The Roth Catch-Up Mandate Is Here. Is Your Plan Ready?

AUTHOR
Stargret Thompson | QPA, ERPA, Retirement Plan Consultant | Stargret joined Nydia Retirement Solutions in 2001 bringing over 15 years of pension administration experience. Her technical expertise and proactive approach to customer service have been invaluable assets to the defined contribution team and the clients they serve.

 

Since January 1, 2026, participants age 50 and older who earned more than $150,000 in the prior year have faced new rules on how they can make catch-up contributions to their 401(k).

If your organization sponsors a 401(k) plan and has employees who earn over $150,000 a year, this change affects you directly. The SECURE 2.0 Act introduced a provision, commonly called the Roth catch-up mandate, that took effect on January 1, 2026. Here’s what you need to know.

$150K — Prior-year wage threshold that triggers the Roth catch-up mandate

What exactly changed?

Under the new rules, any participant who is age 50 or older in 2026 and earned more than $150,000 in the prior year (2025) is classified as a Highly Paid Individual, or HPI. These participants can no longer make catch-up contributions on a pre-tax basis. Instead, every dollar of their catch-up contribution must be directed into a Roth 401(k) account.

To be clear: HPIs can still defer pre-tax up to the regular annual limit. The change only applies to the catch-up portion, the extra amount available to those age 50 and above. That piece must now be funded as a Roth deferral.

Who is impacted?

Three-part test. All three must be true:

• The participant is age 50 or older in 2026 (they attain age 50 during the plan year)
• The participant earned more than $150,000 in wages during 2025
• The participant is making or intends to make catch-up contributions to the plan

The good news for plan sponsors: you already have the data you need. Your 2025 employee census tells you exactly who crossed the $150,000 threshold. Cross-reference that against employees turning 50 in 2026, and you have a clear list of affected participants.

What if your plan does not offer a Roth option?

If your plan does not currently allow Roth 401(k) deferrals, HPIs are unable to make any catch-up contributions at all. They lose access to that additional savings opportunity entirely, which can create frustration and potential liability. The solution is a plan amendment to add a Roth deferral feature.

Adding a Roth 401(k) option to your plan is not complicated, but it does require a formal plan amendment and updates to your recordkeeping and payroll systems. If your plan has not yet been amended, addressing it now is a priority, since the mandate is already in effect.

Action steps for plan sponsors

Your compliance checklist:

• Pull your 2025 census and identify employees earning over $150,000
• Flag anyone turning 50 in 2026 from that group. These are your HPIs
• Confirm whether your plan document currently allows Roth 401(k) deferrals
• If Roth is not available, work with your plan consultant to amend the document as soon as possible
• Notify affected participants about the change and update enrollment materials accordingly
• Coordinate with your payroll provider to confirm catch-up contributions for HPIs are coded as Roth

The Roth catch-up mandate is one of the most operationally significant SECURE 2.0 changes for mid-to-large employers. Plan sponsors who confirm their plan documents, census data, and participant communications are in order protect their highest-earning participants’ retirement savings options and stay ahead of any compliance gaps.

Questions about whether your plan is ready for the Roth catch-up mandate? Reach out to a retirement plan consultant to review your options.