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Beginning January 1, 2026, a SECURE 2.0 provision affecting retirement plan catch-up contributions took effect for certain higher-income participants. We wanted to share a quick overview of what’s changing and what it may mean for you.

What's Changing

Beginning in 2026, participants age 50 or older who received more than $150,000 in FICA wages from their employer during the preceding calendar year and who choose to make catch-up contributions to a 401(k), 403(b), or governmental 457(b) plan will be required to make such contributions on a Roth (after-tax) basis. Accordingly, pre-tax catch-up contributions will no longer be available to individuals exceeding this compensation threshold.

The $150,000 compensation threshold is determined solely by prior-year wages and will be indexed for inflation in future years.

Anticipated 2026 Contribution Limits

• Standard elective deferral: $24,500
• Age 50+ catch-up contribution: $8,000
• Age 60 - 63 enhanced catch-up contribution (if permitted by the plan): $11,250

A Few Important Details

•  The regulations state that only wages from “the employer sponsoring the plan” are to be included in the compensation threshold determination.  For example, if an employee has wages of $100,000 from the sponsoring employer and $50,000 from a related employer who also participates in the plan, the employee does not meet the compensation threshold since their wages from the “sponsoring employer” were less than $150,000.  However, note that for ease of administration, the regulations DO allow these employers to voluntarily aggregate the wages where the employers are part of the same controlled group, affiliated service group, or predecessor employer.
• While the IRS's final regulations are formally effective beginning in 2027, plans are expected to administer these rules in good-faith compliance during 2026.
• Plans that do not currently offer a Roth contribution feature may need to be amended in order for affected participants to make catch-up contributions.

For Plan Sponsors

We recommend confirming whether your plan currently allows Roth contributions, coordinating implementation with your payroll provider and recordkeeper, and preparing for any required plan amendments before the December 31, 2026, deadline.

For Individual Participants

This change may affect both your current take-home pay and your long-term tax strategy. Although Roth catch-up contributions do not provide a current-year tax deduction, they may offer the benefit of tax-free growth and qualified tax-free withdrawals in retirement.

Next Steps
If you'd like to discuss how these changes may apply to your retirement plan or personal financial situation, please do not hesitate to contact your Sisterson team member. As always, we're here to help navigate and advise on these rules.