The Department of the Treasury and the Internal Revenue Service have issued final regulations (TD 10033) providing comprehensive guidance for retirement plans regarding catch-up contributions, particularly reflecting statutory changes introduced by the SECURE 2.0 Act of 2022. These regulations primarily focus on the new requirement that certain higher-income participants’ catch-up contributions must be designated Roth contributions, along with adjustments to catch-up contribution limits and operational rules for plan administrators. This article aims to distill the key provisions of these final regulations, highlight significant changes from the proposed regulations, clarify effective and applicability dates, and note other crucial items for tax professionals involved in administering affected retirement plans.

General Statutory and Regulatory Framework of Catch-Up Contributions

Section 414(v) of the Internal Revenue Code permits retirement plans to allow participants aged 50 or older to make additional elective deferrals, known as catch-up contributions. These contributions are generally exempt from certain otherwise applicable limitations, such as those under sections 401(a)(30), 403(b), and 457(b)(2), and are largely excluded from nondiscrimination requirements under sections 401(a)(4), 401(k)(3), and 410(b). However, plans must ensure universal availability, meaning all catch-up eligible participants must have an effective opportunity to make the same dollar amount of catch-up contributions, with exceptions for certain groups.

Key Provisions of the Final Regulations

The final regulations introduce several critical provisions that implement and clarify the SECURE 2.0 Act changes.

The Roth Catch-Up Contribution Requirement

A central aspect of the new regulations is the mandatory Roth catch-up contribution requirement for certain participants, as introduced by Section 603 of the SECURE 2.0 Act.

Applicability Threshold: For taxable years beginning on or after January 1, 2024, a catch-up eligible participant in an applicable employer plan whose FICA wages (as defined in section 3121(a) for Social Security tax purposes, i.e., Box 3 of Form W-2) from the plan-sponsoring employer exceeded $145,000 in the preceding calendar year must make any catch-up contributions as designated Roth contributions. This $145,000 threshold is subject to cost-of-living adjustments for calendar years beginning after December 31, 2024, rounded down to the nearest $5,000.
Exempt Plans: This Roth catch-up requirement does not apply to SEP arrangements or SIMPLE IRA plans.
Universal Availability of Roth: If a plan permits any participant subject to the Roth catch-up requirement to make designated Roth catch-up contributions for a plan year, then all catch-up eligible participants in that plan must also be permitted to make catch-up contributions as designated Roth contributions.
Coordination with Code Section 402A: The final regulations explicitly state that the Roth catch-up requirement applies notwithstanding the general requirements regarding elections to make designated Roth contributions under sections 402A(b)(1) and (c)(1). This resolves a potential inconsistency between the mandatory Roth nature of these contributions and the elective nature described in prior law.

Enhanced Catch-Up Contribution Limits

The SECURE 2.0 Act also increased the applicable dollar catch-up limits for specific age groups and plan types, which are incorporated into the final regulations.

Participants Aged 60-63: For taxable years beginning after December 31, 2024, catch-up eligible participants who would attain age 60, 61, 62, or 63 during the taxable year are subject to an increased catch-up limit. For non-SIMPLE plans, this limit is 150 percent of the otherwise applicable dollar catch-up limit in effect for 2024 (initially $11,250). For SIMPLE plans, it is 150 percent of the 2025 limit (initially $5,250). These increased limits are subject to annual cost-of-living adjustments after 2025. The higher limits apply only up to age 63.
Certain SIMPLE Plans: For taxable years beginning after December 31, 2023, SIMPLE plans sponsored by certain eligible employers (those described in section 408(p)(2)(E)(iv), typically smaller employers) may offer an increased catch-up limit of 110 percent of the otherwise applicable dollar catch-up limit for 2024 (initially $3,850). This limit is adjusted for cost-of-living after 2024.
Interaction of SIMPLE Plan Increases: A SIMPLE plan cannot apply both the 150% increase for age 60-63 participants and the 110% increase for certain SIMPLE plans simultaneously. However, a SIMPLE plan that generally provides the 110% increase may, for participants attaining age 60-63, instead permit the 50% increase, if that results in a higher applicable dollar catch-up limit.
Universal Availability: A plan does not fail the universal availability requirement (section 414(v)(4)) merely because it allows catch-up eligible participants to make the statutory maximum dollar amount of catch-up contributions permitted for them, even if this means participants aged 60-63 have a higher limit than other catch-up eligible participants. This flexibility extends to employees described in section 410(b)(3) (e.g., collectively bargained employees), who may be excluded or offered a lesser opportunity to make catch-up contributions without violating universal availability. Existing permitted practices, such as the cash availability rule, are not precluded by this flexibility.

