Roth Catch-Up Rule for High Earners: What Changes in 2026

Under the Roth catch-up rule for high earners, if your 2025 FICA wages from your plan's sponsor topped $150,000, your 2026 catch-up must go in as Roth.

What is the Roth catch-up rule for high earners?

Section 603 of the SECURE 2.0 Act added a new paragraph to the tax code, 26 U.S.C. 414(v)(7). It says that if your wages from the employer sponsoring the plan were above a set amount in the prior calendar year, you can make catch-up contributions only as designated Roth contributions. The law set that amount at $145,000 and indexes it for inflation.

For 2026, the IRS has raised the line to $150,000, measured on your 2025 wages. Catch-up limits for 2026 are $8,000 at age 50 and over, and $11,250 if you turn 60, 61, 62 or 63 this year. The regular elective deferral limit is $24,500.

Catch-up contribution

An extra elective deferral allowed once you are 50 or older by the end of the year. Deferrals become catch-up once they pass the regular limit, or sooner if they pass a lower plan limit or the plan's nondiscrimination test limit.

Designated Roth contribution

A 401(k), 403(b) or governmental 457(b) deferral you pay tax on now, in exchange for qualified withdrawals that are not included in income later.

FICA wages

Pay subject to Social Security tax, the figure in Box 3 of your Form W-2. The final regulations use this number for the test.

These figures are adjusted annually. Confirm the current-year number before acting.

The rule leaves the amount you can save alone and changes only when you pay tax on the catch-up dollars: now instead of later.

Who does the 2026 rule apply to?

It applies to a participant who is 50 or older, in a 401(k), 403(b) or governmental 457(b) plan, whose 2025 FICA wages from the employer sponsoring that plan were over $150,000. Three details decide most cases.

• It is one employer's wages. Wages from an unrelated second job do not count toward the test. The final regulations let a plan administrator choose to combine wages from certain related employers, so owners with more than one company should ask how their plan handles it.
• It is last year's wages. A big bonus in 2026 does not change your 2026 status. It may change your 2027 status.
• SIMPLE IRA and SEP arrangements are outside it. The final regulations exclude plans described in sections 408(k) and 408(p).

Self-employed owners and partners

This is the nuance most owners miss. The test reads FICA wages only, from the prior year. A sole proprietor's or a partner's share of business profit is self-employment income, taxed under a different system, so it does not count. Timing still matters: the regulations show a new partner who is covered for a year because of employee wages earned before becoming a partner. The final regulations include an example of a partner who earned $60,000 in FICA wages before becoming a partner and $155,000 of self-employment income after. That partner was not subject to the rule.

The regulations also confirm that a plan cannot force Roth catch-up on someone the law does not cover. So a self-employed owner with no 2025 FICA wages from the business keeps the choice between pre-tax and Roth catch-up for 2026. If you run a Solo 401(k) as a sole proprietor, the rule likely does not reach you.

An S corporation owner is in a different spot. The salary the company pays you is FICA wages, reported in Box 3 of your W-2, so it counts. If your 2025 Box 3 wages from that company were over $150,000, your 2026 catch-up must be Roth. A raise in 2026 affects 2027, not 2026. How you set that salary is its own decision, covered in our look at S-Corp vs LLC taxes.

Two owners with the same income can land on opposite sides of this rule, depending on whether the business pays them wages or profit.

When did the rule start, and what is still unsettled?

The timeline has four parts, and it is easy to mix them up.

1. The statute applies to contributions in taxable years beginning after December 31, 2023.
2. An IRS administrative transition period under Notice 2023-62 generally ended on December 31, 2025. The final regulations did not extend it. That is why 2026 is the first year most plans must follow the rule.
3. The final regulations, issued in September 2025, generally apply to contributions in taxable years beginning after December 31, 2026. Before then, plans may follow a reasonable, good faith interpretation of the statute. Governmental plans and plans under collective bargaining agreements get later dates.
4. The written plan amendment is a separate step. The IRS has said it expects the amendment deadline for this rule to generally be December 31, 2029. The plan still has to follow the rule in operation before the document catches up.

So for 2026, plans have a final rule to look at but are held to a good faith standard. Two plans may handle edge cases a little differently this year, and your plan's own procedures govern your account.

For 2026, the law is in force, the regulations are final, and the regulations are not yet binding. All three are true at once.

What happens if your 401(k) has no Roth option?

The plan does not have to add one. But if it does not, the final regulations set the catch-up limit at zero for any participant the rule covers. In plain terms, a 52-year-old employee with $200,000 of 2025 W-2 wages from you cannot make a catch-up contribution in 2026 under a pre-tax-only plan.

There is a second effect. Plans must pass nondiscrimination testing on who can make catch-up contributions. When higher-paid employees with W-2 wages lose catch-up while some highly compensated owners with only self-employment income keep it, the plan may need to restrict those owners too. The final regulations give a safe harbor for this, but it is a design call your plan's administrator should make, not something to discover at testing time.

