For high-earning workers approaching retirement, a SECURE 2.0 Act provision that took effect on January 1, 2026 quietly changed how catch-up contributions work. If you are 50 or older and earned more than $150,000 in FICA wages from a single employer in the prior year, any catch-up contributions you make to an employer-sponsored retirement plan must now be made on a Roth (after-tax) basis. The pre-tax catch-up that high earners have used for decades is no longer available to this group.
What Counts and Who's Affected
The $150,000 threshold is measured by Social Security wages reported in box 3 of your 2025 W-2 — not adjusted gross income, not household income. Self-employed individuals are not subject to the rule because they do not pay FICA on a W-2. The provision applies to 401(k), 403(b), and governmental 457(b) plans. IRAs are not affected.
The standard 2026 catch-up amounts the rule applies to are:
- $8,000 for participants age 50–59 and 64+
- $11,250 for participants age 60–63 under the SECURE 2.0 "super catch-up"
These sit on top of the regular $24,500 elective deferral limit announced by the IRS for 2026.
The Tax Math Has Flipped
Under the old rule, a 55-year-old earning $200,000 could shelter $7,500 of catch-up money from current federal income tax, deferring the bill until retirement when their bracket might be lower. Starting in 2026 that same worker pays tax on the $8,000 catch-up today, but every dollar — plus decades of growth — comes out tax-free at retirement.
For workers who expect to be in a similar or higher tax bracket in retirement, that's a long-term win. For workers planning to retire to a lower-bracket state, or who expect lower spending in retirement, the change can raise their lifetime tax bill. Fidelity and Charles Schwab both note that the rule effectively forces a Roth conversion decision on people who may never have intended one.
What Plan Sponsors Had to Build
The IRS issued final regulations in late 2025 confirming that plans without a Roth option cannot accept catch-up contributions from affected employees at all. Most large-plan recordkeepers added a Roth source during 2025, but workers at smaller employers should confirm their plan offers Roth — otherwise the catch-up is simply unavailable.
Practical Steps for Affected Savers
- Check box 3 of your 2025 W-2. If FICA wages from a single employer exceeded $150,000, the rule applies to your 2026 catch-up.
- Confirm your plan has a Roth source. If not, ask your benefits team when one will be added.
- Rebalance your withholding. Roth catch-ups raise your current-year tax bill; the $8,000 (or $11,250) is no longer pre-tax.
- Revisit your Roth/Traditional mix. A forced Roth catch-up may shift your overall tax diversification — consider whether you still want pre-tax dollars filling the regular $24,500 deferral.
- Coordinate with IRA strategy. Backdoor Roth IRAs, taxable brokerage accounts, and HSAs remain unaffected and may now play a different role in your plan.
The $150,000 threshold will be indexed for inflation in future years, so the population of affected workers will grow more slowly than wage growth alone would suggest. But for the workers it does cover, the practical effect is straightforward: catch-up dollars now build a tax-free bucket instead of a tax-deferred one.
Sources: Internal Revenue Service, Fidelity Investments, Charles Schwab, Vanguard, The CPA Journal