The SECURE 2.0 rule that makes high earners’ catch-ups Roth
Updated October 2026
SECURE 2.0 (section 603) added section 414(v)(7) to the tax code: an employee whose prior-year Social Security wages from the employer sponsoring the plan exceeded the threshold may make catch-up contributions only as designated Roth contributions. IRS Notice 2025-67 raised the threshold from $145,000 to $150,000, applied to 2025 wages for 2026 catch-ups; it is indexed after that.
The rule applies to 401(k), 403(b) and governmental 457(b) plans, not to IRAs, SEP IRAs or SIMPLE IRAs. The IRS administrative transition period ended December 31, 2025, so plans must apply the rule to 2026 contributions. Final regulations (IR-2025-91, September 15, 2025) generally apply from 2027; for 2026 plans may follow a reasonable, good-faith reading of the statute. A plan with no Roth option cannot accept catch-ups from affected employees, and the catch-up limits stay $8,000 at 50 or older and $11,250 at ages 60 through 63.
Extra tax this year = 2026 federal tax on your wages minus tax on wages less the catch-up. Roth value later = catch-up × (1 + return)years, tax-free. Pre-tax value later = catch-up × (1 + return)years × (1 − retirement tax rate), plus the tax you saved, invested at the same return. The comparison is fair only if the pre-tax saver actually invests the tax saving.
Worked example (default). Age 55, single, $180,000 of wages, $8,000 catch-up, 12 years at 6%, 22% tax rate in retirement. Roth costs $1,920 more tax now (24% bracket). After 12 years the Roth catch-up is worth $16,098 tax-free; the pre-tax version would be worth $16,420 after tax, counting the invested $1,920. The $322 gap is the value of the 2-point drop from 24% to 22%, which is what the rule takes away.
The test uses Social Security wages, Form W-2 box 3, from the employer that sponsors the plan, for the prior year. Box 3 includes your pre-tax 401(k) deferrals, so it is often higher than box 1 (federal taxable wages), and someone with $140,000 in box 1 plus $15,000 of deferrals has $155,000 in box 3 and is covered. Box 3 stops at the Social Security wage base ($176,100 in 2025, $184,500 in 2026), which does not matter for a $150,000 test. For 2027 the Social Security wage base rises to $192,300 (Social Security Administration, announced October 14, 2026). For the tax estimate, enter your expected 2026 taxable wages.
Twelve years at 6%; retirement tax rate 22% except the last row (12%). Values are for one year’s catch-up.
| Saver | 2026 catch-up | Roth required? | Extra tax now if Roth | Roth value later | Pre-tax value later, after tax |
|---|---|---|---|---|---|
| Age 52, 2025 FICA wages $140,000 | $8,000 | No (choice) | $1,920 | $16,098 | $16,420 |
| Age 55, $180,000, single (default) | $8,000 | Yes | $1,920 | $16,098 | $16,420 |
| Age 61, $200,000, single | $11,250 | Yes | $2,700 | $22,637 | $23,090 |
| Age 63, $320,000, married | $11,250 | Yes | $2,700 | $22,637 | $23,090 |
| Age 58, $240,000, married, retires to 12% bracket | $8,000 | Yes | $1,760 | $16,098 | $17,707 |
The Roth catch-up costs the most when today’s bracket is well above the expected retirement bracket, as in the last row. The first saver is below the line and may still choose either kind.
Only the catch-up portion is affected. Your regular $24,500 of deferrals can still be pre-tax. Employer matches are not catch-up contributions. Roth money in a 401(k) has had no required minimum distributions since 2024 and diversifies the tax treatment of your savings, which has value if future rates rise.
New hire. If you had no 2025 wages from your current employer, there are no prior-year FICA wages to test, so the rule does not apply to that plan in 2026. Two employers. Each plan looks only at wages from its own sponsor (plans may combine wages from certain related employers). Plan without Roth. Affected employees lose the catch-up in that plan entirely. Age 60-63. The $11,250 catch-up is available only in the years you turn 60, 61, 62 or 63; at 64 it drops back to $8,000. Self-employed. Self-employment income is not FICA wages, so a solo 401(k) owner is not covered. Deemed Roth. Many plans automatically treat an affected employee’s catch-up as Roth; check your pay stub rather than assume it went in pre-tax.
It uses 2026 federal brackets only and ignores state income tax, which can tilt the result either way. It assumes a steady return and one retirement tax rate, and it does not consider the Roth five-year rule, Medicare IRMAA in retirement, or estate planning. Ask your plan administrator how your plan applies the rule, and talk to a tax adviser if you are deciding whether to keep making catch-ups at all.