The Roth Catch-Up Mandate Is Live: What Employers Need to Know Now
For years, catch-up contributions to employer-sponsored retirement plans have been a straightforward tax planning tool: employees age 50 and older could set aside extra pre-tax dollars beyond the standard contribution limits, reducing their taxable income in their peak earning years. As of January 1, 2026, that is no longer true for a significant portion of the workforce.
Section 603 of the SECURE 2.0 Act of 2022 requires that catch-up contributions made by employees who earned more than $145,000 in prior-year wages from the plan sponsor be made on a Roth — that is, after-tax — basis. The IRS finalized implementing regulations in September 2025, and the mandate is now in effect. Employers that have not yet implemented this change have an active operational failure. The good-faith compliance grace period running through December 31, 2026 is intended to ease implementation difficulties, not to excuse delay.
Below is a summary of what changed, what plan sponsors need to do now, and how to address non-compliance if it has already occurred.
What Changed
The new rule applies to 401(k), 403(b), and governmental 457(b) plans. SIMPLE IRAs, SARSEPs, and certain plans maintained by churches and tax-exempt organizations are excluded.
Starting January 1, 2026, any employee who is age 50 or older and who earned more than $145,000 in FICA wages — reported in Box 3 of the W-2 — from the employer sponsoring the plan in the prior year must make all catch-up contributions to a designated Roth account. Pre-tax catch-up contributions are no longer available for these employees. The $145,000 threshold is adjusted for inflation annually and is applied on a per-employer basis, not in the aggregate across former employers.
The super catch-up provision for employees ages 60 through 63 is also affected. Those who meet the income threshold must make their enhanced catch-up contributions — up to $11,250 in 2026 — as Roth as well.
One point that has caught some employers off guard: a plan that offers catch-up contributions must have a designated Roth contribution feature to comply with the mandate. There is no permissible workaround that allows an employer to simply bar affected employees from making catch-up contributions rather than adding a Roth feature. The only narrow exception applies where the plan eliminates catch-up contributions for all employees entirely.
Plan documents must be formally amended to reflect the Roth catch-up requirement. The deadline for most plans is December 31, 2026. Collectively bargained plans and governmental plans have later deadlines.
What Plan Sponsors Need to Do Now
The amendment deadline may feel distant, but the operational changes required to implement the Roth catch-up rule take time — and errors that have been accumulating since January 1, 2026 compound the longer they go unaddressed. Plan sponsors should move on the following immediately.
Confirm whether the plan offers a designated Roth contribution feature.
If not, a plan amendment is required before any compliance is possible. This involves engaging benefits counsel, coordinating with the recordkeeper and TPA on the system changes needed to support a Roth feature, and ensuring the payroll provider can route contributions to the correct account type.
Identify which employees are subject to the mandate.
Pull prior-year FICA wage data for all employees currently eligible to make catch-up contributions. Any employee who is age 50 or older and whose 2025 FICA wages exceeded $145,000 is subject to the Roth requirement for 2026. This exercise needs to be repeated at the start of each plan year.
Verify that payroll has been configured correctly.
This is where most failures originate. The payroll provider must be set up to identify affected employees and route their catch-up contributions to the designated Roth account. Confirm this in writing and request documentation showing that the configuration has been tested and is working correctly.
Confirm that the recordkeeper and TPA are administering contributions properly.
Verify that affected participants’ account statements reflect proper Roth treatment and that TPA records match payroll output. Discrepancies between payroll and recordkeeper data are a common source of operational errors.
Communicate the change to affected employees.
Employees subject to the mandate should receive clear written notice explaining that their catch-up contributions will now be taxed in the year of deferral. This is a material change in after-tax economics, and affected employees should have the opportunity to adjust their deferral elections accordingly.
Adopt required plan amendments before December 31, 2026.
Begin the amendment process well in advance of the deadline to allow adequate time for counsel review, recordkeeper processing, and any required participant disclosures.
If Your Plan Has Been Operating Incorrectly: Correction Under EPCRS
If a plan has not been correctly implementing the Roth catch-up rule since January 1, 2026, the sponsor has an operational failure. This is a serious matter, but not an unrecoverable one. The IRS’s Employee Plans Compliance Resolution System — EPCRS — provides a structured correction path, and acting proactively before an IRS examination produces significantly better outcomes than waiting.
EPCRS offers three programs:
- Self-Correction Program (SCP) - The SECURE 2.0 Act substantially expanded self-correction rights. For eligible inadvertent failures — those that occurred despite reasonable compliance practices and that are not egregious or connected to abusive tax avoidance — plan sponsors may self-correct without notifying the IRS, without paying a fee, and within a reasonable period of discovering the failure. A Roth catch-up implementation error is likely to qualify as an eligible inadvertent failure for most sponsors, making SCP the natural starting point. One important caveat: the IRS has not yet formally updated Rev. Proc. 2021-30 to reflect all SECURE 2.0 EPCRS changes. Plan sponsors are currently operating under the interim guidance in Notice 2023-43, and counsel review before proceeding is advisable.
- Voluntary Correction Program (VCP) - Where a failure is not eligible for self-correction, or where the sponsor wants formal IRS approval and certainty of closure, VCP is available at any time before the plan is selected for audit. The sponsor submits an application and user fee through Pay.gov and receives a compliance statement from the IRS confirming the correction was appropriate.
- Audit Closing Agreement Program (Audit CAP) - If a failure surfaces during an IRS examination, it can be resolved through Audit CAP via a negotiated sanction and closing agreement. Sanctions in Audit CAP are substantially higher than VCP fees, which is why proactive correction under SCP or VCP is strongly preferred.
Regardless of which program applies, correcting a Roth catch-up failure will generally require identifying the affected participants and payroll periods, restoring participants to the position they would have been in under correct Roth treatment, correcting any Form W-2 reporting errors, adopting any necessary plan amendments as part of the correction, and documenting the new administrative controls put in place to prevent recurrence.
One development worth noting: in early 2026 the IRS announced a pilot program under which certain retirement plan sponsors receive 90 days’ advance notice before their plan is selected for examination. During that window, sponsors may be able to self-correct and reduce or avoid sanctions entirely. This makes proactive identification and correction of failures — including Roth catch-up failures — more valuable than ever.
Takeaways for Employers
The Roth catch-up mandate is not a future compliance item. It is in effect now, and for most plan sponsors, any gap in implementation since January 1, 2026 represents an existing operational failure. The practical priorities are:
- Determine whether your plan offers a designated Roth contribution feature and, if not, initiate the amendment process immediately.
- Identify which employees are subject to the mandate and verify that payroll and recordkeeper systems are routing their contributions correctly.
- Communicate the change to affected employees before the next payroll cycle in which errors could continue.
- If compliance gaps have already occurred, assess the scope of the failure and begin the EPCRS correction process — do not wait for IRS contact.
- Adopt required plan amendments before December 31, 2026.
For questions about the Roth catch-up mandate, plan amendments, or EPCRS corrections, contact Angela Stockbridge at (214) 420-6142 or astockbridge@frblaw.com.
DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.