Beginning January 1, 2026, the SECURE 2.0 Act of 2022 implements a significant change

impacting high-earners who make “catch-up” contributions to their retirement plans.

Specifically, employees who are age 50 or older, whose FICA Wages exceed more than $145,000 in 2025 (this threshold will be indexed for inflation), will be required to make all catch-up contributions to a Roth account in 2026 (and evaluated each year thereafter). This means these contributions will be made with after-tax dollars, and the high-earners will not receive the traditional tax deduction for those contributions.

Here’s a breakdown of the key points:

• Who is affected? Employees aged 50 or older who participate in a 401(k), 403(b), or governmental 457(b) plan and earned more than $145,000 in the prior year (based on their W-2 wages from the employer sponsoring the plan – Box 3 of W-2).
• What is the change? Catch-up contributions for these high-earners must be made to a Roth deferral account.
• What does this mean for high-earners? They will not receive a tax deduction for their catch-up contributions, as these contributions are made with after-tax dollars.
• What if a plan doesn’t offer a Roth option? If an employer’s retirement plan does not have a Roth option, high-earners subject to the new rule will lose the ability to make any catch-up contributions to that plan.

Important Considerations for Employers:

• Update payroll systems to track employee wages and ensure compliance with the Roth catch-up requirement.
• Educate employees about the upcoming changes and how they may be affected. In summary, high earners aged 50 and older will need to make their catch-up contributions to a Roth account starting in 2026, potentially impacting their tax situation.