From Next Year, High Earners' Catch-Up Contributions Must Be Roth. The Wages That Decide It Are the Ones Being Earned Now.

From taxable years beginning after December 31, 2026 — January 1, 2027 for a calendar-year plan — a participant aged 50 or over whose prior-year wages exceeded a set threshold may only make catch-up contributions to a workplace retirement plan as designated Roth contributions. That is the effect of final regulations issued as Treasury Decision 10033, published in the Federal Register on September 16, 2025 at 90 FR 44527 and effective November 17, 2025.

Because the test looks at the preceding calendar year, the wages that determine whether the rule applies in 2027 are the wages being earned in 2026.

Which wages count

The threshold applies to FICA wages from the employer sponsoring the plan — not from all employers combined, and not total compensation. Specifically it is Social Security wages under sections 3101(a) and 3111(a), the figure reported in Box 3 of Form W-2. Medicare-only wages, reported in Box 5, do not count. Since Box 3 is capped at the Social Security taxable wage base and Box 5 is not, the two can differ substantially for a higher earner, and only one of them is the test.

The statutory threshold is $145,000, indexed for cost-of-living changes under section 414(v)(7)(E) for taxable years beginning after December 31, 2024. IRS Notice 2025-67, which set the 2026 retirement plan amounts, put the indexed figure at $150,000, describing it as the Roth catch-up wage threshold for 2025 — meaning 2025 wages determine whether 2026 catch-up contributions must be Roth.

The limits the rule applies to

• Elective deferral limit for 2026 under section 402(g)(1): $24,500, up from $23,500
• Catch-up limit for those aged 50 and over in 2026: $8,000, up from $7,500
• Higher catch-up limit for those aged 60 to 63 in 2026: $11,250, unchanged
• Compensation limit under section 401(a)(17) for 2026: $360,000
• Highly compensated employee threshold for 2026: $160,000, unchanged

Who is covered, and who is not

The requirement applies to applicable employer plans that permit catch-up contributions: qualified plans under section 401(a), 403(b) plans and eligible governmental 457(b) plans. It does not apply to SEP arrangements or SIMPLE IRA plans.

It also does not reach anyone with no prior-year FICA wages from the sponsoring employer. The regulations give examples: a partner whose income from the firm is self-employment income rather than wages; an employee whose compensation is subject to Railroad Retirement Tax rather than FICA; a state or local government employee excluded from FICA coverage under section 3121(b)(7); and an employee whose cash pay was taxed in an earlier year under section 3121(v)(2). For plans that have no Roth program at all, a nondiscrimination safe harbour permits the plan to bar highly compensated employees whose prior-year self-employment earnings exceed the threshold from making catch-up contributions.

What a plan has to offer

If any participant in the plan is subject to the requirement, the plan must let every catch-up eligible participant make catch-up contributions as designated Roth contributions. A plan cannot apply the rule to its high earners while leaving everyone else without the option.

The deemed Roth election

A plan may provide that a participant subject to the requirement is deemed to have irrevocably designated catch-up contributions as Roth. The deemed election has to be written into the plan document, and the participant must have an effective opportunity to make a different election, judged on the facts and circumstances. The deemed election must stop within a reasonable period once the participant is no longer subject to the requirement, or after an amended Form W-2 shows that the participant was not subject to it.

The regulations also state that a voluntary in-plan Roth rollover cannot by itself satisfy the Roth catch-up requirement, and set out correction methods for violations, including a Form W-2 method and an in-plan Roth rollover method for deferrals exceeding an applicable limit, subject to consistency rules.

The dates already behind us

The underlying statutory rule applies to taxable years beginning after December 31, 2023. Notice 2023-62 treated the first two such years as an administrative transition period, during which catch-up contributions were treated as meeting the Roth requirement even if they were not designated Roth. For contributions made before the regulations' applicability date, a reasonable good-faith interpretation standard applies. Under Notice 2024-2, the general deadline for amending plans for these provisions is December 31, 2026, with later deadlines for some plan types. Dual-qualified plans with Puerto Rico participants have transition relief until the Puerto Rico Code provides for designated Roth contributions.