What is the mandate?

Starting January 1, 2026, participants earning more than $145,000 (indexed) in FICA wages in the prior year must make all catch-up contributions as Roth contributions.

FICA wages
  • FICA wages include salary, tips, bonuses, commissions, and taxable fringe benefits (Box 3 on W-2).
  • FICA wages would be defined by reference to Social Security taxes and considered in the same year that they are considered for Social Security tax purposes.
  • Wage calculation is not prorated or aggregated across multiple employers. Eligibility is only met upon exceeding the $145,000 (indexed) threshold with the current employer.
Roth contributions
  • Section 603 applies to age 50+ and the enhanced age 60-63 catch-up contribution types1
  • All Roth contributions made during the year count towards the Roth catch-up limit. This will be regardless of when they were contributed for purposes of determining if the mandatory Roth deferrals are satisfied.
  • Employers can deem a participant's pre-tax catch-up election to be a Roth catch-up election. Although they must provide the participant with an effective opportunity to stop catch-up contributions.
Correction method
  • Distribute pretax contributions and earnings: Employers may return the contribution as an excess deferral to the plan. (Employers must return excess deferrals in the scenario where Roth is not available to the plan).
  • Correct W-2: Employers may correct the W-2 for the same tax year and must be corrected before issuance to the employee.
  • In-plan Roth conversion: Corrections may be made by April 15th via in-plan Roth conversion. A 1099-R will be issued for the tax year in which the conversion was processed.
Exclusions and impact
  • FICA Participation: An individual who did not have any FICA wages from the Employer from the prior calendar year would not be subject to the mandatory Roth catch-up and can maintain Pre-Tax Salary Contribution catch-up.
  • Optional Roth Offering: Employers are not mandated to offer Roth. If Roth is not offered, those participants earning greater than $145,000 (indexed) in the previous year cannot make any catch-up contributions.

Checklist for Plan Sponsors/Employers

Let us assist you in navigating the Roth catch-up requirements

  1. If your Plan offers catch-up contributions but does not currently offer Roth, you may need to update your Plan. Otherwise, high-income earners will no longer be eligible to contribute catch-up contributions. (If your plan offers Roth, skip to question 2)
    Have you discussed your options with your Plan Document Sponsor to begin to prepare?
    Options include:
    __ Amend your Plan document to include Roth deferrals
    __ Do not amend your Plan document and limit catch-up contributions to only non-impacted participants who earned $145,000 (indexed) or less in FICA wages in the previous year
  2. Have you discussed the Secure 2.0 Section 603 Roth catch-up provision with your payroll organization or payroll software provider?
    __ Yes
    __ No; but I will reach out to our payroll provider to review this checklist
  3. Plan Sponsors/employers have the responsibility to identify eligibility for catch-up contributions.
    Can you/your payroll system:
    __ Identify impacted participants who earned more than $145,000 (indexed) in FICA wages in the previous year?
    __ Restrict catch-up contributions to the Roth source for impacted participants who earned more than $145,000 (indexed) in FICA wages in the previous year?
    __ Continue allowing pre-tax catch-up contributions for non-impacted participants who earned $145,000 (indexed) or less in FICA wages in the previous year?
  4. Are you planning to educate participants of the new rule?
    __ Yes
    __ No; but I understand impacted participants who earned more than $145,000 (indexed) in FICA wages in the previous year must be provided with an opportunity to change allocations if Roth deferral source for catch-up contributions is not desired.

Note: Information will be available on the website to educate Participants on the new rule.

Download checklist and full document

[1] Under current proposed regulations, a participant who is eligible for Special 457(b) and 403(b) catch-ups may make such contributions on a pre-tax or Roth basis and are not required to make such contributions as Roth. Additionally, Section 603 has made changes to the Catch-Up coordination rules that may allow participants to utilize both Special Catch-Ups Contributions and Age 50+ Catch-Ups Contributions in the same year under certain circumstances. However, final guidance on this aspect of Section 603 is needed.

This material is not a recommendation to buy or sell a financial product or to adopt an investment strategy. Investors should discuss their specific situation with their financial professional.

FOR FINANCIAL PROFESSIONAL, CONSULTANT AND PLAN SPONSOR USE – NOT FOR DISTRIBUTION TO THE PUBLIC