On September 16, 2025, the Department of the Treasury ("Treasury") and the Internal Revenue Service ("IRS") issued final regulations regarding the provisions of the SECURE 2.0 Act of 2022 ("SECURE 2.0") that relate to catch-up contributions made by participants in Section 401(k), 403(b), and governmental 457(b) plans. The final regulations provide much-awaited guidance, addressing key questions that employers and plan administrators identified after the publication of the proposed regulations in January (described in our prior alert).
In Parts I and II below, we summarize how the final regulations resolved key questions raised by the SECURE 2.0 catch-up contribution changes. Part III addresses applicability dates. Despite the late date, the final regulations do not extend the administrative transition period from Notice 2023-62. This means that compliance with the mandatory Roth catch-up contribution requirement is generally required effective January 1, 2026. However, the final regulations do provide some relief for reasonable good faith compliance through January 1, 2027, as described below.
Part I – Mandatory Roth Catch-Up Contributions
Section 603 of SECURE 2.0 generally requires that catch-up contributions for employees with more than $145,000 in prior year FICA wages from the "employer maintaining the plan" be designated as Roth contributions, beginning as soon as January 1, 2026.
Q&A-1 – Can an employee's prior-year FICA wages from multiple employers be aggregated to determine if the employee is subject to the Roth catch-up requirement?
Yes, in certain cases. In general, the Roth catch-up requirement applies to an employee with prior-year FICA wages (Social Security Wages reported in Box 3 of Form W-2) in excess of $145,000 (as indexed) from the employee's common law employer, without regard to wages from any other employer within the controlled group. However, a plan's terms may provide for the "aggregation" of wages from the employee's common law employer and (1) one or more other employers using a common paymaster under section 3121(s) of the Internal Revenue Code ("Code"), or (2) one or more other employers that are members of the same controlled group. If some, but not all, related employers will be aggregated, the regulations appear to require that the employers to be aggregated be individually identified in the plan document. Similar aggregation rules are available in the calendar year of an asset purchase, and would allow a successor employer to take into account wages paid by the predecessor employer.
Q&A-2 – Can a plan that allows employees to make a "separate" catch-up contribution election provide for deemed Roth catch-up elections?
Yes. A plan that provides for separate catch-up contribution elections can apply the deemed Roth catch-up election rules to those designated catch-up contributions at the time they are made. If those contributions are later recharacterized as "regular" contributions, they would retain their Roth contribution status.
Q&A-3 – Can a plan that provides for "spillover" catch-up contributions apply the deemed Roth catch-up election to the spillover amount, without regard to any prior Roth contributions?
Yes. A plan that uses a spillover election may provide that the deemed Roth catch-up election will apply either (1) once the employee's year-to-date pre-tax deferrals reach the annual limit, or (2) once the employee's year-to-date aggregate (pre-tax and Roth) deferrals exceed the annual limit (although this alternative may raise additional complexities where corrections are required).
Q&A-4 – What requirements apply when implementing deemed Roth elections?
Use of the deemed Roth election is contingent on the employee having an effective opportunity to make a different election. The IRS did not provide a sample notice or require specific content, but referenced existing rules that take into account all the relevant facts and circumstances, including the adequacy of notice of the availability of the election, the period of time during which an election may be made, and any other conditions on elections.
In addition, plans must stop the deemed election within a reasonable period of time after the employee ceases to be subject to the Roth catch-up requirement or an amended Form W-2 is filed or furnished to the employee indicating that the employee is not subject to the Roth catch-up requirement. Roth contributions made before the end of that "reasonable period of time" do not need to be recharacterized as pre-tax contributions.
Q&A-5 – Is a plan required to provide for deemed Roth elections to use the amended Form W-2 or in-plan Roth rollover methods of correction?
