Who has to make catch-up contributions on a Roth basis in 2026?

An employee whose FICA wages from the employer sponsoring the plan for the prior calendar year exceeded the Roth catch-up wage threshold must make their catch-up contributions on a designated Roth basis. For catch-up contributions made in 2026 the threshold is 150,000 dollars, measured on 2025 wages, per Notice 2025-67. The requirement was added by section 603 of the SECURE 2.0 Act as section 414(v)(7) of the Code, and it applies to 401(k), 403(b), and governmental 457(b) plans, not to SEP arrangements or SIMPLE IRA plans.

Which wages are used to decide whether the Roth catch-up rule applies?

The test uses section 3121(a) FICA wages, which the final regulations read as the Box 3 Social Security wages on Form W-2, or Box 5 for a Medicare covered employee with no Box 3 wages. The wages are those from the employer sponsoring the plan for the preceding calendar year, and they are measured per employer. Wages from another employer are not aggregated unless a controlled group or common paymaster rule is written into the plan, so an employee with no FICA wages from you last year is not subject this year.

What happens if the plan does not offer a Roth account?

If a plan does not include a designated Roth account, a participant who is subject to the Roth catch-up requirement cannot make catch-up contributions at all, on either a pre-tax or a Roth basis, until the plan is amended to offer Roth. Under section 414(v)(7)(B), once a plan lets any subject participant make a Roth catch-up, it must let every eligible participant make a Roth catch-up.

When does the mandatory Roth catch-up requirement take effect?

Section 603 applies to taxable years beginning after 31 December 2023, but Notice 2023-62 announced a two year administrative transition period covering 2024 and 2025, during which catch-up contributions could still be made pre-tax. That period covered only those two years, so the requirement takes hold for catch-up contributions made in 2026. The IRS finalised the rules in TD 10033, published 16 September 2025, with the regulations effective 17 November 2025 and a general applicability date for contributions in taxable years beginning after 31 December 2026.

How should payroll be set up for the Roth catch-up test?

Derive a single Roth catch-up flag from each catch-up eligible employee prior year Box 3 FICA wages, compared to the current threshold, and carry it per employer. Route the catch-up of flagged employees, including the larger age 60 to 63 amount, to a designated Roth source once deferrals pass the elective deferral limit, which is 24,500 dollars for 2026. Confirm the plan offers Roth, pair any deemed Roth election with a real opportunity to elect otherwise, and run one query before year end for any flagged employee whose catch-up still posted pre-tax so it can be corrected inside the window the regulations allow.

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Who The Rule Reaches How The Test Works The Payroll RecordPublished September 6, 2026

Last year’s payroll already knows who must make their catch-up on a Roth basis this year.

Whether a catch-up contribution must be Roth in 2026 comes down to one figure your payroll already produces: the FICA wages an employee earned from you last year. Above the line the catch-up is Roth, below it the employee still chooses, and the same number you use to fill Box 3 on the W-2 is the number that decides.

Article signals

Audience: Payroll and HRIS owners, benefits and total rewards teams, controllers, the retirement plan committee and the recordkeeper liaison, and the systems people who own the deferral engine, the wage base, and the W-2
Trigger: The two year administrative transition period announced in Notice 2023-62 covered only 2024 and 2025, so the section 603 Roth catch-up requirement takes hold for catch-up contributions made in 2026, and the IRS finalised the rules in September 2025
Published: September 6, 2026
Scope: Any employer that sponsors a 401(k), a 403(b), or a governmental 457(b) plan with a catch-up feature and has employees who earned more than the wage threshold from them last year. SEP arrangements and SIMPLE IRA plans are outside the rule
The shift: Whether a catch-up must be Roth is decided by one figure your payroll already produces, the prior year FICA wages an employee earned from you, measured per employer rather than across a whole career
The artefact to build: A payroll record where each catch-up eligible employee carries a prior year FICA wage figure and a derived Roth catch-up flag, the deferral engine routes the catch-up of flagged employees to a designated Roth source, the plan actually offers Roth, and one query lists every flagged employee whose catch-up still posted pre-tax

The rule reaches people, and payroll already holds what picks them out.

