How Plan Sponsors Can Address Roth Catch-up Regulations

The final Roth catch-up regulations the IRS issued on Sept. 16 are in effect, detailing SECURE 2.0’s requirements and deadlines for most ERISA-based retirement plans. However, it is important to note that SIMPLE IRA plans and self-employed individuals are not subject to these regulations. Plan sponsors should act now to determine how the new regulations affect their plans and take steps to comply. 

The IRS will allow 2026 to be a “gap year,” allowing plan sponsors time to adjust to the new catch-up requirements, since the IRS did not extend the non-enforcement transition period that ends on December 31, 2025. During 2026, plan sponsors will be required to demonstrate a reasonable, good faith interpretation of the SECURE 2.0 changes, but stricter compliance enforcement begins on January 1, 2027. 

Most plans must be amended to comply with the new requirements by December 31, 2026, regardless of whether the plan operates on a fiscal year or calendar year basis. The 12-month runway to the new amendment date may seem long, but most plan sponsors will need to coordinate with third parties — such as payroll providers, advisors, legal counsel, or recordkeepers — each with their own priorities and timelines. Additionally, plan sponsors must not only understand how the rules affect their plans but also explain these changes effectively to plan participants. 

This article offers five steps for plan sponsors to consider as they implement Roth catch-up contribution requirements. For more information about these regulations, please review IRS Final Catch-Up Contribution Regulations for Salary Deferrals in Retirement Plans: What Employers Need to Know.

1. Identifying Eligible Participants

Are any of the company’s employees eligible for Roth catch-ups or super catch-ups?

Eligibility may not be immediately apparent, and several considerations are at play: 

• Age: Employees age 50 or older can make additional deferrals to their retirement plans beyond the typical contribution limit. Super catch-ups are available to employees in the calendar year they reach age 60, 61, 62, or 63. 
• Prior-year wages: Employees whose 2025 Social Security wages exceed $150,000 are considered highly paid participants (HPPs). This is not simply another name for highly compensated employees (HCEs): it’s a completely new classification. In addition, the HPP prior-year Social Security wage limit is a new data point that employers never had to track before. The HPP Social Security wage limit ($150,000) is lower than the 2025 Social Security wage base ($176,100). Thus, employers cannot simply assume that everyone who hits the Social Security wage base cap is an HPP, because others below that level could also be HPPs.
• Owners with self-employment income are exempt. The new mandatory Roth “age and wage” catch-up rules apply only to W-2 employees and do not apply to self-employed individuals, including partners and LLC profits or capital interest owners who receive K-1s instead of W-2s.

It’s important for employers to identify employees whose age and salary meet the IRS requirements for mandatory Roth (after-tax) deferrals. As employees reach these milestones, plan sponsors must direct deferrals to the appropriate pre-tax and after-tax funds.

2. Updating Payroll and Plan Systems

What steps should employers take to comply with the new Roth catch-up contribution regulations? 

Employers should immediately discuss the new IRS guidance with payroll providers, recordkeepers, and any other critical stakeholders. To help verify compliance with SECURE 2.0 Roth catch-up deferral regulations, employers can take the following steps:

• Evaluate the payroll system to determine if it can track employee eligibility.
• Establish procedures to accurately process Roth catch-up contributions. 
• Monitor contribution limits, participant ages, and participant salaries continuously.
• Communicate regularly with payroll providers and third-party administrators to assess the efficiency and accuracy of the new processes.

Plan participants may be unaware of changes to their retirement plans. It’s critical to inform participants about how the Roth catch-up provisions may affect them.

3. Communicating with Participants 

Do employers need to notify participants of the new Roth catch-up regulations?

Employees who prefer to make pre-tax rather than after-tax contributions to their retirement plan may find the new SECURE 2.0 regulations an unwelcome surprise. Employers are strongly encouraged to inform participants that, based on their age and Social Security wages, their catch-up contributions may automatically be treated as Roth (after-tax) contributions. Communications to plan participants should provide them the opportunity to make an informed decision about their deferral elections.

4. Amending Plan Documents

When should employers amend plan documents?

Conversations about plan amendments should begin immediately. A thorough review of plan provisions will reveal the extent of any changes needed, including those related to the Roth catch-up regulations. For example, what if a company’s current plan doesn’t offer Roth contributions as an option? To allow HPPs to make catch-up contributions, the plan sponsor must amend the plan document to allow Roth contributions from all eligible employees. 

Typically, amending an ERISA retirement plan may involve coordinating with other entities, including third-party administrators and payroll providers. Adapting to another organization’s timelines and priorities can extend the process — another good reason to start reviewing your company’s plan now. Doing so can help plan sponsors comply before deadlines approach and reduce errors that may occur if amendments are rushed at the last minute.

5. Remaining Up to Date

How can the company continue to maintain compliance with Roth catch-up regulations?

As these rules evolve, administrative burdens on employers and plan sponsors could shift. It’s important to monitor new guidance or updates from the IRS, as these may require employers and plan administrators to take additional action.