Employees age 50 and older who earned more than $150,000 from their employer in the prior year can no longer make pre-tax catch-up contributions to their 401(k) plans. Under final regulations issued by the Treasury Department and the IRS, these higher-paid workers must direct all catch-up contributions into designated Roth accounts using after-tax dollars. The rule, rooted in section 414(v)(7) of the Internal Revenue Code as amended by the SECURE 2.0 Act, carries a sharp penalty for plans that have not yet added a Roth option: affected participants lose the ability to make any catch-up contributions at all.
Why the Roth catch-up mandate hits some plans harder than others
The practical bite of this rule depends on whether a 401(k) plan already includes a qualified Roth contribution program. Under section 1.414(v)-2, if a plan lacks that feature, the permitted catch-up amount for participants subject to the Roth requirement drops to effectively $0. That means a 55-year-old executive earning $200,000 at a company whose plan never offered Roth accounts cannot contribute a single extra dollar beyond the standard elective deferral limit until the plan sponsor adds the Roth feature.
This creates a clear split. Plans that already had Roth accounts in place before the mandate can process the required after-tax catch-up contributions through existing payroll and recordkeeping systems. Plans that must build Roth infrastructure from scratch face a longer implementation timeline, and their high-earning participants sit in limbo during that period. The reasonable expectation is that catch-up contribution volume among high earners will be lower in newly compliant plans than in plans where Roth accounts were already routine, simply because of the friction and delay involved in standing up a new account type.
Final regulations and the amendment deadline gap
Treasury and the IRS published final regulations amending the catch-up contribution rules under IRC section 414(v) in the Internal Revenue Bulletin. The regulations confirm that the Roth catch-up requirement applies operationally even though many plan sponsors have until December 31, 2026, to formally amend their plan documents, a deadline extended through guidance described in Notice 2024-2. That distinction matters: a plan must run Roth catch-up contributions through its payroll system now, regardless of whether the legal paperwork has been updated.
The IRS also publishes annual cost-of-living adjustment tables that set the specific dollar limits for catch-up contributions and the wage threshold that triggers the Roth requirement. Those figures shift each year, so the $150,000 wage line and the catch-up dollar cap are not permanently fixed. Plan administrators need to track the annual COLA limits to apply the correct thresholds for each plan year.
In a separate release, Treasury and the IRS highlighted the new Roth catch-up mandate as part of a broader package of SECURE 2.0 changes, emphasizing that affected plans must treat these contributions as designated Roth amounts and withhold income tax accordingly. The agency summary underscores that failure to follow the Roth requirement for eligible high earners can jeopardize the qualified status of the plan’s catch-up contributions.
Open questions for plan sponsors and participants
Several gaps remain in the public record. No IRS release or regulation package includes data on how many 401(k) plans currently lack a qualified Roth contribution program. Without that number, it is difficult to estimate how many older, higher-paid workers will be locked out of catch-up contributions until their employers update plan features and payroll systems. The absence of aggregate data also leaves policymakers with limited insight into whether the Roth mandate is primarily a compliance burden for a small minority of plans or a widespread disruption across the retirement system.
Another open question is participant behavior. The regulations make clear that eligible workers over age 50 can still choose not to make catch-up contributions at all, even when Roth accounts are available. It remains to be seen whether requiring after-tax contributions for higher earners will reduce overall catch-up utilization, shift savings into nonqualified accounts, or simply change the tax character of retirement savings without materially affecting contribution rates. Plan sponsors will need to monitor participation patterns and consider whether additional education or automatic escalation features are necessary to keep older workers on track for retirement.
Plan administration details also present unresolved challenges. Employers must identify which employees crossed the wage threshold in the prior year, coordinate that information with payroll providers, and ensure that deferral elections are properly coded as Roth catch-up amounts where required. Errors could result in pre-tax catch-up contributions being made for employees who should have been restricted to Roth, raising questions about how to correct those mistakes without harming participants or risking plan qualification. While the regulations outline the basic framework, they leave room for future subregulatory guidance on correction methods and reasonable administrative procedures.
For now, the practical takeaway is straightforward. Employers sponsoring 401(k) plans should confirm whether their documents and systems support designated Roth contributions, update payroll and recordkeeping interfaces to route catch-up dollars correctly, and communicate the new rules clearly to employees who are age 50 or older and above the applicable wage threshold. Participants in that group should review their current deferral elections, understand the tax implications of Roth versus pre-tax contributions, and be prepared for catch-up amounts to appear as after-tax deductions on their pay statements. Until further data and guidance fill in today’s gaps, careful implementation and clear communication remain the best tools for navigating the Roth catch-up mandate.
