Major Changes Coming to Catch-Up Contributions

When passed in 2022, the Secure Act 2.0 introduced sweeping reforms to numerous tax issues. On September 16^th, 2025, final regulations on the planned adjustments to catch-up contributions for those participating in 401(k), 403(b), and governmental 457(b) plans were issued to include the addition of a “super catch-up” for those aged 60 to 63 and a change to how those aged 50 and older may designate catch-up contributions.

Beginning in 2025, individuals aged 60 to 63 now possess the ability to make a “super” catch-up contribution on top of the existing regular catch-up contribution. For 2025, this “super” catch-up contribution is set at an additional $3,750 alongside the regular catch-up contribution amount of $7,500 for a total of $11,250.  For future years, the catch-up is coded as limited to the greater of $10,000 or 150% of the regular catch-up limit. Participants aged 64 and up will then go back to the catch-up limit of $7,500. It is important to note this provision is not a requirement for plans that allow catch-up contributions, and it will be up to the plan administrator to choose whether or not to include the provision.

A substantial change to the character of catch-up contributions was included in the final regulations. Previously, the catch-up contribution provision for individuals aged 50 years and above allowed those additional contributions to be made either as Traditional pre-tax or as post-tax Roth, depending on the preference of the participant. Beginning in 2026, high-income earners (defined as those making above $145,000 in FICA wages) will no longer have the choice to designate catch-up contributions as traditional pre-tax. All catch-up contributions will be required to be made as post-tax Roth contributions. This change impacts tax planning as all catch-up contributions will now be subject to income tax in the year they are made. The final regulations have also clarified that the $145,000 wage limit will be indexed with inflation in $5,000 increments in future years.

For most plans, there will be a new requirement to offer a Roth component for plan years starting in 2027. For 2026, if an employer plan does not include a Roth component, no catch-up contributions will be allowed for plan participants! 

There are cases where this new provision does not apply to catch-up contributions for high earners. If one is self-employed and did not earn any FICA wages from a sponsor, they are not subject to Roth requirement and may designate catch-up contributions as Traditional pre-tax. Additionally, the Roth catch-up only requirement does not apply to SIMPLE IRA plans.

The implication of Roth only catch-up contributions means high earners will no longer have the tax benefit of excluding those additional catch-up contributions from current year income. One might ask: if there is no longer the benefit of a current year tax deduction for the contribution, why wouldn’t they simply use additional income to contribute to an after-tax brokerage account? Ultimately, it is important to consider the longer-term tax benefits afforded by a Roth. Earnings in a Roth will continue to grow tax deferred, allowing for greater compounding versus an after-tax account where interest, dividends and gains are taxed on an annual basis. In the end, while the tax benefit afforded to traditional pre-tax contributions is no longer available, the tax-free growth, income and withdrawals afforded by the Roth do outweigh the benefit of simply saving those funds to an after-tax brokerage account. 

As always, call us if you would like more information on how these changes affect your financial journey!

Sources:

https://www.employeefiduciary.com/blog/401k-catch-up-contributions

https://www.federalregister.gov/documents/2025/09/16/2025-17865/catch-up-contributions

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