A plan with no Roth option does not move high earners to Roth. It shuts off their catch-up contributions.

Is paying tax now on catch-up dollars a bad deal?

Not necessarily. You lose the deduction today, but qualified distributions from a designated Roth account are not included in gross income. To be qualified, a distribution generally must come after a five-taxable-year period of participation, counted from the first day of the first year you made Roth contributions to that plan (a direct rollover from another plan's Roth account can carry over an earlier start year). It also must be made at age 59 1/2 or older, or after death or disability.

Here is a hypothetical. Assume the whole $8,000 would be taxed at 32 percent and nothing else on your return changes. Making that 2026 catch-up as Roth instead of pre-tax then adds $2,560 to your 2026 federal income tax. Whether that trade pays off depends on your tax rate when you withdraw it, how long it grows, and whether you have other Roth money to draw on. Many high earners hold almost everything in pre-tax accounts, and some Roth money gives more control over taxable income in retirement. See how that fits in tax-efficient retirement income.

What should a business owner who sponsors a plan check?

1. Does the plan offer Roth deferrals? If not, decide now whether to add them, because covered employees (and possibly you) cannot make catch-up contributions without them.
2. Who is covered for 2026? Pull 2025 Box 3 wages for everyone 50 or older and compare them to $150,000.
3. How does payroll handle it? The final regulations allow a deemed Roth election, where catch-up dollars switch to Roth automatically once a covered employee hits the regular limit, as long as the employee can change that election. Confirm your payroll provider and recordkeeper do this the same way.
4. Do you own more than one company? Ask whether the plan combines wages across related employers, since that can bring more people into the rule.
5. Where do you, the owner, land? Your status depends on whether you take W-2 wages or self-employment income. Run that with your CPA before setting your 2026 deferrals.

This is a coordination job across your third-party administrator, payroll provider and CPA. Anchor provides tax strategy and coordination, not tax filing or legal advice, so keep your own CPA and plan administrator involved, and see proactive tax planning for how this fits a full-year plan.

Frequently asked questions

Does the Roth catch-up rule apply to my regular 401(k) contributions?

No. It applies only to catch-up contributions. Regular deferrals, up to $24,500 for 2026, can still be pre-tax if your plan allows it. A lower plan limit or a nondiscrimination test limit can cause catch-up treatment before you reach $24,500, and those catch-up dollars follow the Roth rule.

What wages count toward the $150,000 test for 2026?

Your 2025 FICA wages (Box 3 of Form W-2) from the employer that sponsors the plan. Wages from an unrelated employer are not added in, though a plan may choose to combine wages from certain related employers.

I am self-employed with a Solo 401(k). Does the rule apply to me?

For 2026, if your only income from the business in 2025 was self-employment income, such as a sole proprietor's or partner's profit, you had no FICA wages from it and the rule does not apply. If you own an S corporation and your 2025 Social Security wages (Box 3 of your W-2) from it were over $150,000, it does.

Can I still make a catch-up contribution if my plan has no Roth option?

Not if the rule covers you. Under the final regulations, the catch-up limit for a covered participant in a plan without a Roth option is zero.

Do the higher catch-up limits for ages 60 to 63 also have to be Roth?

Yes, if you are covered by the rule. The Roth requirement applies to catch-up contributions, including the $11,250 limit for 2026.

Sources

1. 26 U.S.C. 414(v)(7), Legal Information Institute: the statutory Roth catch-up requirement, the $145,000 base amount, its inflation indexing, and the Roth option rule.
2. IRS, Internal Revenue Bulletin 2025-49 (Notice 2025-67): the Roth catch-up wage threshold of $150,000 applied to 2025 wages for 2026 catch-up contributions.
3. IRS retirement topics, 401(k) contribution limits: 2026 elective deferral limit of $24,500, catch-up of $8,000, and $11,250 for ages 60 to 63.
4. IRS retirement topics, catch-up contributions: Roth catch-up beginning in 2026 for participants whose prior-year wages with the plan sponsor exceeded $150,000.
5. Federal Register, Catch-Up Contributions final regulations (Sept. 16, 2025): FICA wage definition, plans without a Roth option, partner examples, deemed Roth election, and applicability dates.
6. IRS news release IR-2025-91: final regulations generally apply in 2027, good faith standard before then, and the end of the Notice 2023-62 transition period.
7. IRS Employee Plans news: expected plan amendment deadline for the Roth catch-up requirements.
8. 26 U.S.C. 402A(d), Legal Information Institute: qualified distributions from a designated Roth account and the five-taxable-year period.
9. IRS, Retirement plans FAQs on designated Roth accounts: how the five-taxable-year period of participation is counted, including direct rollovers.