Yes. A plan must provide for deemed Roth elections in order to use the Form W-2 or in-plan rollover methods of correction. The same correction method must apply to similarly-situated employees (but may not be based on investment returns). The in-plan Roth rollover correction method is not limited to plans that otherwise allow in-plan Roth rollovers (but the correction method must be reflected in the plan document). Both the Form W-2 and in-plan Roth rollover corrections are subject to rules regarding the determination of earnings and, in the case of an in-plan Roth rollover, application of the five-year Section 72(t) "recapture" rule.1
Q&A-6 – What is the deadline for using the amended Form W-2 or in-plan Roth rollover correction methods?
To use the Form W-2 (if available) or in-plan Roth rollover correction methods, plans must generally correct failures relating to a statutory limit by the end of the taxable year following the year the contribution was made and by the end of the plan year following the year the contribution was made for failures relating to an employer-provided or ADP limit. However, plans must still comply with the otherwise applicable – and in most cases, earlier – correction deadlines that have other tax consequences. For example, if the deferral is a catch-up contribution because it exceeds the Code section 401(a)(30) deferral limit, the applicable correction deadline to distribute the deferral is April 15 of the calendar year following the calendar year for which the deferral was made.
Q&A-7 – Are there any situations in which mandatory Roth catch-up failures do not need to be corrected?
Yes. There are two situations where correction is not required: (1) if the pre-tax deferrals that should have been Roth do not exceed $250, and (2) if the employee's FICA wages are determined to exceed the applicable threshold (e.g., $145,000) on account of adjustments made after the correction deadline.
Q&A-8 – How does a dual-qualified Puerto Rico plan comply with the Roth catch-up requirement?
Where a plan is qualified under both the Internal Revenue Code and Puerto Rico Code (a "dual-qualified plan"), the final regulations generally treat the Roth catch-up requirement as satisfied with respect to employees subject to the PR Code until the PR Code is amended to provide for designated Roth contributions.
Q&A-9 – Does the Roth catch-up contribution requirement impact special catch-up contributions under 403(b) plans or governmental 457(b) plans?
For 403(b) plans, catch-up amounts are applied first to the special catch-up and then to the age 50 catch-up. Therefore, the special catch-up may always be pre-tax and only age 50 catch-up amounts in excess of the special catch-up limit would be subject to the Roth requirement.
Similarly, for governmental 457(b) plans, the special catch-up may always be pre-tax and only contributions made in excess of that limit, which would be age 50 catch-up contributions, must be Roth contributions.
Q&A-10 – Is a plan required to provide for Roth contributions to comply with the mandatory Roth catch-up requirement?
Generally, no. If the plan does not provide for Roth contributions (a qualified Roth contribution program), then a catch-up eligible participant who is subject to the Roth catch-up requirement will not be permitted to make catch-up contributions. The final regulations provide nondiscrimination (benefits, rights, and features) testing relief with respect to this scenario.
Part II – Increased Limits for Catch-Up Contributions
Section 109 of SECURE 2.0 allows plans to apply an increased catch-up contribution limit to employees attaining age 60 through 63 during a calendar year ("super catch-up" contributions), beginning January 1, 2025. Section 117 of SECURE 2.0 provides a higher regular catch-up limit for certain small SIMPLE plans, beginning January 1, 2024.
Q&A-1 – Is a plan amendment required if the document incorporates the catch-up contribution under Section 414(v) by reference?
Yes. Treasury and IRS expect that a plan's terms will be clear as to whether or not the increased catch-up limit applies.
Q&A-2 – If one employer in a controlled group adopts the increased catch-up limit, are all plans maintained by all other employers in the same controlled group required to do the same (the "universal availability" rule)?
Yes. Although the increased catch-up limit is an "optional" SECURE 2.0 change, the preamble to the final regulations clarifies that if one employer in a controlled group adopts the increased catch-up limit, all employers in the same controlled group will be required to do the same, even if they maintain separate plans. However, the preamble states that the "final regulations do not address application of the universal availability requirement before the applicability date of the final regulations."