Section 603 of the SECURE 2.0 Act added a new requirement to the retirement plan rules: for certain higher paid employees, the catch-up contribution they make on top of the ordinary limit must be a Roth contribution, made with after-tax money, rather than a pre-tax one. It became section 414(v)(7) of the Code, and by its terms it applied to taxable years beginning after the end of 2023. Almost nobody has felt it yet, because the IRS gave everyone room to get ready.

That room was a two year administrative transition period, announced in Notice 2023-62, and it covered 2024 and 2025 only. During those two years a subject employee could still make a pre-tax catch-up without the plan being treated as out of compliance. The period was not extended. In September 2025 the Treasury Department and the IRS finalised the rules in a regulation, TD 10033, effective in November 2025. So the requirement now applies to the catch-up contributions employees make in 2026, and the finalised detail is what payroll and plan teams have to build against.

Here is the reassuring part, and it is the whole point of this piece. The rule sounds like a plan compliance problem, but the input that decides it is a number your payroll system already produces for every employee, every year. Section 414(v)(7)(A) turns on an employee wages, defined as FICA wages under section 3121(a), for the preceding calendar year, from the employer sponsoring the plan. The final regulations read those FICA wages as the Box 3 Social Security wages on the Form W-2. You compute that figure already. The task is not to gather new data, it is to derive one flag from data you hold and let it steer where the catch-up lands.

The rest of this piece is about doing exactly that well. It walks through who the rule reaches and who it quietly leaves out, how the prior year wage test actually works once you read the finalised regulations, and the payroll record worth building so the right catch-up goes to the right source without anyone having to remember a rule at the moment of a paycheck.

How the test works, and what each answer needs from your systems.

The mechanic is a single comparison. Take an employee FICA wages from you for the prior calendar year, and compare that figure to the Roth catch-up wage threshold. If the wages are above the threshold, the employee catch-up for the current year has to be Roth. If they are at or under it, the employee keeps the choice between pre-tax and Roth. The threshold started at 145,000 dollars and is adjusted for the cost of living each year. Notice 2024-80 kept it at 145,000 dollars for the 2024 wages that governed 2025, and Notice 2025-67 raised it to 150,000 dollars for the 2025 wages that govern 2026. The year matters as much as the number, so carry both together.

Three features of the test decide who is really in scope, and each one is a data rule as much as a legal one. First, the wages are measured per employer. The statute looks at wages from the employer sponsoring the plan, which the regulations tie to the employee common law employer, and it does not add in wages the employee earned somewhere else. So a senior hire who earned a large salary at a prior firm last year, but nothing from you, is not subject this year. Wages from related employers combine only where a controlled group or common paymaster rule is written into the plan. Second, an employee with no FICA wages from you in the prior year is simply not subject, which is a definite answer and not a missing one. Third, the rule covers 401(k), 403(b), and governmental 457(b) plans, and it does not reach SEP arrangements or SIMPLE IRA plans at all.

Two more points catch teams out. The Roth catch-up wage threshold, 150,000 dollars for 2026, sits below the highly compensated employee threshold, which stays at 160,000 dollars. Being subject to the Roth catch-up rule is therefore not the same as being highly compensated, so the HCE list is the wrong list to borrow. And the plan has to offer Roth in the first place. If it does not, a subject employee cannot make a catch-up on any basis until the plan is amended, and under section 414(v)(7)(B), once any subject employee can make a Roth catch-up, every eligible employee must be allowed to as well. The table below sets out the common cases, what the wage picture looks like, whether the rule applies, and what payroll needs to hold to get each one right.

