Secure 2.0 & Year-End
If you have a 401K Plan - What you need to know heading into 2026
Roth Catch-Up Mandate for Highly Paid Individuals Effective 1/1/2026.
Beginning January 1, 2026, employees who are age 50 or older (eligible for catch-up contributions), and have FICA wages exceeding $150,000 (indexed for inflation) in the prior calendar year will be required to make all catch-up contributions on a Roth (after-tax) basis.
It is the responsibility of you as an employer and your financial advisor/record keeper to ensure that your participants comply.
Read the details below for more information on what is changing and how PremierNow can help you be prepared.
Roth Catch-Up Mandate Effective 1/1/2026
Recent legislative changes under the SECURE 2.0 Act mean that, starting in 2026, employees aged 50 or older who earned more than $150,000 (indexed for inflation) in FICA wages in the previous calendar year will be required to make all catch-up contributions as Roth contributions. This is a significant shift from previous rules that allowed catch-up contributions to be either pre-tax or Roth.
Key Points:
- This change applies to 401(k), 403(b), and governmental 457(b) plans that allow catch-up contributions.
- Employees earning $150,000 or less in the prior year may continue to make catch-up contributions on a pre-tax or Roth basis (if both are permitted under the plan).
- Plan sponsors must ensure their payroll systems and deferral elections are updated to properly distinguish Roth catch-up contributions for affected employees beginning in 2026.
If you have a 401K plan, you need to first identify the employees impacted with a report.
PremierNow has made a report available called Deferred Comp Highly Paid Individuals Report to identify Highly Paid Individuals (HPI) based on prior year earnings or override settings in the Employee Benefit Plan screen.
Access the report by going to REPORTING> CLIENT REPORTS.
You can then determine if any action is needed and you can discuss with them how best to handle their 401k deferrals for 2026.
Please note that the wages to be analyzed on are the SOCIAL SECURITY WAGES based on current IRS guidelines. The gross wages will also be included in the report for your reference.
Simple IRAs
If you have a Simple IRA plan and over 25 employees, you have already received an email from us asking to confirm the limits for your plan. It’s important to note that our system is setup with the Secure 2.0 limits for plans that have 25 employees or LESS! This is a conversative approach as it is easier to give money back to someone who over contributed than take money from someone. We have seen multiple clients who have more than 25 employees confirm with their financial advisors and recordkeepers that they are using the limits for 25 employees or LESS as well, so it is important you confirm what your limits are! Premier cannot advise on what limits to be using.
Work with your financial advisor / record keeper.
It is the responsibility of you and your financial advisor to determine best steps to ensure compliance.
Wait, what is Secure 2.0?
SECURE 2.0 is a comprehensive update to U.S. retirement law that aims to improve retirement savings for workers by making it easier to save, expanding plan eligibility, offering more flexibility in how savings can be accessed, and providing incentives for employers to offer retirement plans. Some provisions are already in effect, while others will phase in over the next couple of years. This page is reserved for current updates relevant to payroll.
Before 2025
For details on provisions that were already put into before 2025, see our guide from November 2024.
April 2025: Deferred Compensation Catch-Up Limits
This provision allows for catch-up contributions based on age, ensuring employees can save more for retirement as they approach key milestones. isolved has already integrated this change into our system. Read the details here.
What you need to know for 2025 Year-End
Roth Catch-Up Mandate Effective 1/1/2026
Recent legislative changes under the SECURE 2.0 Act mean that, starting in 2026, employees aged 50 or older who earned more than $150,000 (indexed for inflation) in FICA wages in the previous calendar year will be required to make all catch-up contributions as Roth contributions. This is a significant shift from previous rules that allowed catch-up contributions to be either pre-tax or Roth.
- Catch-Up Contributions Must Be Roth: Employees over 50 earning above the threshold can only make catch-up contributions as Roth, not pre-tax.
- The Income Threshold: The current threshold is $150,000 in FICA wages, and it will be adjusted for inflation in future years.
- Deemed (Mandatory) vs. Voluntary Roth Catch-Up: Employers must choose whether Roth catch-up contributions will be deemed/mandatory Roth catch-up elections for eligible employees, or allow employees to opt into Roth catch-up contributions voluntarily.