Deemed Roth Catch-Up Contribution Elections

To facilitate compliance, the final regulations permit plans to implement deemed Roth catch-up elections.

General Rule: For taxable years beginning after December 31, 2023, a plan may provide that a participant subject to the Roth catch-up requirement is deemed to have irrevocably designated any catch-up contributions as designated Roth contributions. These contributions must be treated as not excludable from gross income and maintained in a separate Roth account.
Participant Election Opportunity: The application of a deemed Roth catch-up election is conditioned on the participant having an effective opportunity to make a different election (e.g., to make pre-tax catch-up contributions or no catch-up contributions).
Cessation of Deemed Election: The deemed election must cease to apply within a reasonable period after the employee is no longer subject to the Roth catch-up requirement or an amended Form W-2 indicates non-applicability.
Separate Election Plans: Plans that permit participants to make a separate election to treat a portion of deferrals as catch-up contributions during each payroll period (e.g., without regard to whether the section 401(a)(30) limit has been reached) may also provide for a deemed Roth election for such amounts, provided the participant has an effective opportunity to make a different election. In such cases, no recharacterization is required even if these amounts are later determined not to be catch-up contributions.
Plan Document Requirement: Any deemed Roth catch-up election must be set forth in the plan document.

Correction Methods for Roth Catch-Up Failures

The regulations provide specific correction methods for instances where a pre-tax elective deferral was made but was required to be a designated Roth contribution under section 414(v)(7) (a "section 414(v)(7) failure").

Permitted Correction Methods: Plans may use either of two new methods:
- Form W-2 Correction Method: The catch-up contribution (adjusted for earnings/losses per §1.402(g)-1(e)(5)) is transferred from the participant’s pre-tax account to their designated Roth account. The contribution (not adjusted for earnings/losses) is reported as a designated Roth contribution on the participant’s Form W-2 for the year of deferral. This method is only available if the Form W-2 for that year has not yet been filed or furnished to the participant. The Treasury and IRS determined that allowing amended Forms W-2 for this purpose would be overly burdensome for taxpayers and the IRS.
- In-Plan Roth Rollover Correction Method: The elective deferral (adjusted for earnings/losses per §1.402(g)-1(e)(5)) is directly rolled over from the participant’s pre-tax account to their designated Roth account. This amount is includible in the participant’s gross income for the year of the rollover and reported on Form 1099-R. This correction is implemented by the plan and does not require a voluntary participant election under section 402A(c)(4)(E)(i). A plan may utilize this correction method even if it does not generally permit participant-elected in-plan Roth rollovers.
Consistency Requirement: A plan must apply the same correction method for similarly situated participants, and the choice of method cannot be based on investment returns.
Prerequisite for Correction Methods: To use these new correction methods for pre-tax elective deferrals exceeding statutory limits, the plan sponsor or administrator must have in place practices and procedures designed to ensure compliance with section 414(v)(7) at the time the deferral is made. This includes providing for a deemed Roth catch-up election. Plans can choose to deem elective deferrals as Roth once a participant’s total elective deferrals (including Roth contributions) or only pre-tax elective deferrals exceed the section 401(a)(30) limit.
Deadlines for Correction:
- For failures related to statutory limits (e.g., 401(a)(30), 415(c)): The deadline to complete corrective steps is the last day of the taxable year following the taxable year for which the deferral was made. However, earlier correction deadlines for other tax consequences still apply (e.g., April 15 following the year of deferral for 402(g) excess deferrals).
- For failures related to employer-provided limits or ADP limits: The deadline is the last day of the plan year following the plan year for which the contribution was made.
Correction Not Required in Certain Circumstances:
- De Minimis Exception: No correction is required if the amount of the pre-tax elective deferral that should have been a designated Roth contribution does not exceed $250.
- Amended Form W-2 Exception: Correction is not required if the participant became subject to section 414(v)(7)(A) solely because FICA wages were not determined to exceed the Roth catch-up wage threshold until after the correction deadline (e.g., due to a later adjustment or audit).

