3761 / What are the rules for catch-up contributions to employer sponsored retirement plans?
Editor's Note: The SECURE Act 2.0 Roth catch-up contribution mandate, discussed below, is effective January 1, 2026. The final regulations on the Roth catch-up mandate created some confusion over whether the IRS had again delayed the requirement. The IRS decided to delay the effective date of the final regulations themselves, so the regulations are not effective until January 1, 2027. The preamble to the regulations do, however, specifically state that the regulations are not extending or modifying the existing transition period. Beginning with the 2026 tax year, employers are required to comply with the Roth mandate on a reasonable, good faith basis until the effective date of the regulations themselves.
Catch-up contributions are defined as additional elective deferrals by an eligible participant in an applicable employer plan, as defined in IRC Section 414(v) and regulations thereunder. Elective deferral for this purpose refers to the amounts described in IRC Section 402(g)(3) ( Q 3760), but also includes amounts deferred to eligible Section 457 governmental plans.1 The provisions allowing catch-up contributions are among the retirement amendments of EGTRRA 2001 that became permanent under the Pension Protection Act of 2006 ("PPA 2006").2
For purposes of IRC Section 414(v), an applicable employer plan means:
- employer plans qualified under IRC Section 401(a) ( Q 3838);
- Section 403(b) tax sheltered annuities ( Q 4047);
- eligible Section 457 governmental plans (457(b) plans);
- salary reduction simplified employee pensions (i.e., SAR-SEPs ( Q 3705)); and
- SIMPLE IRAs ( Q 3706).3
For this purpose, qualified plans, Section 403(b) plans, SAR-SEPs, and SIMPLE IRAs that are maintained by a controlled group of corporations, a group of trades or businesses under common control, or members of an affiliated service group ( Q 3935) are considered one plan. In addition, if more than one eligible Section 457 governmental plan is maintained by the same employer, the plans will be treated as one plan.4
Catch-up contributions permitted under IRC Section 414(v) do not apply to a catch-up eligible participant for any taxable year in which a higher catch-up amount is permitted under IRC Section 457(b)(3) during the last three years prior to the plan's normal retirement year ( Q 3584).5
Dollar limit. A plan may not permit additional elective deferrals for any year in an amount greater than the lesser of (1) the indexed amount listed below or (2) the excess (if any) of the participant's compensation as defined in IRC Section 415(c)(3) ( Q 3868, Q 3728) over any other elective deferrals for the year made without regard to the catch-up limits.6 An employer that sponsors more than one plan must aggregate the elective deferrals treated as catch-up contributions for purposes of the dollar limit.7 An individual participating in more than one plan is subject to one annual dollar limit for all catch-up contributions during the taxable year.8
The indexed dollar limit on catch-up contributions to SIMPLE IRAs and SIMPLE 401(k) plans is $3,500 in 2023-2025 and $3,000 in 2015-2022. The SECURE Act 2.0 increased the catch-up contribution limit to $5,000 for taxpayers aged 60, 61, 62 or 63 for tax years beginning after 2024.9
The indexed dollar limit on catch-up contributions to all other 401(k) plans and to Section 403(b) plans,eligible Section 457 plans, and SAR-SEPs is $8,000 in 2026, $7,500 in 2023-2024 and $6,500 in 2020-2022.
The SECURE Act 2.0 increased the catch-up contribution limit to the greater of (1) $10,000 or (2) 150% of the regular catch-up limit for 2024 for taxpayers aged 60, 61, 62 or 63 for tax years beginning after 2024 (up from $6,500 in 2020-2022 and $7,500 in 2023 to 2024).10 For 2025, the $10,000 catch-up contribution limit was indexed to $11,250.11 The amount remains at $11,250 for 2026.
Planning Point: Only taxpayers who are aged 60,61,62 or 63 on December 31 of the year of contribution qualify for the enhanced catch-up contribution amount. If the individual reaches age 64 during the year, they no longer qualify for the enhanced contribution. If they make the enhanced contribution, it's treated as an excess contribution. If the excess amount (plus associated earnings) is withdrawn by the April 15 tax filing deadline, the individual pays tax on the excess amount in the year of deferral and the earnings are taxed in the year of distribution. If the individual misses the April 15 deadline, the excess is taxed both in the year of deferral and the year of distribution (a double-taxation situation results).
