A Playbook on IRS Final Regulations for Roth Catch-Up Contribution Requirements Under SECURE 2.0

The Wagner Law Group’s Jon Schultze and Barry Salkin explain the coming changes

On September 16, 2025, the Internal Revenue Service (IRS) issued final regulations providing guidance on changes made by the SECURE 2.0 Act of 2022 to the catch-up contribution provisions of the Internal Revenue Code (“Code”).

Under the “Roth catch-up contribution requirement,” catch-up contributions made by plan participants with FICA wages greater than $145,000 (as indexed beginning in 2026) in the preceding calendar year must be made as designated Roth catch-up contributions. The IRS issued proposed regulations in January 2025; the final regulations, as explained in the preamble, provide plans with more flexibility than the proposed regulations in certain respects.

The Roth catch-up contribution requirement is extremely complicated, and plan sponsors will need to carefully coordinate their compliance with their internal resources, payroll provider and the plan’s recordkeeper.

Applicable Employer Plans

The Roth catch-up contribution requirement applies to Code section 401(k) plans, 403(b) plans and eligible governmental 457(b) plans. The requirement does not apply to SEP arrangements, SIMPLE IRA plans, certain governmental 457(b) plans and tax-exempt 457(b) plans.

Applicability Dates

The applicability date of the final regulations depends on the plan:

• For plans that are not maintained pursuant to collective bargaining agreements and are not eligible governmental 457(b) plans, the final regulations are effective January 1, 2027.
• For plans maintained under one or more collective bargaining agreements, the final regulations apply with respect to contributions in taxable years beginning after the later of the first taxable year beginning after December 31, 2026, or the first taxable year that begins after the expiration date (without regard to any extension) of the last collective bargaining agreement related to the plan in effect on December 31, 2025.
• For governmental 457(b) plans, the final regulations apply with respect to contributions in the later of the first taxable year beginning after December 31, 2026, or the first taxable year beginning after the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2025.

The SECURE 2.0 Act originally made the Roth catch-up contribution requirement effective January 1, 2024, but the IRS provided a two-year “transition period” through the end of 2025. The IRS has not extended the transition period.

Thus, beginning on January 1, 2026, plans must apply a reasonable, good faith interpretation standard to implement the Roth catch-up contribution requirement until the applicable date by which the plan must comply with the final regulations. Compliance with the final regulations is presumably reasonable good faith compliance, and taking a position that the IRS rejected in the preamble in response to comments would likely be regarded by the IRS as not constituting a reasonable good faith interpretation.

Affected Participants

The Roth catch-up contribution requirement applies to participants:

• who are catch-up eligible, i.e., attain or have attained age 50 during a calendar year (not the plan year);
• whose FICA wages from the employer in the preceding calendar year exceeded $145,000, as indexed; and
• who make salary deferrals that exceed either the Code section 402(g) limit (the “salary deferral dollar limit”), as indexed ($23,500 for 2025), or a comparable limitation or restriction included in the terms of the plan.

The final regulations make several important clarifications regarding the determination of affected participants’ FICA wages.

• “FICA wages” are wages for purposes of Social Security taxation as reported in Box 3 of Form W-2. A participant who does not have FICA wages, such as a partner with self-employment income or an employee of an exempt state or local government, will not be subject to the Roth catch-up requirement.
• The FICA wage dollar amount is not pro-rated for an employee’s partial year of employment. Thus, for example, an employee who is hired on October 1 at a $200,000 salary will not be subject to the Roth catch-up requirement in the following year because the employee’s FICA wages will total only $50,000 for the calendar year.
• The relevant employer is the common law employer of the plan participant. The proposed regulations did not allow FICA wages paid by multiple members of the same controlled group or affiliated service group to be aggregated, even if the group uses a common paymaster (a common paymaster simplifies FICA withholding and reporting for compensation paid by multiple entities). In response to comments received by the IRS, the final regulations allow a plan to aggregate the FICA wages a participant receives from all employers in a controlled group and/or where a common paymaster is used.

Deemed Elections

A plan may provide that an election by a participant subject to the Roth catch-up contribution requirement to make catch-up contributions on a pre-tax basis will be treated as a deemed election to make catch-up contributions as designated Roth catch-up contributions.

If a plan will apply deemed elections, the plan document must provide for them and must permit participants to change their deemed elections. For example, a participant who has reached the salary deferral dollar limit with pre-tax dollars can elect to discontinue making catch-up contributions that would otherwise have to be made as Roth contributions. Additionally, a plan must cease to apply a deemed election if an employee is not subject to, or ceases to be subject to, the Roth catch-up requirement, such as when an employee’s FICA wages for the preceding year are determined not to exceed the Roth catch-up threshold or the employee changes employers during the year and remains covered under the same plan.

Catch-up contributions that were designated as Roth catch-up contributions pursuant to a deemed election do not need to be recharacterized as pre-tax catch-up contributions.

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