Roth Catch-Up Mandate Goes Live: What Clients Should Consider in Their 2026 Tax Planning
Many high-income taxpayers are already fully taking advantage of a company-sponsored 401(k) plan by maximizing their annual pre-tax contributions. For taxpayers over age 50, that includes taking advantage of the extra catch-up contribution to further reduce their taxable income while supplementing their retirement savings. Starting in 2026, however, the rules are changing. The SECURE Act 2.0 requires that any taxpayers with earnings in excess of $150,000 treat any catch-up contributions as Roth contributions—eliminating the previously available tax break that these taxpayers were able to claim prior to 2026. These high-income taxpayers could easily find that their taxes will jump in 2026 because of this lost pre-tax deduction—but there are possible steps that taxpayers can take now in light of the new changes.
Roth Catch-Up Mandate: The Basics
Starting in 2026, employees with at least $150,000 in FICA wages for the year must treat all catch-up contributions as Roth contributions. Included are both the traditional $8,000 catch-up contribution amount and the “super catch-up” of $11,250 that’s available to taxpayers who are between ages 60 and 63. The $24,500 “regular” contribution amount can continue to be made on a pre-tax basis—and the Roth requirement does not apply for 2025 contributions. The $150,000 amount will be indexed for inflation in $5,000 increments going forward.
That means the entire catch-up contribution is made with after-tax dollars, so the immediate pre-tax deduction will be lost. Roth funds, however, can be withdrawn tax-free down the line, while distributions from traditional retirement accounts are fully taxable.
Only FICA wages from the employer who sponsors the retirement plan count. Investment income, a spouse’s income and even self-employment wages from a side job won’t be counted in determining whether a client has reached the $150,000 threshold. The IRS has confirmed that the definition of “wages” for purposes of the Roth mandate includes only wages that are subject to FICA taxes (so amounts that are reported in Box 3 of the taxpayer’s Form W-2).
When a participant is required to make a Roth catch-up contribution, yet makes a pre-tax catch-up contribution, the final regulations allow plans to treat a participant’s pre-tax catch-up election as though they had elected to make a Roth contribution. However, the participant must be given an effective opportunity to opt-out of the deemed Roth election. Deemed elections must also stop within a reasonable time after the participant is no longer subject to the Roth mandate.
Planning for the 2026 Changes
First and foremost, clients should be advised on the potential benefits of funding a Roth account in the first place. Clients who have a source of tax-free income upon which to draw in retirement are generally better able to manage their tax picture and minimize overall taxes later in life. That’s especially true for
higher-income clients who will likely have higher RMD requirements in retirement. A Roth account can be extremely valuable for this reason alone.
Next, clients should understand that the Roth mandate applies only to employer-sponsored 401(k)s. IRAs have lower catch-up contribution limits (only $1,100 in 2026), but there is no Roth requirement.
Clients should also consult their employers to determine whether they offer a Roth option in the first place—it’s entirely optional for employers to decide whether or not to adopt a Roth 401(k) option.
Conclusion
As a general matter, clients should watch closely for ongoing guidance from the IRS. The Roth catch-up mandate is incredibly new. 2026 is treated as a type of grace period for employers, who are only required to make a reasonable, good faith effort to comply with the new rules—plan participants, on the other hand, are subject to the Roth requirement as of January 1, 2026. Your questions and comments are always welcome. Please post them at our blog, AdvisorFYI, or call the Panel of Experts.