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New 401(k) Catch-Up Rules Are Coming in 2026: Here’s What You Need to Know Thumbnail

New 401(k) Catch-Up Rules Are Coming in 2026: Here’s What You Need to Know

Retirement Planning Tax Planning

Beginning January 1, 2026, workers age 50 and older who earned more than a certain amount of W-2 wages in the previous year will be required to make their 401(k) or 403(b) catch-up contributions a Roth (after-tax) instead of pre-tax. The income threshold was originally set at $145,000 and will be adjusted for inflation. Your eligibility will be based on your prior-year W-2 wages (Box 5) from your current employer. If a retirement plan does not offer a Roth option, employees above the income threshold may temporarily lose the ability to make catch-up contributions until a Roth feature is added.

In September 2025, the IRS issued final guidance confirming the 2026 start date (following a two-year delay). For 2026, retirement plans can follow a reasonable and good-faith approach as they transition to the new rules, but most plans will still need to enforce the Roth-only catch-up requirement starting that year. Formal compliance with all technical regulations begins for plan years starting after December 31, 2026.

What is a Roth Plan?

Before we begin, let’s start by defining what a Roth Plan is.  A Roth plan is a type of retirement account, such as a Roth IRA or Roth 401(k), that allows you to contribute money you have already paid taxes on, and then enjoy tax-free growth and tax-free withdrawals in retirement. Unlike traditional retirement accounts, you do not get a tax deduction up front, but the trade-off is that all future qualified withdrawals—both contributions and investment earnings—can be taken out tax-free as long as you meet basic rules, such as being at least age 59½ and having the account open for at least five years. Roth plans are especially appealing to people who expect to be in a higher tax bracket later in life, since they allow you to lock in today’s tax rate and avoid taxes on your retirement income down the road.

How this new rule impact Employees vs. Self-Employed individuals

Regular employees (W-2)

If your prior-year W-2 Box 5 from your current employer exceeds $145,000 then your 401(k)/403(b) catch-up must be a Roth beginning in 2026. If your plan does not offer a Roth option, you cannot make catch-up contributions until the plan adds a Roth feature (plans may still allow catch-ups for those below the threshold).

If you are below the income threshold then you can keep making catch-ups pre-tax or Roth, based on your plan’s options. 

Self-employed individuals (solo 401(k), partners)

If you do not receive W-2 wages from the plan sponsor (e.g., a sole proprietor with only net earnings from self-employment), the Roth-only catch-up does not apply—you may still make pre-tax catch-ups (or Roth, if your plan allows).

If you operate as an S-corporation and pay yourself W-2 wages, the rule can apply if your Box 5 wages exceed $145,000—your catch-up must be a Roth in 2026.

The September IRS ruling—what exactly changed?

In September 2025, Treasury and the IRS published final regulations that:

  • Confirmed the mandatory Roth-only treatment for high earners’ catch-ups begins in 2026.
  •  Clarified how to measure wages (use W-2 Box 5 from the plan sponsor; allowed certain aggregation in limited circumstances), and added correction and de minimis relief (e.g., small pre-tax amounts that should have been Roth may not require correction).
  • Explained that for 2026, plans may operate under a reasonable, good-faith interpretation of the statute/proposed rules; but full regulatory compliance generally applies for taxable years beginning after December 31, 2026.

“Super” catch-ups for ages 60–63

SECURE 2.0 also adds an enhanced catch-up for participants age 60–63 (150% of the standard age-50 catch-up for that year). That feature continues, but if you are over the wage threshold in the prior year, those enhanced catch-ups must also be Roth in 2026.

Planning Considerations for 2025 and 2026

For employees

  • Track your 2025 W-2 Box 5. If you’ll be over the indexed threshold, set your 2026 catch-up to Roth (and confirm your plan offers Roth).
  • Confirm payroll readiness. Some recordkeepers will auto-switch catch-ups to Roth for affected employees; others require an employee election.
  • Be mindful of the tax trade-offs. Roth catch-ups mean tax now, tax-free later—which can be attractive if you expect higher future tax rates or desire more tax-diversified retirement income.

For self-employed individuals

  • No W-2 wages?  The Roth-only mandate doesn’t apply—you can keep using pre-tax catch-ups (or Roth) in your solo 401(k).
  • S-Corp owners: If your 2025 W-2 wages from your S-Corp will exceed the threshold, plan on Roth catch-ups in 2026.
  • Cash-flow & estimated taxes. Roth catch-ups do not reduce current-year taxable wages—adjust Federal withholding and quarterly tax payment estimates accordingly.

In Summary

The Roth-only catch-up requirement is one of the most meaningful retirement plan changes to come out of SECURE 2.0, and it will affect many high-earning workers beginning in 2026. While the rule adds a layer of complexity—especially for employers and payroll systems—it also creates a tax advantaged opportunity. For many, shifting catch-up dollars to Roth can strengthen long-term tax diversification, reduce uncertainty around future tax brackets, and provide more flexibility in retirement income planning.

With hat said, the impact will differ depending on your situation. Employees who cross the wage threshold of $145,000 will want to prepare for higher current-year taxes, while self-employed individuals may experience little to no change.  Plan sponsors and recordkeepers also have work to do to ensure Roth features are available and properly administered before the deadline.

As 2026 approaches, the best course of action is to stay informed, review your withholding and savings strategy, and confirm that your retirement plan elections align with your goals.  If thoughtfully planned for, this change can be more than just a compliance hurdle—it can be a valuable tool for building tax-efficient income in retirement.

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This content is developed from sources believed to be providing accurate information, and provided by Attune Financial Planning. The opinions expressed and material provided are for general information only.  Please consult your financial, tax, and estate planning professional regarding your specific situation.