Roth Catch-Up Rule Finalized by IRS Under SECURE 2.0

October 6, 2025

The Treasury Department and the IRS recently issued final regulations on the Roth catch-up contribution rule, one of the most anticipated provisions under the SECURE 2.0 Act. These changes are designed to reshape how employees, particularly higher earners and those nearing retirement, contribute to their employer-sponsored retirement plans.

While the adjustments may look straightforward, the implications are far-reaching. Employers will need to prepare for administrative changes, and employees will need to rethink their tax planning and retirement strategies.

Here’s a breakdown of the key details and what they mean for you.

Who Must Use Roth Catch-Ups?

Starting in 2026, a new rule takes effect for higher-income employees.

Employees earning more than $145,000 in wages from their employer, indexed for inflation each year, will be required to make all of their catch-up contributions to Roth accounts. These accounts are funded with after-tax dollars, meaning employees will pay taxes upfront but future withdrawals will generally be tax-free.

This applies across popular retirement vehicles, including 401(k), 403(b), and similar employer-sponsored plans. Employees earning $145,000 or less retain the choice between pre-tax or Roth catch-up contributions, giving them more flexibility in managing their tax liability.

Catch-Up Limit Increases for Ages 60–63

Another important update is the special contribution boost for individuals ages 60 through 63.

These individuals can contribute more each year through a higher catch-up contribution limit than the standard one available to those age 50 and older.

The goal is to give workers approaching retirement more time and more capacity to build their nest egg, especially if they started saving later in their careers.

For employees in this age range, this rule provides a valuable opportunity to accelerate retirement savings during their final working years.

Wage Aggregation Rule

The final regulations clarify how to count wages when an employee works for multiple common-law employers under the same retirement plan.

All wages from these employers are aggregated to determine whether the employee crosses the $145,000 threshold. This prevents high earners from splitting their income among related employers in an attempt to sidestep the Roth-only requirement.

This rule makes payroll reporting and plan administration more complex for businesses, since they must track and aggregate accurate wage data across all related employers.

Corrections and Special Cases

Recognizing that mistakes will happen, the IRS included provisions for error correction and unique circumstances.

Employers will be able to reclassify contributions if they were incorrectly applied as pre-tax instead of Roth. Special guidance has been issued for governmental plans, collectively bargained (union) plans, and Puerto Rico plans, ensuring that the regulations are applied consistently while accounting for unique plan structures.

This flexibility gives employers and employees a framework for fixing mistakes without significant penalties.

Effective Dates and Transition Relief

Here’s a breakdown of the timeline you need to know:

December 31, 2025: Temporary transition relief provided in IRS Notice 2023-62 remains in effect through this date. No extensions will be granted.
January 1, 2026: Official start date of the Roth catch-up requirement. Employers and plan sponsors may also choose to implement earlier.
During 2026: Plans may operate under a “reasonable, good-faith interpretation” of the statutory provisions.
2027 Tax Year: The final IRS regulations generally apply beginning in this year.

This timeline gives businesses a limited window to update payroll systems, amend plan documents, and communicate changes to employees.

Big Changes, Bigger Impacts

Here are some of the most critical points from the final regulations.

High earners earning above $145,000 must use Roth-only accounts for catch-up contributions starting in 2026.
Individuals ages 60 to 63 will be eligible for larger catch-up contribution limits compared to the standard 50+ rule.
Transition relief ends December 31, 2025, with no extensions.

What This Means for You and Your Business

The Roth catch-up rule will change the way both employees and employers handle retirement contributions. For employees, particularly those with higher incomes, this rule could mean higher upfront tax bills since Roth contributions are after-tax. However, the long-term benefit is significant because these contributions grow tax-free, potentially reducing tax burdens in retirement. For workers in the 60 to 63 age range, the increased contribution limits are a golden opportunity to supercharge retirement savings.

For employers, the changes are equally important. Businesses must be prepared to handle Roth-only contributions for eligible employees, ensure payroll systems can accurately aggregate wages, and train staff on compliance requirements. Employers who take proactive steps now will not only avoid penalties but will also earn employee trust by guiding them through these adjustments.

Here are three key action points.

Plan for the tax impact now, especially if you are a high earner.
Employers should begin updating payroll and recordkeeping systems to comply with Roth-only rules.
Both employers and employees should review retirement strategies to make the most of the new contribution opportunities.

Looking Ahead with Confidence

The SECURE 2.0 Roth catch-up rule are not just another technical tax adjustment. They represent a significant shift in retirement savings policy that will reshape how Americans save and how businesses manage retirement plans. With 2026 approaching, early preparation is critical.