Final IRS regulations now require catch-up contributions from higher earners to go Roth, and a plan without a Roth feature has a hard call to make before the rule takes effect. This post covers the trigger, the timeline, and the coordination work that has to happen in 2026.
Take one of your most engaged participants. She is 58, a senior engineer or a partner at the firm, and she has maxed the deferral each year since you took over the plan and added the catch-up on top without being asked. She likes the pre-tax deduction and has built her tax picture around it. In a little over a year, that catch-up money will either be taxed up front or disappear.
That is the practical effect of the final regulations Treasury and the IRS issued on September 16, 2025. For a participant whose prior-year FICA wages from that specific employer cleared the threshold, the catch-up has to go in on a Roth basis. High earners lose the pre-tax catch-up. If the plan permits catch-ups but has no Roth feature, the only compliant move is to stop offering catch-ups to those people. The dollars are the same, and the conversation is very different.
A lot of the commentary on this rule gets the trigger wrong. It keys off the participant's FICA wages from one particular employer in the prior year. W-2 income in general, household income, and modified AGI do not enter into it.
The threshold started at $145,000 and is indexed. For 2026 it sits at $150,000 in FICA wages. The people to watch are the ones who crossed $150,000 in Social Security wages with this employer during the look-back year. A new hire who earned nothing from this employer last year is unaffected in their first year, however large the offer letter was. Someone with two jobs is measured employer by employer. Per-employer, prior-year FICA wages are where the operational headaches start.
The mandate generally applies to taxable years beginning after December 31, 2026, so the money starts moving in 2027. Read the amendment calendar before you relax.
The rule operationally applies in 2027, but for most plans the document has to be amended by the end of 2026. That runway is short. The recordkeeper build, the payroll mapping, and the participant calls all have to land inside calendar 2026.
Underneath the detail, the choice is simple. A plan that permits catch-up contributions either adds a Roth feature or stops offering catch-ups to affected high earners. The pre-tax catch-up does not survive for these participants under either option.
Doing nothing counts as a choice. A plan that allows catch-ups, has no Roth source, and lets 2027 arrive has decided to take the catch-up away from its highest-paid savers: the partner, the owner, sometimes the people on the committee. Imagine explaining at a committee meeting that the plan stripped a benefit from the employees making the decisions because nobody acted on a rule with a public effective date more than a year out. Most plans should add the Roth feature, and the sponsor should make that call on purpose, with you in the room.
This rule succeeds or fails in the plumbing between payroll and the recordkeeper. Before you promise a sponsor a smooth 2027, get concrete answers to these:
This work is unglamorous, and it separates a clean January 2027 from a stack of corrections in March. It is also the kind of cross-system detail a system of record can hold in one place per plan, so the FICA threshold, the Roth source mapping, and the amendment status live together instead of across three vendor portals and your memory. You still own the judgment calls, and you no longer have to run them out of your head.
To your high earner, the headline reads as a loss: the pre-tax deduction she counted on is gone, and her taxable income went up by the amount of the catch-up. That sting is real, and you should name it.
The same change opens a planning opportunity. Roth catch-up money grows and comes out tax-free, which is valuable for someone who expects meaningful retirement income or worries about where rates go. For a participant already maxing pre-tax everywhere else, forced Roth diversification can be a reasonable outcome and a reason to revisit the whole tax picture: bracket management this year, a Roth conversion strategy, where the next marginal dollar should go. Handled well, she leaves feeling advised instead of penalized. That conversation is care, and the recordkeeper will not have it for you.
One more trap, because two SECURE 2.0 provisions land on the same person. The age 60 to 63 super catch-up is $11,250 for 2026. A 61-year-old high earner is dealing with both rules at once: a larger catch-up limit and a requirement that the catch-up go Roth.
That means a bigger dollar amount, taxed up front, in the same year. A participant blindsided by both will not remember that the rules came from Congress. He will remember that nobody warned him. Model it now, in 2026, so the 2027 paycheck is not a surprise.
The date to circle is the end of 2026, when the document comes due for most plans. The advisors who handle this well will treat 2026 as the year of groundwork: payroll mapping confirmed, Roth feature added, high earners called one at a time. Do that, and 2027 is uneventful. Skip it, and you spend next spring explaining to your best participants why their paychecks shrank without warning.
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