Congratulations, High Earner: Your Catch Up Contributions Are Now Roth Only

There is a small but expensive line item buried in SECURE 2.0 that quietly went live this year, and if you are over 50, earn a solid paycheck, and have been happily stuffing extra money into your 401(k) pretax every year, it is worth five minutes of your attention. Starting January 1, 2026, some high earners no longer get to choose how their catch up contributions are taxed. Congress chose for them.

What actually changed

Under a rule known as Section 603, certain 401(k) participants must now make their catch up contributions as Roth contributions instead of pretax.² There is no opting out and no box to uncheck. If the rule applies to you, every dollar you contribute above the standard deferral limit goes in after tax. If you meet the rules for a qualified withdrawal, generally age 59½ and at least five years after your first Roth contribution to the plan, that money and its growth come out tax free in retirement, whether you wanted it that way or not.

Who actually counts as a “high earner” here

This is the part that trips people up, because the number that matters is not your salary today. The rule looks backward. If your FICA wages, the number in Box 3 of your W2, from the employer sponsoring the plan exceeded $145,000 in the prior calendar year, you are locked into Roth catch up treatment for the current year.² That base threshold adjusts for inflation, and for 2026 the actual lookback number is $150,000 in 2025 wages.³

Because it is a look back rule, it can lag behind reality in ways that catch people off guard. A sales director who had a huge bonus year in 2025 and cleared $160,000 in wages is stuck with mandatory Roth catch up for all of 2026, even if commissions dry up and this year's income looks nothing like last year's. The rule cares about what your W2 said, not what your bank account currently shows.

One exception worth knowing about if you are a business owner: sole proprietors and partners with no FICA wages from the plan sponsor are not subject to this rule at all, and because wages are measured employer by employer, moving to a new job generally does not carry last year's high wages over with you.²

The dollar amounts involved

For 2026, the standard 401(k) deferral limit is $24,500.¹ On top of that, workers 50 and older can add a catch up contribution of $8,000, and workers aged 60 through 63 get an even bigger “super catch up” of $11,250, if your plan offers it, thanks to a separate SECURE 2.0 provision.¹ For anyone affected by the new rule, that entire catch up piece, the $8,000 or the $11,250, has to go in as Roth. The base deferral limit is untouched and can still be split between pretax and Roth however you like.

The twist most people never see coming

Here is the detail that should really get a business owner's attention. If your 401(k) plan does not offer a Roth contribution option at all, the rule does not bend to make an exception for you. There is no pretax fallback. Anyone in the plan whose prior year wages were over the threshold simply cannot make catch up contributions for the year, and the final IRS regulations confirm the plan is not required to add a Roth feature to fix that.⁵ In plain terms, a plan without a Roth feature cannot keep offering pretax catch up contributions to its higher paid employees. It just stops offering catch up contributions to them at all. If you are a business owner or key employee and your plan has never bothered adding a Roth option, this is the year that oversight gets expensive.

Why this might not be the bad news it sounds like

It is easy to hear “the government is forcing me into a specific tax treatment” and assume it is a loss. The trade off is real: a Roth catch up contribution does not reduce your taxable income this year, so your take home pay and this year's tax bill will look different than they did with pretax catch up. But for some high earners, the long term picture can offset that. Roth withdrawals in retirement do not count toward the income calculations that trigger higher Medicare premiums or push more of your Social Security benefit into taxable territory.⁴ If you were already debating whether some of your retirement savings should be Roth instead of pretax, the rule just made that decision for a slice of it. Whether that slice works in your favor depends on your tax bracket today compared with what you expect in retirement.

The bottom line

If you are 50 or older, check what your W2 wages looked like last year and confirm your plan actually offers a Roth option before you assume your catch up strategy is still on autopilot. This is a rule that changes based on numbers most people never think to look up until a paycheck or a plan document forces the issue. Worth confirming where you land before assuming last year's contribution plan still applies.

This is general education, not personalized tax or financial advice. Whether this rule applies to you, and whether your plan is set up to handle it, depends on your specific wages and your plan's provisions, so let's take a look at your situation before assuming either way.

Sources

1. Internal Revenue Service, “401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500”: confirms the 2026 elective deferral limit of $24,500, the standard age 50 and older catch up limit of $8,000, and the enhanced catch up limit of $11,250 for participants aged 60 through 63. https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
2. Internal Revenue Service / Federal Register, final regulations on “Catch-Up Contributions”: establishes the mandatory Roth catch up rule under SECURE 2.0 Section 603, the $145,000 base wage threshold measured using FICA wages under IRC Section 3121(a) from the employer sponsoring the plan, and the exception for participants with no FICA wages from that employer. https://www.federalregister.gov/documents/2025/09/16/2025-17865/catch-up-contributions
3. Internal Revenue Service, Notice 2025-67, “2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost of Living”: confirms the Roth catch up wage threshold for 2026 is $150,000, based on 2025 wages. https://www.irs.gov/pub/irs-drop/n-25-67.pdf
4. Social Security Administration, “Premiums: Rules for Higher-Income Beneficiaries”: explains that income related Medicare premium surcharges are based on modified adjusted gross income from your tax return, the same measure that determines how much of your Social Security benefit is taxable. https://www.ssa.gov/benefits/medicare/medicare-premiums.html
5. Trucker Huss, “The Roth Catch-Up Regulations are Final: What You Need to Know!”: confirms that a plan without a qualified Roth contribution feature may exclude all participants over the wage threshold from catch up contributions entirely without violating the universal availability nondiscrimination rule, rather than being required to add a Roth option. https://www.truckerhuss.com/newsletter/roth-catchup-regulations/