Who the 2026 Roth catch-up rule reaches, what decides it, and what payroll needs to hold for each case. The threshold of 150,000 dollars on 2025 wages is from Notice 2025-67; the per employer measurement, the treatment of a participant with no prior year FICA wages, and the SEP and SIMPLE carve-out are read directly from the final regulations and Notice 2023-62.
The person	The prior year wage picture	Does the Roth rule apply	What payroll needs to hold
A high earner who stayed with you	Prior year Box 3 wages from you above the line, 150,000 dollars for 2025 wages	Yes. The catch-up must be Roth	The prior year FICA wage figure from you and a derived flag set to subject.
Someone hired by you this year	No FICA wages from you in the prior calendar year	No. Not subject this year	An absent prior year wage read as not subject, a rule rather than a blank the system stalls on.
A steady earner below the line	Prior year wages from you at or under the threshold	No. The catch-up may stay pre-tax at the employee choice	The same wage figure, tested against the current year threshold, with the flag left off.
A mid-career joiner from another firm	High wages last year, but from a different employer	Decided only on wages from you, so not subject on the outside wages	Wages kept per employer, with no aggregation unless a controlled group or common paymaster term is in the plan.
A partner or owner with self-employment income	Earnings that are not section 3121(a) FICA wages from the plan sponsor	No. Self-employment income does not trigger the test	A wage figure that reflects FICA wages only, so self-employment earnings do not set the flag.
A subject employee aged 60 to 63	Prior year wages from you above the line, in the higher catch-up band	Yes, and the larger age 60 to 63 catch-up must be Roth as well	The higher catch-up amount routed to Roth, not just the standard catch-up.

Who the 2026 Roth catch-up rule reaches, what decides it, and what payroll needs to hold for each case. The threshold of 150,000 dollars on 2025 wages is from Notice 2025-67; the per employer measurement, the treatment of a participant with no prior year FICA wages, and the SEP and SIMPLE carve-out are read directly from the final regulations and Notice 2023-62.

The 2026 numbers give the test its edges. The elective deferral limit is 24,500 dollars, so a contribution becomes a catch-up only once an employee passes that line. The ordinary age 50 catch-up is 8,000 dollars, and the larger catch-up for employees who reach ages 60 to 63 during the year is 11,250 dollars. For a flagged employee, all of the catch-up must be Roth, including that larger age 60 to 63 amount, which is easy to route in part and miss in part. None of this asks payroll to judge anything at the moment of a paycheck. It asks the deferral engine to know one flag and two boundaries.

The payroll record, read as a governed control.

A worked example makes it concrete. An employee earned 172,400 dollars in Box 3 wages from you in 2025. That is above the 150,000 dollar threshold, so a single derived flag on the employee record reads subject. In 2026 their deferrals run through the year and pass the 24,500 dollar elective deferral limit. From that point the extra is catch-up, and because the flag is set, the deferral engine routes it to a designated Roth source rather than a pre-tax one. If the same employee is in the 60 to 63 band, the larger catch-up follows the same route. Nobody had to remember the rule on payday, because the rule was resolved once, from data, and written into where the money goes.

Here is that logic expressed as a record. The wages that decide the test are held explicitly, per employer, with the prior year and the aggregation basis attached. The threshold is a versioned number that carries the year it applies to. The flag is derived from the two, not typed in. The routing knows the deferral limit and the catch-up amounts. The plan Roth capability is a prerequisite the flow checks. And an exception query at the end names the gaps that would make any of it untrustworthy.

A payroll record shaped for the Roth catch-up test

# Payroll record shaped for the Roth catch-up test
# Names, figures, and dates are placeholders for shape, not real values.

