Starting January 1, 2026, new IRS rules for 401(k) catch-up contributions will take effect. These changes require that if certain high-income earners make catch-up contributions, those contributions must be made as Roth deferrals.
What are catch-up contributions?
Catch-up contributions allow eligible participants who are age 50 and older to contribute beyond the standard annual deferral limit for their 401(k) plan.
Age | Annual catch-up limit (2026) | Type |
Ages 50–59 | Up to $8,000 | Standard catch-up limit |
Ages 60–63 | Up to $11,250 | Enhanced catch-up limit |
Ages 64+ | Up to $8,000 | Returns to standard limit |
*The standard IRS deferral limit is $24,500 for 2026. Catch-up limits are subject to change annually by the IRS.
Learn more about catch-up contributions here.
Who is affected by the Roth catch-up rule?
The requirement to make Roth catch-up contributions only applies to participants who meet both of the following conditions:
You are 50 or older during the calendar year.
Your FICA wages (or Social Security benefits), found in Box 3 of your W-2, from the previous calendar year exceeded $150,000 (earned in 2025).
If you earned $150,000 (in 2025) or less and you are eligible to make a catch-up contribution in 2026, you can choose to make catch-up contributions as pre-tax or Roth.
How will you ensure my catch-up contribution is Roth if it is required?
Your plan administrator is responsible for ensuring compliance with the new Roth catch-up rules.
If you are a high-wage earner subject to the Roth catch-up rules and you have elected to make all or a portion of your deferrals pre-tax, the system will automatically manage the switch:
You will continue making pre-tax contributions until you reach the standard annual deferral limit ($24,500 for 2026) in pre-tax deferrals.
Once the standard limit is reached with pre-tax deferrals, all subsequent contributions will automatically switch to Roth (after-tax) to keep you contributing to your 401(k) without interruption.
Example: You are 55 and earned $160,000 in FICA wages in 2025 (meaning you are subject to the catch-up rule). You elect a 10% pre-tax contribution rate for 2026.
Your contributions will be made as pre-tax until you contribute to the $24,500 limit (2026).
After that, your contributions will automatically switch to 10% Roth until you reach your catch-up limit.
If you do not wish to contribute any of your deferrals as Roth contributions, you will have the opportunity to reduce your contribution percentage to zero once you reach your annual deferral limit.
Note that if you are subject to the Roth catch-up rules and are a highly compensated employee (HCE) you may have catch-up contributions even if you do not contribute up to the annual deferral limit. In some cases your regular deferrals may be recategorized as catch-up contributions in order to pass non-discrimination testing. In these cases a correction may be needed (described below).
Tax implications of Roth catch-up contributions
Roth catch-up contributions are made with after-tax dollars— this means that you won’t receive a tax deduction now, but future withdrawals will be tax-free if they meet the requirements to be a qualified Roth distribution.
How corrections are handled
If a high wage earner who is subject to the requirement does not have enough Roth deferrals to cover their catch-up contributions (due to either exceeding the annual deferral limit or due to a testing correction), a correction must be made to bring the contributions into compliance.
Two methods of correction are used for deemed contributions: W-2 amendment or recategorizing the pre-tax deferral to a Roth deferral and issuing a 1099-R (in-plan Roth rollover method). In either case the assets will move from the pre-tax deferral to the Roth deferral account under the plan.
Correction method | When it is used | What happens |
W-2 amendment | If the W-2 has not yet been issued. | The plan will adjust the participant’s W-2 form to recategorize the pre-tax contribution as a Roth contribution before the form is issued. |
In-plan Roth rollover | If the W-2 has already been issued. | A 1099-R form will be issued early in the following year to reflect the re-categorization of the funds. |
These changes may affect your overall retirement and tax planning strategy. We recommend that you consult with a qualified financial or tax advisor to understand how this new mandate impacts your personal situation.
This information is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances. You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein.