Your 401(k) catch-up contribution now works differently if you earn more than $150,000, under a change that took effect on Jan. 1, 2026.
Workers aged 50 and older who have relied on pre-tax catch-up deferrals to lower their current tax bill will lose that option entirely.
The shift stems from Section 603 of the SECURE 2.0 Act, which Congress passed in December 2022 but the IRS delayed by two years, from its original January 2024 effective date, through Notice 2023-62.
The provision forces high-earning workers to route all catch-up contributions into Roth accounts, meaning after-tax dollars with no immediate deduction.
The mandate applies to 401(k), 403(b), and governmental 457(b) plans, creating an immediate tax consequence for millions of workers.
The $150,000 wage threshold determines who loses the pre-tax catch-up option
The rule uses an income test tied to your prior-year W-2 wages reported under the Federal Insurance Contributions Act, CAPTRUST explained.
If your 2025 FICA wages from the sponsoring employer exceeded $150,000, your 2026 catch-up contributions must go into a Roth account.
Roth accounts tend to benefit earlier-career workers earning less, said Olga Ismail, head of retirement plans consulting at Provenance Wealth Advisors, according to CNBC.
We always recommend [Roth] for someone who’s on a low salary, typically the younger working folks.
The Internal Revenue Service raised that threshold from $145,000 to $150,000 on Nov. 13, 2025, when it published the 2026 contribution limits.
Future adjustments will be indexed for inflation, meaning the income cutoff will continue rising alongside wages over time.
Only wages from the employer sponsoring your plan count toward the threshold, excluding spousal income, side jobs, and investment returns, Fidelity reported.
Workers earning less than $150,000 retain full flexibility to direct their catch-ups into either traditional pre-tax or Roth accounts.
Immediate tax hit could reach $3,040 for workers at a combined 38% marginal rate
The lost deduction creates a concrete, near-term cost for every affected worker, and the amount depends on your marginal tax rate.
A worker in the 24% federal bracket contributing the full $8,000 catch-up would face about $1,920 in additional taxes, CAPTRUST’s wealth planning team calculated.
At a combined 38% marginal rate including state taxes, that cost climbs to approximately $3,040 on the $8,000 catch-up contribution.
The take-home pay difference between the old pre-tax catch-up and the new Roth requirement totals roughly $2,560 each year.
The gap widens for workers ages 60 to 63, because the $11,250 super catch-up pushes the immediate tax cost to about $4,275 at the same combined rate.
Plans without a Roth option will block catch-ups entirely for high earners
The mandate creates a compliance problem for employers that have not added a Roth feature, and the consequences fall directly on affected employees.
If a plan does not offer Roth deferrals, workers earning above $150,000 cannot make catch-up contributions at all, CAPTRUST confirmed.
Most plans have already added the feature, with 95.6% of 401(k) plans offering Roth options as of the end of 2024, the Plan Sponsor Council of America found.
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That share rose from 89% in 2022 and 62% a decade earlier, reflecting steady adoption ahead of the mandate.
“Offering Roth as an option has become a best practice the last few years,” and due to the mandate for high earners, “we will continue to see Roth become commonplace,” Hattie Greenan, research director at the Plan Sponsor Council of America, told CNBC in December 2024.
The remaining 4.4% of plans without Roth options will lock out high-earning employees from making catch-up contributions starting Jan. 1, 2026, unless the plan sponsor adds a Roth feature.
Formal SECURE 2.0 plan amendments must be adopted by Dec. 31, 2026 for most calendar-year plans.
Employer match contributions remain pre-tax, regardless of the Roth mandate
One detail that often confuses workers is how this rule affects employer matching contributions, and the answer provides some clarity for savers.
The employer match on catch-up contributions remains pre-tax, even when the employee’s catch-up is mandated into a Roth account, CAPTRUST confirmed.
The tax treatment change applies only to the employee’s own contribution, leaving the employer’s side of the equation untouched by the mandate.
Payroll systems must now track employee wages against the $150,000 threshold and automatically designate qualifying catch-ups as Roth, Larson Gross noted.
The IRS designated 2026 as a “reasonable good faith” compliance period, giving employers limited flexibility to correct errors before stricter enforcement begins on Jan. 1, 2027.
The long-term case for Roth catch-ups depends on future tax rates in retirement
The forced Roth treatment costs money now, but qualified Roth 401(k) withdrawals in retirement are entirely tax-free, and Roth accounts have no required minimum distributions, Fidelity noted.
CAPTRUST’s wealth planning team projected that $8,000 in annual contributions over five years, $40,000 in total, would grow at a 5% rate over 10 years to approximately $81,178.
Under Roth treatment, all gains and withdrawals from that balance would be available without any federal tax liability in retirement, the team calculated.
The mandate stops at the workplace plan line. SEP IRAs, SIMPLE IRAs, and traditional or Roth IRAs all fall outside its scope, Eric Bronnenkant, head of tax at Edelman Financial Engines, confirmed. This means high earners who want a pre-tax catch-up still have channels open, just not inside their 401(k), 403(b), or 457(b).
Related: Americans using Roth IRA rule are leaving thousands on the table