employee:
  employee_id: "E-40917"
  age_as_of_year_end: 58
  catch_up_eligible: true

wages_for_the_test:                    # the one figure that decides it
  employer_sponsoring_plan: "Acme Corp only"
  prior_year: 2025
  fica_wages_box3: 172400.00           # section 3121(a), Form W-2 Box 3
  aggregation_rule: "none"             # per employer, unless plan says otherwise

threshold:
  applies_to_wages_of: 2025
  applies_to_catchup_in: 2026
  roth_catchup_wage_threshold: 150000.00
  source: "Notice 2025-67"

derived:
  roth_catchup_required: true          # 172400 > 150000
  # if fica_wages_box3 were absent -> not subject, not "unknown"

deferral_routing_2026:
  elective_deferral_limit: 24500.00    # section 402(g), 2026
  standard_catchup_50plus: 8000.00     # must be Roth for this employee
  age_60_to_63_catchup: 11250.00       # if in band, also must be Roth
  catchup_source: "designated Roth"    # routed by rule, not by memory

plan_capability:
  offers_designated_roth: true         # prerequisite
  # if false -> a subject employee catch-up limit is 0

election:
  type: "deemed Roth"                  # allowed by the regulations
  effective_opportunity_to_elect_otherwise: true
  recorded_on: 2025-11-20

exception_query:                       # the readiness control, run before year end
  - flagged employee whose catch-up still posted pre-tax
  - subject employee in a plan with no designated Roth source
  - flag computed from a stale or wrong-year threshold
  - catch-up routed to Roth for the standard amount but not the age 60 to 63 amount
  - flag set from taxable pay or plan compensation instead of Box 3 FICA wages

The exception query is what keeps it honest. A flag derived from Box 3 wages cannot silently drift, but a flag copied into a spreadsheet can, so compute it from the wage base and check that no flag came from taxable pay or plan compensation by mistake. Reading a missing prior year wage as not subject, rather than as unknown, keeps a new hire catch-up from being blocked. Confirming the plan offers Roth before 2026 keeps a subject employee from losing the catch-up entirely. And keeping a correction path means a catch-up that posted pre-tax by error can be fixed with a Form W-2 correction or an in-plan Roth rollover inside the window, rather than sitting as a plan failure.

The whole determination runs on prior year FICA wages from a single employer. Above the threshold the catch-up must be Roth, and the deferral engine routes it once deferrals pass the elective deferral limit, which only works if the plan offers a designated Roth account. At or under the line the catch-up may stay pre-tax at the employee choice. The guard keeps the edges honest: a new hire is not subject, wages are not aggregated by default, and a deemed election needs a genuine opt-out.

An implementation checklist.

1.Derive the flag once from prior year FICA wages, per employer. Take the Box 3 Social Security wages each catch-up eligible employee earned from you last year, compare it to the current Roth catch-up wage threshold, which is 150,000 dollars for 2025 wages applying to catch-up contributions made in 2026, and set a single derived flag. Compute it from the wage base you already keep, not from a spreadsheet someone maintains by hand.
2.Route the catch-up of flagged employees to a designated Roth source. Once an employee deferrals pass the elective deferral limit, 24,500 dollars for 2026, the extra is catch-up, and for a flagged employee it has to land in a Roth source. Wire the deferral engine so the split happens by rule, and remember that the larger age 60 to 63 catch-up must go to Roth too.
3.Make sure the plan actually offers Roth before 2026. If the plan has no designated Roth account, a flagged employee cannot make a catch-up at all, on either a pre-tax or a Roth basis, so confirm the plan document and the recordkeeper support Roth and that every subject employee is offered it. Under the statute, once any subject employee can make a Roth catch-up, every eligible employee must be allowed to as well.
4.Give a deemed election a real opt-out. The regulations let a plan treat a flagged employee as having elected Roth for the catch-up, but only where the employee has an effective opportunity to elect otherwise. Present that choice clearly rather than flipping the source in the background.
5.Handle the person who is new and the person who crosses the line. An employee with no FICA wages from you last year is not subject this year, which is a rule and not a gap, and someone whose wages or age change during the year needs the flag recomputed on the correct prior year figure.
6.Keep the wages that decide it per employer. The test looks at wages from the employer sponsoring the plan, so do not add in wages from a prior employer or a related entity unless a controlled group or common paymaster aggregation is written into the plan. One employee, one employer wage figure.
7.Reconcile at year end and keep a correction path. Run a query for every flagged employee whose catch-up still posted pre-tax, and use one of the correction methods the regulations provide, a Form W-2 correction or an in-plan Roth rollover, inside the allowed window, so a miss is fixed cleanly rather than left as a plan failure.

