IRS Explains When Roth Catch-Up Contributions Are Required

Ever since the Secure 2.0 Act laid out changes for workplace retirement plans, employers have been waiting for final regs from the IRS.

Now, the regs are here.

The 2022 law established new requirements, impacting 401(k), 403(b) and 457(b) plans that allow participants who are age 50 or older to make catch-up contributions.

Specifically, the Secure 2.0 Act said catch-up contributions made by participants who exceed a certain wage threshold will need to be designated as after-tax Roth contributions.

The final regs, issued September 16, 2025, provide needed details and generally pertain to tax years beginning after December 31, 2026.

The final regs explain that the Roth catch-up wage threshold is $145,000 (to be adjusted for inflation). If in one year, an employee earns more than that amount in FICA wages, any catch-up contributions made in the next year will be subject to taxes.

One way the final regs differ from the proposed regs: To determine if a participant has exceeded the wage threshold, the plan administrator can aggregate wages received from certain separate common law employers.

Reporting Corrections to IRS

Employers that fail to comply with the Roth catch-up requirement can use one of two methods to correct the problem and report the changes to the IRS. They are:

• Form W–2 Correction Method. You’d transfer the elective deferral from the pre-tax account to the Roth account and report the contribution accordingly on Form W–2 for the deferral year.
• In-Plan Roth Rollover Correction Method. You’d roll over the elective deferral from the pre-tax account to the Roth account, and the rollover would be reported on Form 1099–R.

Super Catch-Up Contributions

The Secure 2.0 Act also permitted so-called super catch-up contributions. These are higher contribution limits for employees who are closer to retirement age — i.e., those who are ages 60, 61, 62 and 63.

The allowed amount is 150% of the regular catch-up contribution amount.

For example, if the normal catch-up max is $7,500, for the eligible participants, it’d be $11,250.

The IRS final regs stated that if a plan document references the catch-up contribution limit under Internal Revenue Code Sec. 414(v), the plan’s terms should make it clear whether that includes super catch-up contributions.