Under the SECURE ACT 2.0 of 2022, new federal rules apply to 401(k), 403(b) and governmental 457(b) plans regarding Catch-Up Contributions.

Beginning January 1, 2026, employees only classified as “High Earners” – those whose prior year (2025) Social Security Wages exceed $145,000 (Amount in Box-3 of W-2), must make Catch-Up Contributions exclusively as Roth (After-Tax) Contributions.

Employees must be 50 years of age or older by end of 2025 and earning FICA Wages exceeding $145,000in the prior year (2025 wages will determine 2026 status). Coordinate with payroll providers and record-keepers to ensure systems can identify high earners and apply Roth contributions correctly.

Employers who currently don’t offer Roth features must amend the plan to permit Roth (After-Tax) Contributions by end of Plan Year 2026 or earlier. If plan is not amended and Roth features not provided, the employees may not be able to contribute to Catch-Up contributions.

Additionally, the SECURE ACT 2.0 “Super” Catch-Up provision for employees ages 60 to 63 remains available in 2026, must also follow Roth rules for high earners.

IRS regulations provide for two correction methods for instances when catch-up contributions should have been Roth, but 401(k) (Pre-Tax) contributions were made.

• Form W-2 Correction Method: A plan may transfer the catch-up contributions (adjusted for earnings/Losses) from the high earner’s 401(k) (Pre-Tax) account to their designated Roth account and report the contribution (not adjusted for earnings/losses) as a designated Roth contribution on their Form W-2 for the year of deferral. This method is only available if the Form W-2 for that year has not yet been filed or provided to the participant.
• In-Plan Roth Rollover Correction Method: A plan may directly roll over the elective deferral (adjusted for earnings/losses) from the participant’s pre-tax account to their designated Roth account. This correction does not require a voluntary participant election under Code section 402A(c)(4)(E)(i).

The deadline to correct a failure using these correction methods depends on which limit is the basis for the recharacterizing the pre-tax deferrals as Roth catch-up contributions:

• Correction for Exceeding Individual or Aggregation Annual Contribution Limit: A plan must generally correct failures relating to a statutory limit by the end of the taxable year following the year the contribution was made. However, a plan must still comply with correction deadlines that have other tax consequences. For example, if the deferral is a catch-up contribution because it exceeds the individual deferral limit, the applicable correction deadline to avoid penalty taxes is to recharacterize the deferral by April 15 of the calendar year following the calendar year for which the deferral was made.

Correction for ADP Failure: The correction must be made by the end of the plan year following the plan year, the excess contribution was made.