Post SECURE Act 2.0, if the taxpayer has wages of at least $145,000 from the employer sponsoring the plan in the prior year, the catch-up contribution must be treated as a Roth contribution (the $145,000 limit is also indexed for inflation, to $150,000 in 2026). Congress intends to clarify that it only intended this change for taxpayers earning less than the applicable amount for the prior year can continue to make Roth or pre-tax catch-up contributions.
The IRS provided transition relief so that catch-up contributions satisfied the SECURE 2.0 provisions until 2026 even if they were non-Roth contributions made on behalf of high-earning taxpayers.12 The IRS clarified that if an employee who is subject to the Roth catch-up requirement elects to make catch-up contributions on a pre-tax basis, the plan sponsor can disregard that election and treat the catch-up as a Roth contribution. When multiple employers sponsor the same 401(k) and an employee has wages from more than one of those employers, the amounts will generally not be aggregated for purposes of determining whether the employee is subject to the Roth mandate.
However, in final regulations, final regulations released in 2025 now provide that if the employee's common law employer uses a common paymaster in accordance with IRC Section 3121(s), the plan may provide that the employee's common law employer is aggregated with one or more other employers using that common paymaster.Those aggregated employers may then be treated as a single employer sponsoring the plan for purposes of determining Roth catch-up eligibility. Employers that are part of a controlled group or affiliated service group are also permitted to aggregate compensation across multiple entities for purposes of determining whether a participant is required to make Roth catch-up contributions.
The IRS has also confirmed that it remains optional for employers to offer a Roth savings option. If the plan itself does not offer a Roth savings option, an individual who is subject to the Roth catch-up requirement will not be permitted to make catch-up contributions at all (meaning that employers must track which employees are subject to the catch-up rule regardless of their choice).
However, pursuant to the proposed regulations, if employees who are subject to the Roth catch-up requirement are permitted to make Roth catch-up contributions, all catch-up eligible employees must be permitted to make Roth catch-up contributions.13
The IRS also clarified that only FICA wages from the employer are counted in determining whether the employee is subject to the Roth catch-up requirement. Self-employment income is not counted. Similarly, if the employee had no FICA wages from the employer in the prior year (i.e., they were a new hire), they are not subject to the Roth catch-up requirement even if their wages in the current year exceed the threshold. The wage threshold is not prorated for an employee's first year of employment, so the employee's FICA wages must have exceeded the full threshold for the prior year to become subject to the Roth catch-up requirement.14
The applicable FICA wages must come from the individual's common law employer. When multiple employers sponsor the plan, wages from one employer are not aggregated with the wages from another employer sponsoring the plan.15
Employees who are subject to the Roth catch-up requirement will not be required to make an affirmative election to have their catch-up contributions treated as Roth contributions. Contributions from employees who have made elections to defer on a pre-tax basis will automatically be treated as Roth catch-up contributions if the employee is subject to the requirement and the employer has adopted the deemed election rule.
Pursuant to the deemed election rule, however, the employee must be given an opportunity to make a different election (in other words, they must be given the opportunity to stop making catch-up contributions altogether). The final regulations retained these provisions.
The regulations also confirm that plans will not violate the universal availability rule by allowing individuals subject to the Roth catch-up requirement to make those Roth contributions. The final regulations also confirmed that plans do not violate the universal availability requirement by allowing for super catch-up contributions, assuming that all participants are entitled to contribute up to the statutory limit that applies to each participant.
However, the regulations clarify that if any plan within a controlled group permits super catch-up contributions, all plans within that controlled group must permit super catch-up contributions to avoid violating the universal availability requirement.
The regulations have also provided correction methods to correct failures to adhere to the Roth catch-up requirements. The W-2 method allows the employer to transfer the catch-up contribution from the traditional 401(k) to the Roth account and report the contributions on the employee's W-2. Employers can also use a direct rollover between the traditional and Roth accounts within the plan and report the contribution on Form 1099-R. Under the proposed regulations, the employer would have been required to apply the same correction method to all plan participants for the plan year in question. In response to comments, the final regulations removed this requirement and instead require a plan apply the same correction method for similarly situated participants.
To use these correction methods, however, the employer must have adopted effective procedures to comply with the Roth catch-up requirement. Specifically, the employer must have adopted the deemed Roth catch-up election provision.16
Planning Point: As the SECURE Act 2.0 is drafted, once a taxpayer reaches age 64, the lower catch-up contribution limit will once again apply. Additionally, note that the $145,000 limit is a new limit that is not related to the existing definitions for highly-compensated employees. Plans will be required to track this new limit to determine whether any given participant's catch-up contributions must be treated as Roth contributions (the income limit that applies in the definition for highly-compensated employees is $160,000 in 2025-2026).
