Defined Contribution plans can allow employees age 50 or older to make “catch-up contributions,” which are additional elective deferrals beyond the annual limit. The purpose is to allow those close to retirement to stash away extra money just before they cease working. Like all other elective deferrals, these extra contributions are made on a pre-tax basis.
However, the SECURE Act 2.0 made two major changes to these rules. First, participants aged 60-to-63 can make what is called a “super catch-up” which is beyond the regular catch-up contribution limit. Second, beginning on January 1, 2026, all catch-up contributions for high-income employees must be made on an Roth (i.e,, “after-tax”) basis.
The Basics:
- For 2025, the standard elective deferral limit is $23,500.
- Participants age 50-to-59 can make an additional “catch-up” contribution. The 2025 limit is $7,500. Therefore, someone aged 50-to-59 can contribute up to $31,000.
- Instead of the regular “catch-up,” Participants age 60-to-64 can make an additional “super catch-up” contribution. The 2025 limit is $11,250, meaning the maximum contribution for these participants is $34,750.
- Both the “catch-up” and “super-catch-up” limits change each year. The 2026 limit has not been released.
What’s New?
- All catch-up contributions for employees age 50+ with more than $145,000 in W-2 wages in the previous year must be made as Roth (i.e., after-tax). These people are referred to as “high income employees.”
- There is no-opt out provision.
- Only the wages from a single employer are considered. Therefore, an employee that makes $100,000 with 1 employer and $50,000 with another is not considered a “high income employee.”
- The annual wage limit (i.e., $145,000 threshold) will change each year.
- Any Roth feature must be extended to all participants. That means if “high income employees” can make Roth catch-up contributions, all employees eligible for catch-up contributions should have a Roth option.
The new rules are effective January 1, 2026. However, plans maintained by a collective bargaining agreement can delay enforcement until January 1st following the expiration of the last CBA in effect on December 31, 2025 terminates. Plan sponsors will need to make sure contributing employers and administrative staff are aware of these changes before the applicable effective date.