The Department of Treasury and the Internal Revenue Service (IRS) issued final catch-up regulations that support the updates covered within SECURE 2.0 Act of 2022 (SECURE 2.0). These regulations impact 401(k), 403(b), governmental 457(b) (collectively, Retirement Plans), SARSEP, SIMPLE IRA, and SIMPLE 401(k) plans.

SECURE 2.0 made changes that required Retirement Plan participants with prior-year FICA wages over $145,000 (adjusted for inflation) to make age-based catch-up contributions on a Roth basis only. Additionally, plans could allow a higher catch-up limit for Retirement Plan participants who attain age 60 through 63 during the calendar year.

On January 13, 2025, the IRS issued proposed catch-up contribution regulations. Below are a few of the changes noted within the proposed regulations:

• FICA wages are defined generally as the FICA taxes imposed by Social Security tax, and not by Medicare tax.
• Retirement Plans may include a “deemed” Roth election for impacted employees and must allow for an effective opportunity to elect out of making catch-up contributions.
• Retirement Plans that do not allow for Roth contributions may not offer catch-up contributions for employees who make over the $145,000 threshold.
• There are two possible correction methods for Retirement Plans that fail to satisfy the Roth catch-up contribution provisions; however, the plan must include deemed Roth election language.
• Retirement Plans, SARSEP, SIMPLE IRA, and SIMPLE 401(k) plans are not required to offer the higher catch-up for ages 60 to 63.
• Plans that offer the higher catch-up for ages 60 to 63 may not limit catch-up contributions only to those employees.

Generally, proposed regulations were adopted; however, highlighted below are a few points of clarification within the final regulations issued on September 16, 2025:

• Wages
  • Determined based on prior year FICA wages as reported in Box 3 of Form W-2.
  • Retirement Plans that used Box 5 of Form W-2 are deemed to use a good faith interpretation until January 1, 2027.
  • Self-employment income, subject to SECA taxes, is not counted for this purpose.
  • Wages are not required to be aggregated between employers, but aggregation is permitted for employers who are members of a common control group or employers using a common paymaster.
• Retirement Plans that permit a participant to make an election during each payroll period to treat a portion of their elective deferrals as catch-up (referred to as a separate election plan) are not required under a deemed Roth election to recharacterize that money to a pre-tax deferral even if it’s later determined that the money isn’t eligible for catch-up.
• Plans may allow deemed elections for Roth catch-up contributions to be effective only when
  • Pre-tax deferrals reach the contribution limit imposed under Internal Revenue Code section 402(g) or
  • When both the pre-tax and Roth deferrals reach the limit.
• Corrections for plans that fail the Roth catch-up contribution provisions are not required if:
  • The amount is less than $250 or
  • The participant became subject to the Roth requirement due to an amended Form W-2 increasing FICA wages over $145,000 in the prior year that is issued after the deadline for correction.

Final regulations are generally effective January 1, 2027. The effective date of the final regulations does not extend the necessary implementation of the Roth catch-up requirement (generally January 1, 2026). From January 1, 2026, through December 31, 2026, a reasonable good faith interpretation must be followed. Later implementation dates may apply to collectively bargained or governmental plans.