Many 401(k) plans will be required to include Roth deferrals or remove the provision for catch-up contributions due to SECURE 2.0. This change is now effective beginning January 1, 2026. It was originally set to be effective in 2024, but the IRS has permitted an administrative delay. Still, it is important to know the requirements for this provision to prepare for this change.
What are the specific requirements for the Roth deferrals?
Beginning in 2026, any plan that allows for catch-up contributions, for participants age 50 or over, will be required to allow Roth deferrals. This is because any employee whose salary is over $145,000 who makes a catch-up contribution will be required to treat the catch-up portion as a Roth deferral—or they can’t make it.
What else do I need to know?
There are still a lot of open questions surrounding this provision. Like, what if an employee defers less than the deferral limit but due to a testing failure some of this deferral is treated as a catch-up? How will this be handled? When must an employee make their election to defer the catch-up as Roth? Can amounts be recharacterized later? We will need to wait for guidance to address these issues.
What should I do now?
We recommend including Roth deferrals in any new 401(k) plan. Additionally, we recommend amending any current plans to allow Roth in advance of this change. The industry is still awaiting guidance regarding pertinent details. However, if you have specific questions, we’re happy to help. Fill out the form below and we’ll reach out with more information.
