A SECURE 2.0 provision took effect January 1, 2026, requiring high earners 50 and older to make all 401(k) catch-up contributions to a Roth account.
If you’re 50 or older and your 2025 W-2 wages from your employer were more than $150,000, your 2026 catch-up contributions to your 401(k), 403(b), or governmental 457(b) plan must now be made as Roth (after-tax) contributions. The pre-tax catch-up option many high earners used for years is no longer available for this group.
This is SECURE 2.0 Section 603. The rule was originally scheduled for 2024, delayed twice, and finally took effect this year. The IRS issued final regulations in September 2025, with a “reasonable, good-faith” transition period running through 2026 before the regulations formally bind plans for tax years beginning in 2027.
What actually changed?
Beginning January 1, 2026, if your prior-year FICA wages from your current employer exceeded $150,000, all catch-up contributions must be designated as Roth. The threshold was originally $145,000 but was raised to $150,000 by the IRS on November 13, 2025, in Notice 2025-67, the same notice that announced the 2026 contribution limits.
The catch-up amounts are unchanged in structure: $8,000 for ages 50 and older, or $11,250 for the “super catch-up” available to ages 60 through 63 (if your plan adopts it). Only the tax treatment changed. For high earners, that catch-up dollar can no longer reduce current-year taxable income.
What didn’t change?
Your standard $24,500 elective deferral can still be made pre-tax, regardless of income. If you’ve been making the full $32,500, the first $24,500 still goes pre-tax in 2026; only the additional $8,000 is now Roth. The $150,000 test looks only at wages from your current employer; prior or concurrent employers don’t aggregate. Your IRA catch-up ($1,100 in 2026) and SIMPLE IRA catch-ups are unaffected, and the mega backdoor Roth strategy is unchanged.
What if my plan doesn’t offer a Roth option?
If your plan has no Roth feature and you’re subject to this rule, you cannot make catch-up contributions at all in 2026. Larger employer plans have been preparing since 2023 and most have added Roth features, but smaller plans, private-company plans, and some governmental plans have lagged. Several of my clients first learned of the change from a Q4 2025 plan update; others got no notice at all, so it’s worth a direct call to HR this quarter.
Is this actually bad news?
Roth dollars give you flexibility on which “bucket” to draw from in retirement, which can keep you in lower brackets, manage Medicare IRMAA surcharges, and reduce taxable RMDs after age 73. What you lose immediately is the deduction on $8,000 (or up to $11,250 if you’re 60-63), roughly $3,000 to $4,500 at a 32% federal marginal rate plus state.
A real-world example
Take a client of mine, Dave, age 58, a senior software engineer in Bellevue earning $285,000, who has maxed his 401(k) at $31,000 for years and used the pre-tax catch-up to manage his bracket exposure and Net Investment Income Tax. When I told him his $8,000 catch-up would now be Roth, his first reaction was frustration. The $2,560 in lost federal deduction (32% of $8,000) was real. But he was already converting $40,000 a year from a rollover IRA to Roth, and his projection showed a meaningful RMD problem at age 73. The new rule simply layered another $8,000 of Roth on top of a strategy he was already executing. We adjusted his quarterly estimated payments and pulled his year-end conversion forward into the same tax year. His current-year bill went up modestly, but his lifetime tax picture improved.
What should you consider doing?
Confirm your plan offers a Roth option; don’t assume. Review your withholding and quarterly estimates before the second-quarter due date. And talk to your CPA about whether to lean further into the Roth shift, including conversions of existing pre-tax balances, perhaps paired with charitable bunching, a Donor Advised Fund, or Qualified Charitable Distributions to manage the conversion tax.
For a deeper look at high-earner planning, contact the Madrona Wealth Advisory and CPA team.
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