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On September 15, 2025, the Department of the Treasury and the Internal Revenue Service issued final regulations implementing key provisions of the SECURE 2.0 Act relating to Roth catch-up contributions. The final regulations focus primarily on requirements relating to the so-called mandatory Roth catch-up contributions for participants who made more than $145,000 in FICA wages from the plan sponsor in the prior calendar year.

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Applicability Dates

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As an initial matter, the final regulations do not change the general effective date for mandatory Roth catch-up contributions, which is January 1, 2026.&nbsp; The Roth catch-up requirement under SECURE 2.0 was originally effective for tax years beginning after December 31, 2023. The IRS previously provided an administrative transition period in IRS Notice 2023-62, delaying the effective date until January 1, 2026. &nbsp;While the final regulations are not effective until 2027, the mandatory Roth catch-up requirement is still required to be implemented as of January 1, 2026. &nbsp;During 2026, a reasonable, good-faith interpretation standard applies.

The IRS also noted in the preamble to the final regulations that under Q&amp;A J-1 of IRS Notice 2024-2, the deadline to amend a plan (for required, integral, and discretionary plan amendments) under Section 603 of the SECURE 2.0 Act, or any regulations thereunder, was generally extended to December 31, 2026.&nbsp;

Other Considerations

The IRS initially issued proposed regulations relating to mandatory Roth catch-up contributions in January 2025.&nbsp; The final regulations make several changes to provisions in the proposed regulations, namely: (i) permissive aggregation of FICA wages for purposes of determining if the $145,000 threshold applies; (ii) implementation of a deemed Roth catch-up election; (iii) correction methods for failure to comply with the Roth catch-up requirement; and (iv) dual qualified plans that cover participants in Puerto Rico.&nbsp; The IRS also addressed requests that plans be permitted to require all catch-up contributions to be designated Roth contributions.

Permitted Aggregation of FICA Wages.If an eligible participant has FICA wages from the “employer sponsoring the plan” in excess of $145,000 for the preceding year (as reported in Box 3 of Form W-2 for the participant), such participant is subject to the Roth catch-up requirement. The proposed regulations focused the FICA threshold on the individual employer paying the FICA wages.If a participant worked for two different employers within a “controlled group” of companies during the year, the FICA wages paid by those two employers would not be aggregated for purposes of determining whether a participant exceeds the Roth catch-up income threshold.Although the final regulations permit plan sponsors to use this separate employer approach, it also allows plan sponsors within a “controlled group” to aggregate wages from related employers when determining whether a participant exceeds the Roth catch-up income threshold.

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Implementation of a Deemed Roth Catch-Up Election. To the extent an eligible participant is subject to the Roth catch-up requirement, the final regulations allow a plan to deem that the participant irrevocably designated any catch-up contributions as Roth contributions (provided that the deemed Roth catch-up election is set forth in the plan document and such participant has had an effective opportunity to make a new election that is different than the deemed election).Also, the deemed election must cease to apply to a participant within a reasonable period of time following the date on which (i) the participant ceases to be subject to the mandatory Roth catch-up requirements, or (ii) an amended Form W-2 is filed or furnished to the participant indicating that the participant is not subject to the mandatory Roth catch-up requirements, although in those situations, catch-up contributions that were designated Roth catch-up contributions during that reasonable period of time do not need to be recharacterized as pre-tax catch-up contributions.

Correction Methods for Roth Catch-Up Failures. The final regulations establish two IRS-approved correction methods if a plan mistakenly treats a catch-up contribution as pre-tax when it should have been Roth. Employers can use either (i) the “Form W-2 Correction Method” by transferring the contribution to the Roth account and reporting it as Roth wages on the W-2 for that year, or (ii) the “In-Plan Roth Rollover Method” by rolling over the contribution (with earnings) to the Roth account and using a Form 1099-R.

Special Rules for Puerto Rico Participants. Because the Puerto Rico tax code currently does not permit designated Roth contributions, the final regulations provide a temporary safe harbor for dual-qualified plans that cover Puerto Rico participants. For these individuals, catch-up contributions may continue on a pre-tax basis until Puerto Rico law is amended to allow Roth contributions.

Plans Cannot Require All Catch-Up Contributions to Be Designated Roth Contributions.The IRS concluded that requiring that all catch-up contributions be designated Roth contributions would not be permissible.Accordingly the final regulations do not include a rule permitting a plan to require that all participants’ catch-up contributions be designated Roth contributions.

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For additional information, please contact <a href="/people/christopher-t-collins/">Christopher T. Collins</a> at <a href="mailto:ccollins@vedderprice.com">ccollins@vedderprice.com</a>, <a href="/people/philip-l-mowery/">Philip L. Mowery</a> at <a href="mailto:pmowery@vedderprice.com">pmowery@vedderprice.com</a>, <a href="/people/olivia-n-ustupski/">Olivia N. Ustupski</a> at <a href="mailto:oustupski@vedderprice.com">oustupski@vedderprice.com</a> or any other Vedder Price attorney with whom you have worked.

Treasury and IRS Finalize Regulations for Roth Catch-Up Contributions Under Secure 2.0

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