New IRS Rules on Catch-Up Contributions
The IRS recently issued final regulations clarifying how the SECURE 2.0 Act affects catch-up contributions — the extra amounts employees aged 50 or older can contribute to their retirement plans (like 401(k)s and 403(b)s). These updates include significant changes to both Roth contributions and catch-up limits for older participants.
1. Roth Catch-Up Rule for High Earners
Starting January 1, 2026, if your wages from the prior year exceed $145,000 (indexed annually for inflation), any catch-up contributions you make must be made to a Roth (after-tax) account within your retirement plan.
If your employer’s plan does not offer a Roth option, you will not be allowed to make catch-up contributions.
This rule applies to most 401(k), 403(b), and governmental 457(b) plans — but not to SEP or SIMPLE IRA plans.
2. Higher Catch-Up Limits for Ages 60–63
Beginning January 1, 2025, individuals aged 60 to 63 will be eligible for increased catch-up contribution limits:
For 401(k)/403(b) plans: the greater of $10,000 or 150% of the standard catch-up amount.
For SIMPLE IRA plans: the greater of $5,000 or 150% of the standard catch-up amount.
These amounts will be adjusted for inflation in future years.
3. Implementation Timeline
While most of the final regulations take effect in 2027, the Roth catch-up requirement applies to contributions made in tax years beginning after December 31, 2026.
Employers and plan administrators are allowed to apply these new rules earlier if they follow a reasonable, good-faith interpretation of the law.
Summary
In short, these updates mean that higher-income earners will soon have to make their catch-up contributions on an after-tax Roth basis, while those approaching retirement (ages 60–63) will enjoy higher contribution limits. Employers and plan administrators should begin reviewing their plan features now to ensure smooth compliance.
If you have questions about how these changes affect your specific retirement strategy or payroll setup, please contact the HR at your place of work, or your TPA (Pension administrator).