At a Glance
Section 603 of the SECURE 2.0 Act changed the rules for catch-up contributions to retirement plans. The changes are effective for plan years beginning after December 31, 2025.
Learn about new guidance with respect to catch-up contributions.
Section 603 Changes in Catch-Up Contributions
Under the old rules, catch-up contributions could be made on a traditional (pre-tax) or Roth (after-tax) basis, regardless of the participant’s income. Section 603 of the SECURE 2.0 Act changed this rule for high-income earners, requiring catch-up contributions for individuals with FICA wages above a $145,000 threshold to be made on a Roth basis beginning in 2024.
Under the new guidance there is a two-year transition period for these changes. For plan years beginning in 2024 and 2025, catch-up contributions made by high-income earners will still be allowed on a traditional or Roth basis.
Beginning January 1, 2026, catch-up contributions for high-income earners must be made on a Roth basis. There is no exception for participants who are age 50 or older.
Here are some additional things to keep in mind about catch-up contributions:
- Catch-up contributions are in addition to the regular 401(k) payroll deferral contribution limit for the plan. For example, the 2023 regular contribution limit for 401(k) plans is $22,500. If you are 50 or older, you can make an additional $7,500 in catch-up contributions for a total of $30,000.
- The $145,000 FICA wage threshold for catch-up contributions to be treated as Roth will be increased for Cost of Living Adjustments (COLAs).
- Catch-up contributions are subject to the same withdrawal rules as regular contributions. For example, you cannot withdraw catch-up contributions without penalty before age 59 1/2.
- Additional guidance is needed from the IRS to help employers implement best practices for administering catch-up contributions.
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