Secure 2.0 Catch-Up Contribution Changes: What Employers Need to Know

The SECURE 2.0 Act introduced several retirement plan changes designed to encourage retirement savings and provide additional opportunities for employees nearing retirement age to increase their contributions. One of the most significant changes affects catch-up contributions and requires certain employees to make those contributions on a Roth basis. There is also a higher catch-up contribution limit for employees who are ages 60 through 63.

These changes affect both retirement plan administration and payroll, so employers should make sure their systems and processes are ready. Employees affected by the new Roth requirement may also have questions about how the change will affect their contributions and take-home pay.

 

What Are Catch-Up Contributions?

Catch-up contributions are additional elective deferrals that may be made by employees who attain age 50 or older by the end of the calendar year. These contributions allow employees nearing retirement to contribute above the standard annual deferral limits applicable to 401(k), 403(b), and governmental 457(b) plans.

Historically, participants could generally elect to make these contributions on either a pre-tax or Roth basis, depending on the options available under their employer's plan.

 

Enhanced Catch-Up Contributions for Ages 60-63

SECURE 2.0 also increased catch-up contribution opportunities for employees in the years they reach ages 60, 61, 62, or 63 (sometimes referred to as a super catch-up)

For 2026:

• Employees age 50 and older (who do not attain ages 60–63 during 2026) may make standard catch-up contributions of up to $8,000.
• Employees attaining ages 60, 61, 62, or 63 during the calendar year may contribute up to $11,250 through the enhanced catch-up contribution if permitted by their employer plan

This gives employees approaching retirement an opportunity to put additional money into their employer-sponsored retirement plan.

 

Mandatory Roth Catch-Up Contributions Beginning in 2026

Beginning January 1, 2026, employees whose prior-year FICA wages (W-2 Box 3) from the employer sponsoring the plan exceed the applicable indexed threshold (for 2026, the threshold is $150,000) must make all catch-up contributions on a Roth basis. The $150,000 threshold is indexed for inflation and applies to the employee's prior-year wages.

This means catch-up contributions will be made with after-tax dollars and will no longer reduce current taxable income. This does not mean the employee must make all retirement contributions as Roth contributions. The requirement applies only to catch-up contributions. Regular elective deferrals may still be made on a pre-tax basis if permitted by the plan.

Employees who did not exceed the applicable wage threshold are not subject to this requirement and may continue making catch-up contributions under the options available within their employer's plan.

 

IRA Catch-Up Contributions

SECURE 2.0 also modified IRA catch-up contribution rules. Historically, individuals age 50 and older were eligible for a fixed $1,000 IRA catch-up contribution. That amount is now indexed for inflation, increasing to $1,100 for 2026, with the potential for future increases based on cost-of-living adjustments.

While IRA contributions are made outside employer-sponsored plans, employees may have questions regarding the updated limits.

 

What Should Employers and Payroll Teams Do?

The new rules create a few areas employers should review before processing 2026 catch-up contributions:

1. Identify affected employees. Review payroll records to determine which employees are eligible for catch-up contributions and which may be subject to the Roth requirement based on their prior-year FICA wages.
2. Confirm plan and payroll capabilities. Coordinate with your retirement plan provider and payroll team to ensure the systems can properly identify affected employees, process Roth catch-up contributions when required, and track both standard and enhanced catch-up limits for employees ages 60 through 63.
3. Communicate with employees. Employees who are required to make catch-up contributions as Roth contributions may see a difference in their take-home pay because those contributions will no longer reduce taxable income in the same way as pre-tax contributions. Providing information ahead of time can help employees understand the change and plan accordingly.
4. Establish a process with the plan provider. Because the rules involve both payroll information and retirement plan administration, employers should make sure their payroll team and retirement plan provider have a clear process for identifying and handling affected employees.

 

AHP Can Help

The SECURE 2.0 catch-up contribution changes add another layer to payroll and retirement plan administration. For employers, the key is making sure the right information is being identified and communicated between payroll, the retirement plan provider, and affected employees.

AHP can assist employers in evaluating payroll processes, coordinating with retirement plan providers, and communicating these changes to employees.

Please contact your AHP representative if you would like assistance evaluating how the SECURE 2.0 catch-up contribution rules may affect your organization.