Roth Catch-Up Rule Secure 2.0
Published on May 23, 2025
Published by
Reviewed by
Table of Contents
What is changing with Roth catch-up contributions under SECURE 2.0?
Starting in 2026, workers aged 50 and over who earned more than US$145,000 in wages the previous year will be required to make their catch-up contributions to Roth accounts instead of traditional pre-tax accounts. This means taxes will be paid on the contributions now rather than at retirement.
This new rule applies to 401(k), 403(b), and governmental 457(b) plans. If you’re a public employee or contractor working abroad, and your income is reported on a W-2 from a US employer, this rule still applies if your wages exceed the threshold. The US$145,000 limit will be adjusted over time for inflation.
Why did the IRS delay enforcement until 2026?
Although the law originally set the Roth requirement to start in 2024, the IRS issued a two-year extension. Employers and retirement plan providers needed more time to build systems that could track who meets the income threshold and route contributions correctly.
Several issues triggered the delay:
- Payroll systems weren’t equipped to filter contributions based on prior-year income
- The original legislation had a technical error, raising doubts about whether catch-up contributions could continue at all
- Employers requested more time to avoid compliance errors
How did the IRS clarify the rules for high-income catch-up contributions?
In response to confusion caused by the SECURE 2.0 language, the IRS issued Notice 2023-62 to clarify that:
- Catch-up contributions are still allowed, and won’t be eliminated
- The Roth requirement applies only to those earning more than US$145,000 in W-2 wages
- Those below that income level can continue choosing between pre-tax and Roth
- Mistakes—like contributions being placed in the wrong type of account—can be corrected without penalties, under existing IRS correction procedures
This guidance gave plan sponsors and payroll teams clearer direction on how to implement the change properly.
What new limits apply for catch-up contributions?
The SECURE 2.0 Act didn’t just shift the tax treatment for high earners—it also expanded how much older workers can contribute:
- If you’re age 50 or older, you can still make catch-up contributions in addition to the standard plan limit
- Starting in 2025, workers aged 60 to 63 will have an even higher limit—150% of the normal catch-up cap or US$10,000, whichever is greater
These expanded limits are especially useful for late savers trying to build up their retirement savings quickly before leaving the workforce.
What should employers and plan administrators do to get ready?
To comply with the Roth catch-up mandate, employers sponsoring retirement plans will need to make several adjustments:
- Update plan language – Plans must explicitly require Roth catch-up contributions for those earning above the income limit
- Coordinate with payroll – Systems must be able to identify affected employees using prior-year W-2 wage data
- Notify employees – Workers should understand how the rule applies to them and whether their contributions will be taxed upfront
- Work with service providers – Employers should engage third-party administrators to ensure accounts are set up correctly and processing is accurate
- Prepare for errors – A correction policy should be in place in case contributions are deposited into the wrong type of account
The IRS might issue further updates as the 2026 deadline approaches, so staying up to date—and proactively educating employees—will be important for a smooth transition.
What does SECURE 2.0 change for catch-up contributions?
Beginning in 2026, employees aged 50 or older who earned more than US$145,000 in the previous year must make their catch-up contributions to a Roth account, not a traditional pre-tax one.
This means the money will be taxed upfront but can be withdrawn tax-free in retirement. The rule is part of the broader SECURE 2.0 Act and affects several types of employer-sponsored retirement plans.
Why use the IRS Streamlined Tax Amnesty Program?
It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.
Connect with over 10,000+ expats today!
Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.
Are 401(k) participants impacted by the new Roth rule?
Yes, they are. Employees who contribute to a 401(k) and exceed the US$145,000 income threshold must make their catch-up contributions on a Roth basis.
This is a major shift from previous years, when high earners could choose between Roth and pre-tax. Employers will need to update payroll systems to track eligible employees and apply the rule correctly.
How does this apply to employees with 403(b) retirement plans?
Workers in public education, healthcare, and nonprofits often contribute to 403(b) plans. These plans follow the same Roth catch-up rule as 401(k)s.
If a 403(b) participant earned more than US$145,000, their catch-up contributions must go into a Roth account starting in 2026. However, some of the compliance testing for 403(b)s is more flexible, which may simplify administration.
What about government employees using 457(b) plans?
Government employees participating in governmental 457(b) plans are also subject to the new rule. If their income exceeds US$145,000, their catch-up contributions will need to be Roth contributions starting in 2026. That said, non-governmental 457(b) plans, such as those used by private tax-exempt employers, are not affected by this rule change.
Do SIMPLE 401(k) and SIMPLE IRA plans follow the same requirement?
No. The Roth catch-up rule does not apply to SIMPLE 401(k)s or SIMPLE IRAs. These retirement plans—often used by small businesses—still allow employees to make catch-up contributions on a pre-tax basis regardless of income. This makes them an exception to the general SECURE 2.0 rule.
What should employers do when they offer multiple types of plans?
In cases where companies offer more than one retirement plan (like a 401(k) alongside a 403(b)), special care is needed.
Employers must ensure that each plan type meets its own rules, and that Roth catch-up contributions are correctly applied for employees exceeding the income threshold.
Does this change limit how much someone can contribute?
No. The total catch-up contribution limit hasn’t changed. Employees who qualify can still contribute extra beyond the standard annual limit. What changes is how those extra contributions are taxed—Roth for high earners, optional for others.
Is offering Roth contributions now mandatory for employers?
It depends. Employers are not required to offer Roth contributions for everyone. But if a plan allows catch-up contributions, and the company has employees earning more than US$145,000, then a Roth option must be available starting in 2026. Without this feature in place, high earners won’t be able to make any catch-up contributions.
What happens if a plan doesn’t support Roth contributions yet?
If an employer hasn’t updated their plan to allow Roth contributions by 2026, employees over the income threshold will lose access to catch-up contributions entirely. This can have a real impact on older workers trying to maximize savings before retirement, so plan amendments are essential.
Are lower-income employees affected by this rule?
No. Employees earning US$145,000 or less can still choose whether they want their catch-up contributions to be Roth or pre-tax—assuming both options are available in their plan. The Roth requirement only applies to higher earners based on prior-year W-2 wages.
What steps should employers take to stay compliant?
To prepare for the 2026 rule change, employers should:
- Update plan documents to reflect Roth catch-up rules
- Monitor employee wages to determine who exceeds the income threshold
- Adjust payroll systems to correctly route catch-up contributions
- Communicate with employees so they understand how the change affects them
- Work with plan providers to ensure systems and documentation are aligned
Failing to act in time could result in employees missing out on key retirement savings opportunities. For US expats on W-2 income from US employers, these updates are just as relevant and require careful planning in coordination with HR and payroll teams.
Spread the word. Please share… 👉
