Most coverage of the mandatory Roth catch-up rule treated January 1, 2026 as the finish line. It was not. The IRS final regulations apply to contributions in taxable years beginning after December 31, 2026. All of 2026 has been a transition year in which employers only had to follow a reasonable, good-faith interpretation of the statute. That cushion disappears in about three months — and the wages that determine who is covered in 2027 are being earned right now.
The Lookback Nobody Budgets For
The rule in §414(v)(7) is not based on what you earn in the year you make the catch-up contribution. It is based on the prior calendar year's FICA wages from the employer sponsoring the plan. So your pay from January through December 2026 decides whether your 2027 catch-up must go in as after-tax Roth dollars.
The threshold is indexed. IRS Notice 2025-67 raised it from $145,000 to $150,000 for 2025 wages — the figure governing 2026 catch-ups. Milliman's August forecast projects $155,000 for 2026 wages, governing 2027. That number is a projection, not law; the IRS confirms it after September CPI is final, typically in late October or early November.
It Is Box 3, Not Box 1 and Not Box 5
This trips up people who do the math off a salary figure. The regulations use FICA wages as defined in Code §3121(a) — Box 3 of your Form W-2, Social Security wages. Not Box 1 federal taxable wages, and not Box 5 Medicare wages, despite some commentary saying otherwise.
Two consequences matter if you are near the line:
- Pre-tax 401(k) deferrals do not reduce Box 3. Maxing out your deferral lowers Box 1 but leaves Social Security wages untouched. You cannot defer your way under the threshold.
- Section 125 cafeteria-plan amounts do reduce Box 3. Pre-tax health and dental premiums, health and dependent-care FSA elections, and payroll-deducted HSA contributions are excluded from FICA wages. Someone with a $158,000 salary and meaningful cafeteria-plan elections can land below $155,000 in Box 3.
Box 3 is capped at the Social Security wage base, but that cap sits well above the catch-up threshold, so it rescues no one.
Who Is Outside the Rule Entirely
An individual with no FICA wages from the sponsoring employer in the preceding year is not subject to the requirement at all. That covers employees hired mid-2026 with no 2026 wages from that employer, partners with only self-employment income, and certain state and local government workers outside Social Security. Employers may aggregate wages across affiliated companies, but only if those employers are identified in the plan document — worth checking if you moved between subsidiaries.
Practical Takeaways
- Run your Box 3 year-to-date figure off a current pay stub, not your salary. If you are within a few thousand dollars of $155,000, your 2027 classification is genuinely in play.
- Open enrollment is the lever, not your deferral election. Cafeteria-plan choices made this fall reduce 2026 Box 3 wages; 401(k) deferrals do not.
- If you will be covered, budget the tax now. A projected $8,500 age-50 catch-up in Roth dollars is a larger current-year tax bill, not a deduction.
- Ask whether your plan uses a deemed Roth election. If it does, the reclassification happens automatically once you pass the base deferral limit.
- Errors get harder in 2027. Correction paths exist — distribution, a Form W-2 correction for deemed-election plans, or an in-plan Roth rollover — and failures under $250 are disregarded. But good-faith latitude for interpretive mistakes ends with 2026.
Sources: IRS Notice 2025-67 — 2026 Amounts Relating to Retirement Plans and IRAs; Trucker Huss — The Roth Catch-Up Regulations Are Final; Bryan Cave Leighton Paisner — Final Roth Catch-Up Regulations: Key Takeaways for Plan Sponsors; Ogletree Deakins — IRS Issues Roth Catch-Up Contribution Rules for Highly Paid Participants; Milliman — 2027 IRS Limits Forecast, August