SECURE 2.0: Are You Prepared for Required Changes in 2026?
The SECURE 2.0 Act includes a mandatory change to retirement plans starting January 1, 2026. This new provision has the potential to significantly impact employers by creating administrative challenges while also offering exciting opportunities to improve employee retirement benefits. To prepare effectively, you must understand the changes, evaluate your current plan rules, and make informed decisions that align with your organization’s goals and workforce needs.
Provision Changes
Catch-up contributions have long been a valuable feature of retirement plans, allowing eligible participants to contribute more to their 401(k), 403(b), or governmental 457(b) plan accounts once they reach certain milestones. These contributions may currently be made on either a pre-tax or post-tax Roth basis, depending on the plan’s design, and include:
- Age 50 Catch-Up Contributions: For participants aged 50 and older.
- Age 60 to 63 Catch-Up Contributions: An additional catch-up provision introduced under SECURE 2.0 for participants in their early 60s.
However, starting in 2026, the rules governing catch-up contributions will change for high earners. Under the new provision, participants earning more than $145,000 in FICA wages in the prior year (adjusted for inflation) will only be permitted to make catch-up contributions to a Roth account within their employer’s plan. This requirement mandates that their contributions be made with after-tax Roth dollars, fundamentally altering how catch-up contributions are treated for them.
Plan Sponsor Options
If your plan currently allows catch-up contributions but doesn’t offer Roth contributions, this new requirement could mean administrative changes, potential compliance risks, and added complexity for your HR and payroll teams. Without a Roth option, participants who exceed the FICA wage limit will not be able to make any catch-up contributions. To ensure your plan remains compliant you will need to decide how to structure your plan. Here are some potential options to consider:
Option 1: Incorporate the Rule as Written
If you choose to incorporate the new rule as written, you will need to allow participants exceeding the FICA wage limits to make catch-up contributions to Roth accounts. This approach requires several administrative steps, including:
- Identifying Eligible Participants: You'll need systems in place to determine which participants exceed the $145,000 FICA wage (adjusted for inflation) threshold based on prior-year earnings.
- Monitoring Deferrals: Plan sponsors must track contributions throughout the year to ensure compliance with annual limits.
- Switching Contributions: Once participants surpass the standard annual limit, their catch-up contributions must be reclassified as Roth contributions.
This option may require upgrades to payroll and recordkeeping systems to handle the added complexity, as well as training for HR and payroll teams. While administratively challenging, this approach allows high-earning employees to continue benefiting from catch-up contributions and supports their ability to save more for retirement.
Option 2: Disallow Catch-Up Contributions for High Earners
Alternatively, you could choose to disallow catch-up contributions for participants exceeding the FICA wage limits. This option still requires ongoing monitoring of participant wages and contributions to ensure that the maximum allowable limits are not exceeded. It’s important to consider that this approach may create frustration among your high-earning employees who are no longer able to take advantage of catch-up contributions. They may see this as being treated unfairly or unequally compared to their colleagues who are still allowed to make these contributions.
Option 3: Disallow All Catch-Up Contributions
You could opt to disallow catch-up contributions entirely for all participants. While this eliminates the need for salary tracking and deferral monitoring, it could negatively impact your employees who rely on catch-up contributions to maximize their retirement savings during their peak earning years. Not allowing them to contribute more than the standard limit may cost them in the long run. Especially if they are trying to make up for earlier years where they couldn’t contribute as much.
Opportunities to Enhance Your Plan
While the SECURE 2.0 Roth provision introduces additional complexity, it also presents an opportunity for you to enhance your retirement offerings. Adding or expanding Roth contributions may provide employees with greater flexibility in how they save for retirement, allowing them to take advantage of tax-free growth and withdrawals. You can also use this change as a chance to educate employees about Roth features and empower them to make informed decisions about their retirement savings strategies.
Your Next Step
To ensure compliance with this new requirement, you should work closely with your payroll providers, recordkeepers, and plan administrators to ensure systems are updated to accommodate the changes. You'll also need to consider how to clearly communicate these changes to participants, ensuring they understand how their catch-up contributions will be treated and the potential tax implications of Roth contributions. For example, Roth contributions are made with after-tax dollars, meaning participants will pay taxes on these amounts upfront, but qualified withdrawals of contributions and gains will be tax-free in retirement.
Whether you choose to incorporate the rule as written, disallow catch-up contributions for high earners, or eliminate catch-up contributions altogether, the decision should be guided by a careful assessment of your workforce’s needs and your organization’s goals. By addressing these changes proactively, you can turn this challenge into an opportunity to improve your retirement plan and support your employees’ financial well-being.
This blog is up to date as of October 2025 and has not been updated for changes in the law, administration or current events.
