Mandatory Roth Catch-Up Contributions: Are You (and Your Service Providers) Ready for It?
- Boutwell Fay LLP
- Oct 9
- 4 min read
As we head into the last quarter of the year, plan sponsors should be mindful of the upcoming SECURE 2.0 Act deadline for mandatory Roth catch-up contributions, effective January 1, 2026. The SECURE 2.0 Act was passed on December 23, 2022, so its amendment of Internal Revenue Code Section 414(v) to require mandatory Roth catch-up contributions isn’t new news. Its looming implementation date has been on the horizon for quite a while, but final regulations were recently issued by the Department of Treasury and the Internal Revenue Service on September 16, 2025. Here are some key tips to help ensure plan sponsors are prepared.
Section 603 of the SECURE 2.0 Act requires that participants who earned more than $145,000 in FICA wages in the prior calendar year from the employer sponsoring the plan to make catch-up contributions on a Roth basis. (The prior year’s FICA wage threshold is adjusted for inflation, if necessary, each year—but for purposes of mandatory Roth contributions in 2026, the FICA wage threshold for 2025 is $145,000.)
While the final regulations generally apply to contributions beginning on or after January 1, 2027, the applicability date does not delay Section 603’s effective date. Roth catch-up applies as of January 1, 2026, and plan sponsors must use a reasonable, good faith interpretation standard to implement the new requirement prior to January 1, 2027.
Do you need to amend your plan?
To allow participants subject to Section 603 to make catch-up contributions, a plan must provide a Roth option for such participants’ elective deferrals. Plans allowing participants subject to Section 603 to make contributions on a Roth basis must also allow all catch-up eligible participants to make catch-up contributions on a Roth basis.
Some larger volume submitter plan documents are written to take Section 603 into account. However, if you currently offer catch-up contributions in your plan, you will need to review your plan and determine whether it already allows for Roth contributions or if a discretionary amendment is required to implement Roth catch-up contributions. The final regulations clarify that a mid-year amendment to a 401(k) safe harbor plan to comply with Section 603 will not be deemed a prohibited change. The deadline to adopt amendments reflecting the SECURE 2.0 Act’s provisions is December 31, 2026*, but some plans may need amendments before 2026 to implement Roth catch-up contributions.
If a plan does not allow Roth contributions, then a participant subject to Section 603 will not be able to make catch up contributions starting in 2026. For 403(b) plans, the plan will not fail the universal availability requirement because the plan does not allow catch-up contributions for participants subject to Section 603.
How do you identify who is required to make Roth contributions?
Section 603’s dollar threshold is different from other thresholds applicable to highly paid employees (e.g., highly compensated employees for purposes of 401(k)’s nondiscrimination testing rules). You’ll need to ensure there’s a structure in place to identify who is subject to Section 603. Only FICA wages from a participant’s common law employer are counted, so a participant who receives wages from multiple entities would not have those wages aggregated; however, the final regulations contain optional provisions which allow aggregation for employers using a common paymaster, controlled group members, and in situations where there has been an asset transfer.
Further, if a worker does not have FICA wages (e.g., a governmental agency employee not covered by a Section 218 Agreement), Section 603 does not apply. The preamble to the final regulations clarifies that a worker’s FICA wages are based on those reported in Box 3 of the participant’s prior year Form W-2.
Whose help do you need to ensure a seamless implementation of Section 603?
As noted above, an employee’s prior year FICA wages are the trigger for Section 603’s application. If you use a payroll provider, ask them to confirm their system can correctly code compensation to identify employees subject to Section 603, and that appropriate system testing measures have been performed. Mismatches here could create errors in deferrals or tax reporting that require correction.
Plan sponsors should also contact their recordkeeper and/or TPA to confirm they have systems in place to ensure catch-up contributions for participants subject to Section 603 are properly treated as Roth contributions.
If your plan’s service providers cannot confirm they have appropriate systems in place to comply with Section 603’s requirements, and you are considering prohibiting catch-up contributions until they do, this would require an advance amendment prior to January 1, 2026.
Errors in implementing the Roth catch-up requirements may result in incorrect tax treatment and/or missed contributions which, in turn, may create risk for the plan sponsor. Now is the time to review procedures, coordinate with providers, review service agreements related to your plan, and ensure that both the plan document and operational practices are aligned. If you are unsure if your plan is ready, our team at Boutwell Fay LLP can help.
* December 31, 2029 for governmental plans.
Boutwell Fay is a leading law firm specializing in employee benefits and ERISA.
With a focus on providing customized solutions and exceptional client service, we help businesses navigate the complexities of employee benefit plans. Our team of experienced attorneys is dedicated to delivering results that exceed our clients' expectations.
CA 949-660-0481
NY 332.900.2550