If your company sponsors a retirement plan, the clock is ticking on an important change from the SECURE 2.0 Act. Starting in 2026, higher-earning participants age 50 and older will no longer be able to make pre-tax catch-up contributions. Instead, those dollars must go into a Roth (after-tax) source.
Here’s what that means for you as a plan sponsor — and how to prepare now.
The rule: Participants age 50+ whose prior-year wages exceed $145,000 (indexed annually) must make their catch-up contributions as Roth.
The timing: The IRS granted a two-year transition period. Enforcement begins with plan years starting in 2026.
The consequence: If your plan does not allow Roth deferrals, affected employees will lose the ability to make catch-up contributions altogether.
Plan Compliance
Staying current with SECURE 2.0 isn’t optional. Employers need to ensure their plans are properly amended and administered.
Payroll + Recordkeeping Integration
This change requires new payroll codes and system mapping to your recordkeeper. Employers must also flag participants who cross the wage threshold each year.
Employee Communication
Participants won’t appreciate surprise changes to their contributions. Proactive communication builds trust and helps employees plan ahead.
Fiduciary Oversight
Documenting your compliance steps and decisions demonstrates fiduciary prudence and protects your organization.
Confirm Roth availability. If your plan doesn’t already offer Roth, you’ll need to add it before 2026.
Coordinate with payroll and recordkeeper. Set up source codes, wage-threshold checks, and testing protocols now.
Amend plan documents. Update your plan to reflect Roth catch-up requirements and record the change in committee minutes.
Educate participants. Draft clear, plain-language notices for all age 50+ employees, with targeted messaging for higher earners.
Test before go-live. Run payroll and contribution tests to avoid errors when the rule takes effect.
While this change is driven by regulation, it’s also an opportunity to revisit your plan design. Adding or enhancing Roth options gives employees more flexibility and control over their tax strategy in retirement. Employers that lean in now can turn a compliance requirement into a participant benefit.
At Castle Rock, we simplify retirement plan compliance so you can focus on your business. As a pooled employer plan (PEP), we handle the fiduciary oversight, administrative details, and plan updates like SECURE 2.0’s Roth catch-up provision. That means less risk, fewer headaches, and more peace of mind for you.
Want to learn more? Schedule a one-on-one “PEP Talk” with our team to see how we can help your business stay ahead of the curve.
Simplifying retirement for all. One plan. Every business.