Employer Determination and Aggregation Rules

The determination of "employer sponsoring the plan" for the Roth catch-up wage threshold is crucial, especially for employers with complex structures.

General Rule: "Employer sponsoring the plan" generally refers to the participant’s common law employer contributing to the plan.
Optional Aggregation: Plans may elect to aggregate wages from different entities in certain situations:
- Common Paymaster: If a common paymaster (section 3121(s)) is used, the plan may aggregate the common law employer with other specified employers using that common paymaster.
- Controlled Group: If the common law employer is part of a controlled group (section 414(b), (c), (m), or (o)), the plan may aggregate the common law employer with one or more other specified employers in that group.
- Asset Purchases (Successor Employers): Safe harbors are provided for successor employers in asset purchases. If the successor employer files a single Form W-2 reporting all wages from both predecessor and successor, all reported wages are treated as from the sponsoring employer for the Roth catch-up determination. If separate Forms W-2 are filed, the successor employer’s reported wages are limited by the Social Security wage base minus predecessor wages.
- Disregarded Entities: The owner of a disregarded entity (under §301.7701-2(c)(2)(i)) is treated as the employer sponsoring the plan, and the employee’s wages include those from both the disregarded entity and its owner.
Multiemployer Plans: Unless optional aggregation rules are applied, wages from different employers participating in a multiemployer plan are not aggregated for purposes of determining if the Roth catch-up wage threshold is met. Thus, the Roth catch-up requirement only applies to contributions from an employer whose wages from the participant exceed the threshold. The concept of the "plan sponsor" under ERISA (e.g., joint board of trustees) does not supersede the Code’s "employer sponsoring the plan" for Roth catch-up purposes.

Plans Without Qualified Roth Contribution Programs

Plans are not required to adopt a qualified Roth contribution program.

Impact on Universal Availability: A plan that does not include a qualified Roth contribution program and, therefore, does not permit catch-up contributions for participants subject to the Roth catch-up requirement, will not fail the universal availability requirement of §1.414(v)-1(e) merely for this reason.
Nondiscrimination (401(a)(4)): Such a plan might otherwise fail nondiscrimination testing under §1.401(a)(4)-4. To address this, a safe harbor is provided: the plan will be deemed to satisfy §1.401(a)(4)-4 if it provides that no Highly Compensated Employees (HCEs) with net earnings from self-employment above the Roth catch-up wage threshold are permitted to make catch-up contributions.

Dual-Qualified Plans (Puerto Rico)

Special rules apply to dual-qualified plans (plans qualified under both U.S. and Puerto Rico law).

The Roth catch-up requirement of section 414(v)(7)(A) and the availability requirement of section 414(v)(7)(B) are treated as satisfied for a taxable year with respect to participants subject to the Puerto Rico Internal Revenue Code, if that taxable year begins before the effective date of an amendment to the Puerto Rico Code to provide for designated Roth contributions. This provides transition relief due to the lack of designated Roth contributions under current Puerto Rico law.

