A recent change in the tax law could mean a change in how you are taxed on 2026 catch-up contributions. If you are a high-earning employee making contributions to a pre-tax 401(k), this is an issue to understand before year-end.
The change in catch-up contributions is part of the SECURE 2.0 Act and takes effect in 2026. It expands the use of post-tax Roth contributions within employer-sponsored retirement plans. Catch-up contributions are extra dollars you can contribute to your retirement account beyond the annual elective deferral limits set each calendar year by the IRS if you’re age 50 or older.
Who the new Roth catch-up rule affects
Beginning in 2026, catch-up contribution limits are structured so that participants who attain ages 60 through 63 during the year may make catch-up contributions of up to $11,250. All other eligible participants age 50 or older may make catch-up contributions of up to $8,000.
The most significant change for higher earners is that, beginning in 2026, participants age 50 or older whose 2025 FICA wages from the employer sponsoring their retirement plan exceeded $150,000 must make their catch-up contributions as designated Roth contributions, using after-tax dollars. This applies to plans that offer a Roth feature. If your employer-sponsored retirement plan does not offer a Roth option, you generally will not be able to make catch-up contributions under that plan.
What the change means for your taxes
This means you’ll lose out on the upfront tax deduction associated with pre-tax catch-up contributions, which may result in a higher income tax bill. However, you can potentially benefit from the advantages of Roth contributions, which include tax-free qualified earnings and withdrawals in retirement.
When you receive your 2025 Form W-2 in early 2026, check with your employer or retirement plan provider if you’re unsure whether you exceed the $150,000 threshold. You can also check with your plan administrator now to understand how your plan handles the new Roth catch-up requirement.
What to consider for 2026 taxes
Losing a tax benefit or deduction is never welcome news but understanding how Roth contributions work can help you make informed retirement decisions. If you’re age 50 or older and your 2025 wages were above the threshold, now is a good time to understand what the change means for your 2026 contributions. Reach out to your Councilor tax professional or Councilor Wealth advisor to discuss how the new rule may affect your retirement and tax planning.
