Beck BodeA provision from the SECURE Act 2.0 takes effect in 2026 and it will change how certain high earners make catch-up contributions, in their employer sponsored retirement plans.
Starting in 2026, certain high earners will be required to make their catch-up contributions to the Roth portion of their plan, not the traditional pre-tax side. It's a meaningful shift that could affect your retirement savings strategy, and we want you to be prepared.
Over 50, maxing out your 401(k)/403(b) contributions, AND earning over $150K?
Here's what you need to know.
Effective in 2026, high earners who are 50 or older will be required to make their catch-up contributions to the Roth portion of their 401(k)/403(b) plan.
Note that these wages are not reduced by any pre-tax 401(k) contributions, though pre-tax benefit deductions like medical, dental, and/or vision premiums are excluded from this amount.
A further complication in identifying these earners is those who may have switched jobs. Their W-2 from their current employer for the prior year may fall below the $150K threshold, so it seems they would not be subject to this requirement despite their actual earnings being higher. Initially it seemed like a loophole for job changers, but it appears that loophole has been closed.
Your 401(k) plan administrators and/or HR benefits staff are likely to notify you, or will be notifying you soon, that you are impacted by this, so you do not need to determine this yourself. We also want to make sure you're aware of this upcoming change.
A Brief History
Since 2002, those 50 or older have had the option to make catch-up contributions to their 401(k)s/403(b)s. At that time, pre-tax contributions were the only option. As of 2006, plans could start offering a Roth contribution option. Despite this, many people continued to make these as pre-tax contributions to reduce their taxable income.
The SECURE Act 2.0, passed in December 2022, included a provision that was originally supposed to take effect in 2024. Payroll providers, 401(k) administrators, and human resources personnel pushed back, stating they needed more time to implement, understandably so, since it's a significant change for all their processes and systems.
What This Means for You
If this change affects you, it's worth thinking through how Roth catch-up contributions fit into your broader retirement picture. The short-term tax impact is real, but so are the long-term benefits of tax-free growth.
Have questions about how this rule change affects your specific situation? We're happy to talk it through. Reach out to your advisor or contact us to start the conversation.