Other Important Considerations

Special 403(b) Catch-Up Contributions: Special catch-up contributions for section 403(b) plans under section 402(g)(7) (for employees with at least 15 years of service) are not subject to the section 414(v)(7) Roth catch-up requirement. These contributions are treated as made first, before section 414(v) catch-up contributions.
Special 457(b)(3) Catch-Up Contributions: For eligible governmental 457(b) plans, if a participant’s limit under section 457(e)(18) is greater than the limit under 457(b)(3), a portion of catch-up contributions is required to be designated Roth contributions.
In-Plan Roth Rollover Correction and Nondiscrimination: A plan’s use of the in-plan Roth rollover correction method for a section 414(v)(7) failure is considered an administrative detail and not a benefit, right, or feature subject to section 401(a)(4) nondiscrimination testing.
5-Year Rule for Roth Distributions: If an amount transferred via Form W-2 correction or directly rolled over via in-plan Roth rollover is the first contribution to a participant’s designated Roth account, the 5-taxable-year period for qualified distributions begins with the taxable year in which the amount is includible in gross income. The 5-year recapture rule under sections 402A(c)(4)(D) and 408A(d)(3)(F) does apply to in-plan Roth rollovers used for correction, meaning distributions within the 5-year period may be subject to the 10% additional tax under section 72(t).
Safe Harbor 401(k) Plans: An amendment to a safe harbor 401(k) plan made pursuant to Section 603 of the SECURE 2.0 Act or related regulations is not a prohibited mid-year change under Notice 2016-16.
Recordkeeping: Plan administrators are expected to maintain written practices and procedures designed for real-time compliance with section 414(v)(7)(A). These are considered usual and customary business practices.

Significant Changes from Proposed Regulations

The final regulations incorporate several changes based on comments received on the proposed regulations.

FICA Wage Definition: The final regulations retain the definition of FICA wages for purposes of the Roth catch-up wage threshold as those subject to sections 3101(a) and 3111(a) (Social Security wages, Box 3 of Form W-2), rather than Medicare wages (Box 5 of Form W-2). This decision helps avoid unintended applicability to certain State and local government employees who might have Medicare-only wages.
Plan Requiring All Catch-Up as Roth: The proposed regulations’ preamble noted that requiring all catch-up contributions to be Roth (even for participants not subject to the Roth catch-up requirement) would be inconsistent with Code section 402A(b)(1). The final regulations maintain this position, not permitting a plan design that mandates Roth contributions for all catch-up eligible participants, irrespective of their wage level.
Cessation of Deemed Roth Election: The final regulations clarify that a deemed Roth catch-up election must cease within a reasonable period after the participant is no longer subject to the Roth catch-up requirement or after an amended Form W-2 indicates non-applicability.
Dual-Qualified Plans: The proposed rule allowing after-tax contributions in lieu of Roth for Puerto Rico participants was removed. Instead, the final regulations provide that the Roth catch-up requirement is deemed satisfied for participants subject to the Puerto Rico Code until that code is amended to permit designated Roth contributions.
Consideration of Prior Roth Contributions in Deemed Election: For administrative ease, plans are not required to take into account designated Roth contributions made by a participant earlier in the year when determining when to implement a deemed Roth election (e.g., once total deferrals hit the 401(a)(30) limit). However, if a participant makes an affirmative pre-tax catch-up election, prior Roth contributions must be considered to determine the amount requiring correction.
In-Plan Roth Rollover Correction: The final regulations clarify that the in-plan Roth rollover correction method only applies sections 402A(c)(4)(E)(ii) and (iii) and does not require a participant’s voluntary election. Additionally, the 5-year recapture rule under sections 402A(c)(4)(D) and 408A(d)(3)(F) will apply to these rollovers if distributed prematurely.
Correction Method Consistency: The consistency requirement was relaxed from "the same correction method for all participants with elective deferrals in excess of the same applicable limit" to "the same correction method for similarly situated participants". This allows, for example, using the Form W-2 method for those whose W-2s haven’t been filed, and the in-plan Roth rollover for others.
Prerequisite for Correction Methods: While still requiring practices and procedures (including a deemed Roth election), the final regulations offer flexibility in how the deemed election is implemented, allowing it to apply after total elective deferrals (or only pre-tax deferrals) exceed the section 401(a)(30) limit. The proposed requirement for automatic Roth treatment for 415(c) limit violations was removed [207, footnote 25].
Correction Deadlines: Deadlines were simplified: the last day of the taxable year following the year of deferral for statutory limits, and the last day of the plan year following the year of deferral for employer-provided limits or ADP limits. However, any applicable earlier correction deadline related to other tax consequences (e.g., April 15 for 402(g) excess deferrals) continues to apply.
Correction Not Required Circumstances: New exceptions were added for de minimis failures ($250 or less) and failures attributable to later adjustments of FICA wages after the correction deadline.