Planning Point: Employers who wish to offer high-earning employees a catch-up contribution option must first contact their plan recordkeeper to request the changes, understanding that it can take months for an amendment to be processed and implemented by the recordkeepers and recordkeepers may also limit the number of changes and amendments that they will process in any given year because of staffing constraints. Given the number of employers who will be interested in amending their plans to permit Roth catch-up contribution options, it's important to act early to avoid delays.
Eligible participant. An eligible participant with respect to any plan year is a plan participant who would attain age 50 before the end of the taxable year and with respect to whom no other elective deferrals may be made to the plan for the plan (or other applicable) year as a result of any limit or other restriction.17 For this purpose, every participant who will reach age 50 during a plan year is treated as having reached age 50 on the first day of the plan year, regardless of the employer's choice of plan year and regardless of whether the participant survives to age 50 or terminates employment prior to his or her birthday.18
Universal availability. A plan will not satisfy the nondiscrimination requirements of IRC Section 401(a)(4) unless all catch-up eligible participants who participate in any applicable plan maintained by the employer are provided with the effective opportunity to make the same election with respect to the dollar limits described above.19 This is known as the universal availability requirement. A plan will not fail to satisfy this requirement merely because it allows participants to defer an amount equal to a specified percentage of compensation for each payroll period and permits each catch-up eligible participant to defer a pro rata share of the dollar catch-up limit in addition to that amount.20
For purposes of the universal availability requirement, all plans maintained by employers that are treated as a single employer under the controlled group, common control, or affiliated service group rules ( Q 3933, Q 3935) generally must be aggregated.21 Exceptions to the aggregation rule apply to Section 457 plans and certain newly acquired plans.22
Catch-up contributions are excluded from income in the same manner as elective deferrals.23 The calculation of the elective deferrals that will be considered catch-up contributions generally is made as of the end of the plan year by comparing the total elective deferrals for the plan year with the applicable plan year limit.24 Elective deferrals in excess of the plan, ADP, or IRC limits, but not in excess of the amount limitations described above, will be treated as catch-up contributions as determined on the last day of the plan year.25
An employer may make, but is not required to make, matching contributions on catch-up contributions. If an employer does so, the contributions must satisfy the ACP test of IRC Section 402(m) ( Q 3804).21 Reporting requirements for catch-up contributions are set forth in Announcement 2001-93.26
1. IRC §§ 414(v)(5)(B), 414(u)(2)(C) (USERRA rights); Treas. Reg. § 1.414(v)-1(g)(2).
2. P.L. 109-280, § 811.
3. IRC § 414(v)(6).
4. IRC § 414(v)(2)(D).
5. IRC § 414(v)(6)(C); Treas. Reg. § 1.414(v)-1(a)(3).
6. IRC § 414(v)(2)(A).
7. Treas. Reg. § 1.414(v)-1(f)(1).
8. Treas. Reg. §§ 1.402(g)-2(b), 1.414(v)-1(f)(3).
9. IR-2015-118 (Oct. 21, 2015), Notice 2016-62, Notice 2017-64, Notice 2018-83, Notice 2019-59, Notice 2020-79, Notice 2021-61, Notice 2022-55, Notice 2023-75, Notice 2024-80, Notice 2023-75.
10. IR-2015-118 (Oct. 21, 2015), Notice 2016-62, Notice 2017-64, Notice 2018-83, Notice 2019-59, Notice 2020-79, Notice 2021-61, Notice 2022-55, Notice 2023-75, Notice 2024-80, Notice 2023-75.
11. Notice 2023-62
12. IRC § 414(v)(5).
13. Prop. Treas. Reg. §1.414(v)-2(a)
14. Prop. Treas. Reg. §1.414(v)-2(a).
15. Prop. Treas. Reg. §1.414(v)-2(b).
16. Prop. Treas. Reg. §1.414(v)-2(c).
17. See Treas. Reg. § 1.414(v)-1(g)(3).
18. IRC § 414(v)(4)(A); Treas. Reg. § 1.414(v)-1(e).
19. Treas. Reg. § 1.414(v)-1(e).
20. IRC § 414(v)(4)(B).
21. Treas. Reg. § 1.414(v)-1(e)(2) and (3).
22. See IRC § 402(g)(1)(C).
23. Treas. Reg. § 1.414(v)-1(b)(2).
24. Treas. Reg. § 1.414(v)-1(c).
25. T.D. 9072, 2003-2 C.B. 527.
26. 2001-44 IRB 416.