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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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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. 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. 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. During 2026, a reasonable, good-faith interpretation standard applies.

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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.

The IRS initially issued proposed regulations relating to mandatory Roth catch-up contributions in January 2025. 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. The IRS also addressed requests that plans be permitted to require all catch-up contributions to be designated Roth contributions.

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.

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 Christopher T. Collins at <a href="mailto:ccollins@vedderprice.com">ccollins@vedderprice.com</a>, Philip L. Mowery at <a href="mailto:pmowery@vedderprice.com">pmowery@vedderprice.com</a>, Olivia N. Ustupski 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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