth treatment must be permitted to have their catch-ups designated as Roth contributions.
- Plans Without a Roth Component. The catch-up contribution limit for participants subject to mandatory Roth treatment in a plan without a Roth program is $0, precluding these individuals from making catch-up contributions. Thus, while plans are not required to offer Roth treatment, sponsors of plans without a Roth component may wish to consider implementing one to avoid this result for affected participants.
The Roth catch-up requirement was originally scheduled to take effect in 2024, but the IRS provided a two-year administrative transition period. Compliance is required for taxable years beginning after December 31, 2025.
For more information, see EBIA’s 401(k) Plans manual at Sections VIII.E (“Roth Contributions”), VIII.F.8 (“Roth Treatment Required for Catch-Up Contributions Made by Certain Higher-Income Participants”), and XIV.J.1.c (“Qualified Distributions of Designated Roth Contributions”).
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