Effective Dates and Early Applicability

The final regulations establish various effective and applicability dates for different provisions, alongside opportunities for early implementation.

General Effective Date

The regulations are effective on November 15, 2025 (60 days after publication in the Federal Register).

General Applicability Date

The regulations generally apply with respect to contributions in taxable years beginning after December 31, 2026.

Early Implementation Permitted

Taxpayers have the option to apply certain provisions earlier:

Deemed Roth Catch-Up Election Rules: Amendments to §§1.401(k)-1 and 1.403(b)-3 apply for taxable years beginning after December 31, 2023.
Higher Catch-Up Limit for Certain SIMPLE Plans (SECURE 2.0 Section 117): Taxpayers may elect to apply §1.414(v)-1(c)(2)(ii)(C) and (c)(2)(iii)(C) for taxable years beginning after December 31, 2023.
Higher Catch-Up Limit for Age 60-63 Participants (SECURE 2.0 Section 109): Taxpayers may elect to apply §1.414(v)-1(c)(2)(i)(B), (c)(2)(ii)(B), and (c)(2)(iii)(B) for taxable years beginning after December 31, 2024.
Roth Catch-Up Requirement Rules (§1.414(v)-2): A plan is permitted to apply the rules of §1.414(v)-2 with respect to contributions in any taxable year beginning after December 31, 2023.

Later Applicability Dates for Specific Plan Types

Collectively Bargained Plans: For plans maintained under one or more collective bargaining agreements, §1.414(v)-2 applies to contributions in taxable years beginning after the later of December 31, 2026, or the first taxable year beginning after the date on which the last collective bargaining agreement related to the plan (in effect on December 31, 2025) terminates.
Multiemployer Plans: If a plan is a multiemployer plan (defined in section 414(f)), section 414(v)(7) is deemed satisfied until the first taxable year beginning after the date on which the last collective bargaining agreement related to the plan (in effect on November 15, 2025) terminates. This provides additional transition relief for multiemployer plans due to their unique administrative complexities.
Governmental Plans: For governmental plans (defined in section 414(d)), §1.414(v)-2 applies to contributions in taxable years beginning after the later of December 31, 2026, or the first taxable year beginning after the close of the first regular legislative session of the legislative body with authority to amend the plan that begins after December 31, 2025.

Reasonable, Good Faith Interpretation Standard

Prior to the applicability date of the final regulations, a reasonable, good faith interpretation standard applies with respect to the statutory provisions reflected in the final regulations. For example, determining the Roth catch-up wage threshold by referencing FICA taxes imposed by sections 3101(b) and 3111(b) (Medicare wages) instead of sections 3101(a) and 3111(a) (Social Security wages) would be considered a reasonable, good faith interpretation for contributions in taxable years prior to the final regulations’ applicability date.

Administrative Transition Period (Notice 2023-62)

The administrative transition period provided under Notice 2023-62, which treats pre-tax catch-up contributions that should have been Roth as satisfying the requirement during 2024 and 2025, is not extended or modified by these final regulations. This period generally ends on December 31, 2025.

Conclusion

These final regulations provide much-anticipated clarity on the SECURE 2.0 Act’s changes to catch-up contributions, particularly the mandatory Roth catch-up requirement for high-income earners. Plan administrators and tax professionals must meticulously review these provisions, especially regarding the definition of FICA wages, the various applicability dates (including early implementation options), and the new correction methods. The flexibility offered in areas like optional aggregation and the deemed Roth election, coupled with the transitional relief for certain plan types, should assist in compliance. However, the complexities, such as the continued applicability of earlier correction deadlines for other tax consequences, necessitate careful planning and robust administrative procedures to ensure ongoing plan qualification and participant tax compliance. The December 31, 2026, plan amendment deadline for SECURE 2.0 Section 603 and related regulations (with extensions for certain plans) provides a critical timeframe for operational and documentary updates.

Prepared with assistance from NotebookLM.