Secured Retirement Incorporated

Mandatory ROTH Catch-Up Contributions effective January 1, 2026
Starting January 1, 2026, a new IRS rule under the SECURE 2.0 Act will require certain retirement plan participants to make Roth (after-tax) catch-up contributions. Here's a breakdown of what this means and who it affects:

🔍 Who Is Affected?
• Participants aged 50 or older in 401(k), 403(b), or governmental 457(b) plans.
• Those who earned more than \$145,000 in F**A wages in the prior year (2025), indexed for inflation .

🧾 What’s Changing?
• Mandatory Roth Catch-Up Contributions: If you're a high-wage earner (above the threshold), any catch-up contributions you make must be Roth (after-tax), meaning:
o You pay taxes now.
o Your contributions grow tax-free.
o Withdrawals in retirement are tax-free .
• No Change to Contribution Limits: The catch-up contribution limit remains \$7,500 for 2025 (indexed annually). Ages 60–63 can contribute an additional \$3,750 .

⚠️ Important Considerations
• Plans Must Offer Roth Options: If your employer’s plan doesn’t support Roth contributions, high-wage earners won’t be able to make catch-up contributions at all .
• F**A vs. HCE Definition: The \$145,000 threshold is based on F**A wages, not the traditional Highly Compensated Employee (HCE) definition. This means some employees may unexpectedly fall into the Roth-only category .
• Impact on ADP Testing: Plans that fail nondiscrimination testing may no longer reclassify excess contributions as catch-up unless Roth is available .

✅ What You Should Do
• Employees:
o Review your 2025 income to see if you’ll exceed the threshold.
o Check if your plan offers Roth contributions.
o Consult a financial advisor to adjust your retirement strategy.
• Employers/Plan Sponsors:
o Ensure your plan allows Roth contributions.
o Update payroll and plan documents.
o Educate employees on the upcoming changes.

https://www.irs.gov/newsroom/401k-limit-increases-to-23500-for-2025-ira-limit-remains-7000

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