There are exceptions to universal availability, including that a plan will not fail to satisfy the universal availability rule merely because (a) collectively-bargained employees (and other employees described in Code section 410(b)(3)) are limited or precluded from making catch-up contributions, or (b) employees subject to the Roth catch-up requirement are precluded from making catch-up contributions because the plan does not have a Roth contribution feature.
Q&A-3 – How does the 110% increased catch-up contribution limit under a SIMPLE plan interact with the 150% increase for super catch-ups?
Beginning January 1, 2025, a SIMPLE plan that is eligible to offer the 10% increase to the regular catch-up contribution limit may instead permit employees attaining age 60 through 63 to contribute catch-up contributions up to the super catch-up limit (in lieu of, not in addition to, the 10% increase).
Part III – Applicability Dates
The final regulations incorporate the statutory effective dates under SECURE 2.0, while providing some relief for the rules set forth in the regulations.
Q&A-1 – When are plans required to comply with the final regulations relating to mandatory Roth catch-up contributions, and is there any reasonable, good-faith reliance period?
While the mandatory Roth requirements under the final regulations generally apply to taxable years beginning after December 31, 2026, the statutory Roth catch-up requirement applies for taxable years beginning on or after January 1, 2026. However, prior to 2027, the final regulations allow plans to implement the Roth catch-up provision in accordance with a reasonable, good-faith interpretation of the statutory provisions.
Q&A-2 – When are plans required to comply with the final regulations relating to the increased catch-up contribution limits, and is there any reasonable, good-faith reliance period?
The super catch-up contribution limits generally apply for taxable years beginning after December 31, 2024, with the regulations effective for taxable years after December 31, 2026. However, the increase to the regular catch-up contribution limit for certain small SIMPLE plans applies for taxable years beginning after December 31, 2023, with the regulations effective for taxable years after December 31, 2026. The regulations do not provide a reasonable, good faith standard for these provisions prior to the applicable effective date.
Q&A-3 – Are there any special applicability dates?
Yes, for the mandatory Roth catch-up contribution requirement. For a plan maintained by one or more collective bargaining agreements, the Roth catch-up requirement applies with respect to contributions in the first taxable year after the later of December 31, 2026, or the date on which the last collective bargaining agreement related to the plan that is in effect on December 31, 2025 terminates (determined without regard to any extension of those agreements). The final regulations also provide that a multiemployer plan is deemed to satisfy the mandatory Roth catch-up provision until that applicability date.
In the case of a governmental plan, the Roth catch-up requirement applies with respect to contributions in taxable years beginning after the later of the first taxable year beginning after December 31, 2026, or the first taxable year beginning after the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins after December 31, 2025.
Q&A-4 – When must plans be amended to reflect these new rules?
Generally, plans must be amended by December 31, 2026.2 The final regulations also clarify that an amendment that applies mid-year is not a prohibited change to a safe harbor 401(k) plan as described in Notice 2016-16.
Observations and Next Steps
While the final regulations clarify a number of issues relating to catch-up contributions, challenges remain as employers, recordkeepers, and payroll providers work to make decisions about how to apply the new rules beginning in 2026. Given the complexity, coordination among employers and their counsel, recordkeepers, and payroll providers is essential. Plan sponsors will need to amend their plan documents to reflect plan operations (including certain requirements set forth the final regulations). Participant communications should be carefully crafted to ensure employees understand the contributions available to them.
Footnotes
1 The five-year recapture rule generally provides that amounts included in an in-plan Roth rollover are subject to the Section 72(t) additional tax if they are distributed within the five taxable years following the taxable year of the rollover unless an exception under Section 72(t) applies.
2 Plans maintained pursuant to one or more collective-bargaining agreements must be amended by December 31, 2028, and governmental plans must generally be amended by December 31, 2029. The final regulations also clarify that an amendment that applies mid-year is not a prohibited change to a safe harbor 401(k) plan as described in Notice 2016-16.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