Failure modes, framed so you can avoid them.

Treating a missing prior year wage as unknown rather than as not subject. A new hire with no FICA wages from you last year is simply not subject this year. If the system stalls on a blank instead of reading it as no, it either blocks a legitimate catch-up or quietly guesses.
Aggregating wages across employers by default. The threshold is measured on wages from the employer sponsoring the plan. Rolling in a prior employer wages, or a sister company wages, without a written aggregation rule pulls people over the line who do not belong there.
Forgetting the plan needs a Roth source at all. The quietest failure is a plan with no designated Roth account. A subject employee then cannot catch up on any basis, and a valued benefit disappears for exactly the people most likely to use it, until the plan is amended.
Flipping the source silently. Deeming a Roth election is allowed, hiding it is not. An employee who expected a pre-tax catch-up and finds it taxed, with no clear choice offered, is a trust problem as much as a compliance one.
Missing the larger age 60 to 63 catch-up. For a flagged employee in that band the higher catch-up amount is still a catch-up, so it too must be Roth. Routing only the standard amount to Roth and leaving the extra pre-tax is a partial miss that is easy to overlook.
Reading the wrong wage box. The test is built on section 3121(a) FICA wages, reported in Box 3 of the W-2, or Box 5 for a Medicare covered employee with no Box 3 wages, not on taxable pay, plan compensation, or gross pay. The wrong figure moves the line.
Assuming subject means highly compensated. The Roth catch-up wage threshold sits below the highly compensated employee threshold, so some employees who are not highly compensated are subject, and some highly compensated employees are not. Borrowing the HCE list for this test mislabels both groups.
Leaving correction to plan amendment season. A pre-tax catch-up that should have been Roth is correctable, but the window matters. Waiting until the annual amendment cycle can miss the deadline the regulations set for a clean correction.

What this asks of the data model.

The deciding figure is prior year FICA wages, per employer, held as data. It is the section 3121(a) wage total, the Box 3 amount, from the employer sponsoring the plan for the calendar year before the one in which the taxable year begins, and payroll already computes it for every W-2.
The Roth catch-up flag is derived, not entered. Compare the prior year wage figure to the current threshold and store the result as a single derived field, so it cannot drift away from the wages it depends on.
The threshold is a versioned, indexed number. It began at 145,000 dollars and is adjusted for the cost of living, so the value that applied to 2024 wages, 145,000 dollars, is not the value that applies to 2025 wages, 150,000 dollars. Carry the year with the number.
The elective deferral limit and the catch-up amounts are the routing boundaries. For 2026 the elective deferral limit is 24,500 dollars, the age 50 catch-up is 8,000 dollars, and the age 60 to 63 catch-up is 11,250 dollars, so the engine knows when a contribution becomes catch-up and how much of it must be Roth for a flagged employee.
The plan Roth capability is a prerequisite field. Whether the plan offers a designated Roth account gates the whole flow, because without it a flagged employee catch-up limit is zero.
The election is a governed record with an opt-out. A deemed Roth election is allowed only alongside a real chance to elect otherwise, so store the election, its source, and the opportunity that was given.
Aggregation is an explicit plan choice, not a default. Whether wages from related employers or a common paymaster combine is a written plan term, so the wage figure that feeds the test should carry the aggregation rule that produced it.
Completeness reduces to one query. Every flagged employee whose catch-up posted pre-tax, every subject employee in a plan with no Roth source, and every flag computed from a stale threshold is the exception list, and it can run before year end rather than after a failure.

The evidence to keep.

The prior year FICA wage figure behind each flag, showing the Box 3 amount from the employer sponsoring the plan that the test used.
The derived Roth catch-up flag for each catch-up eligible employee, recorded with the threshold and the year it was tested against.
The deferral routing, showing that the catch-up of each flagged employee posted to a designated Roth source, including the larger age 60 to 63 amount where it applies.
The plan Roth capability, evidencing that a designated Roth account was available to every subject employee before their catch-up was due.
The election records, showing that a deemed Roth election was paired with an effective opportunity to elect otherwise.
The aggregation basis, documenting whether wages from related employers were combined and the plan term that allowed it.
The correction file, showing any pre-tax catch-up that should have been Roth, the method used, and that the fix fell within the allowed window.
The exception query output, ideally empty, listing flagged employees whose catch-up posted pre-tax, subject employees in a plan without a Roth source, and flags computed from a stale threshold.

Questions worth asking in your own review.

Can we produce, for any catch-up eligible employee, the prior year FICA wage figure from us that decides whether their catch-up must be Roth?
Is the Roth catch-up flag derived from the wage base we already keep, or maintained by hand where it can fall out of step?
Does our plan offer a designated Roth account, so a subject employee can still make a catch-up at all?
When we deem a Roth election, do we give the employee a clear and real chance to choose otherwise?
For an employee aged 60 to 63 who is subject, does the larger catch-up amount also route to Roth?
Are we testing on Box 3 FICA wages, or have we borrowed taxable pay, plan compensation, or the HCE list by mistake?
Do we measure wages per employer, and combine across related entities only where the plan says to?
Could we run, today, a list of every subject employee whose catch-up posted pre-tax, and correct it inside the window the rules allow?

What this adds up to.

A rule that sounded like a plan compliance headache turns out to rest on one figure payroll already computes. An employee prior year FICA wages from you, the Box 3 number on their W-2, decide whether the catch-up they make this year has to be Roth. Above the threshold it is Roth, at or under it the employee still chooses, and the whole thing is settled once, from data, rather than judged paycheck by paycheck.

The build that makes it real is small and it pays off in more than one place. Derive a single flag per employer from prior year Box 3 wages, route the catch-up of flagged employees to a designated Roth source once they pass the deferral limit, and confirm the plan offers Roth so no subject employee loses the catch-up. Give any deemed Roth election a genuine opt-out, measure wages per employer, and test on FICA wages rather than on taxable pay or the highly compensated list. Do that and the same wage figure that fills the W-2 also drives a clean, explainable retirement plan operation.

If there is one place to start, run the exception query against your own payroll before the first 2026 pay run leans on the control: every catch-up eligible employee above the threshold whose flag is not set, every subject employee in a plan with no Roth source, and every flag that came from the wrong wage box or a stale year. For a tidy operation that list is short and the fix is a configuration change. For a messy one it is the work, and it is far better found now, at the desk, than found in a corrected W-2 and a plan failure next spring.

Sources.

The rule under section 414(v)(7), the reading of FICA wages as Box 3, the per employer measurement and the no aggregation default, the treatment of an employee with no prior year wages, the deemed Roth election and its required opportunity to elect otherwise, the zero catch-up result for a plan with no Roth account, the correction methods, and the effective and applicability dates were read directly from the final regulations, TD 10033, as a PDF, with the Federal Register browser version linked for readers who prefer it. The 150,000 dollar threshold for 2026, the 24,500 dollar elective deferral limit, the 8,000 dollar age 50 catch-up, the 11,250 dollar age 60 to 63 catch-up, and the 160,000 dollar highly compensated employee threshold were read directly from Notice 2025-67. The two year transition period covering 2024 and 2025, the section 414(v)(7)(B) availability rule, and the SEP and SIMPLE carve-out were read directly from Notice 2023-62, and the 145,000 dollar threshold that held for 2025 was read directly from Notice 2024-80. No embedded posts from X appear here, because no public post on this topic could be verified as current, relevant, and authentic at the time of writing, and an unverified embed is worse than none. Nothing here is tax, benefits, or legal advice for a specific plan or employer. The figures, names, and dates in the worked example and the record are placeholders for shape rather than real values, and how a given plan applies the rule depends on its own document, its recordkeeper, and its payroll systems.