Important Catch-Up Contribution Changes on the Horizon
As we move into the new year, plan sponsors and advisors should be mindful of two significant regulatory changes affecting catch-up contributions under qualified retirement plans. These updates—one effective in 2025 and another in 2026—may require advance planning, employee communications, and payroll system updates to ensure compliance and smooth implementation.
Super Catch-Up Contributions Begin in 2025
Effective January 1, 2025, the SECURE 2.0 Act introduces an enhanced “Super Catch-Up” contribution opportunity for participants nearing retirement.
Employees who are ages 60 through 63 at any time during the plan year will be eligible to make catch-up contributions of up to 150% of the standard annual catch-up limit. For the 2025 and 2026 plan years, this increased limit equates to $11,250, allowing eligible participants to significantly accelerate retirement savings during these critical pre-retirement years.
Once a participant reaches age 64, the catch-up contribution limit will automatically revert to the standard catch-up limit applicable for that year. Plan sponsors are encouraged to proactively communicate this expanded savings opportunity to eligible employees to help them take full advantage of the provision.
Mandatory Roth Catch-Up Contributions for Highly Paid Individuals in 2026
A second, and more operationally impactful, change takes effect January 1, 2026. Under new IRS rules, certain higher-paid employees will be required to make all catch-up contributions on a Roth (after-tax) basis.
Who is affected?
Employees with more than $150,000 in FICA wages (reported in W-2, Box 3) during the 2025 calendar year will be classified as Highly Paid Individuals (HPIs) for the 2026 plan year. These individuals will no longer be permitted to make pre-tax catch-up contributions; all catch-up deferrals must be designated as Roth beginning in 2026.
Who is not affected?
Employees who do not exceed the $150,000 FICA wage threshold may continue to elect either pre-tax or Roth catch-up contributions. In addition, self-employed individuals and partners are not subject to this rule, as they do not have FICA wages and therefore are not considered HPIs for this purpose.
Action Items for Plan Sponsors
With these changes approaching, plan sponsors should begin preparing now. Payroll systems and deferral election processes will need to be reviewed and updated to ensure proper identification of HPIs and accurate handling of Roth catch-up contributions in 2026. Clear employee communication will also be critical to avoid confusion and ensure timely compliance.
For your reference, please view the updated retirement plan contribution limits for 2026. As always, please coordinate with your plan advisor, recordkeeper, and payroll provider to confirm readiness for these upcoming changes.
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